As filed with the Securities and Exchange Commission on November 29, 1996
Registration No. 333-11961
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
MELLON BANK, N.A.
(Originator of Mellon Bank Premium Finance Loan Master Trust described
herein)
(Exact name of registrant as specified in its charter)
United States 25-0659306
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
(412) 234-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------
Carl Krasik, Esq.
MELLON BANK CORPORATION
Suite 1910
500 Grant Street
Pittsburgh, Pennsylvania 15258-0001
(412) 234-5222
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies to:
Robert K. Morris, Esq. Reed D. Auerbach, Esq.
REED SMITH SHAW & MCCLAY STROOCK & STROOCK & LAVAN
435 Sixth Avenue 7 Hanover Square
Pittsburgh, Pennsylvania 15219 New York, New York 10004
(412) 288-3131 (212) 806-5400
---------------------
Approximate date of commencement of proposed sale to the public: From time
to time on or 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 /X/
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 1993, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
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>
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to a public
offering by Mellon Bank Premium Finance Loan Master Trust of $___________
aggregate principal amount of Mellon Bank Premium Finance Loan Asset Backed
Certificates, Series 1996-1, together with certain pages of a second Prospectus
to be used in connection with offers and sales relating to market-making
transactions in the Certificates by Mellon Financial Markets, Inc., an affiliate
of Mellon Bank, N.A. The Prospectus relating to the Certificates follows
immediately after this Explanatory Note. Following such Prospectus are the
alternate cover page and pages _____ of the market-making Prospectus relating to
the Certificates. All other pages of the public offering Prospectus are also to
be used for the market-making Prospectus.
<PAGE>
PROSPECTUS Subject to Completion, dated _________, 1996
$----------------
Mellon Bank Premium Finance Loan Master Trust
$_______________ Class A Floating Rate Asset
Backed Certificates, Series 1996-1
$_______________ Class B Floating Rate Asset
Backed Certificates, Series 1996-1
MELLON BANK, N.A.
Transferor
AFCO CREDIT CORPORATION
AFCO ACCEPTANCE CORPORATION
Originators and Servicers
Each Class A Floating Rate Asset Backed Certificate, Series 1996-1 Class A
Certificates") and each Class B Floating Rate Asset Backed Class B Certificates"
and, together with the Class A Certificates, Certificates") will represent the
right to receive certain payments Trust"), created pursuant to a pooling and
servicing agreement (the Pooling and Servicing Agreement") dated December 1,
1996 among AFCO Credit Corporation ("AFCO Credit"), as servicer, AFCO AFCO
Acceptance"), as servicer (and together with AFCO Credit in Servicer"), Premium
Financing Specialists, Inc. ("PFSI") as back-up servicer, ____________, as
back-up servicer (and together with PFSI, the "Back-up Servicer") and The First
National Bank of Chicago, as Trustee"). The assets of the Trust will include (i)
premium finance agreements between either AFCO Credit or AFCO Acceptance (each
in Originator") and commercial borrowers to finance the payment of insurance
premiums on insurance and related sums regarding insurance policies under which
the borrowers are the insureds governed by the law of a State in the United
States of America or the District of Columbia, which loans are transferred from
time to time by either of the Originators to the Transferor and by the
Transferor to the Receivables"); (ii) all monies due or to become due with
respect to the Receivables, including all monies received from insurance
companies and state insurance guaranty funds representing returns of unearned
portions of insurance premiums, up to the amount of principal, interest and
other charges due on the related Receivables; (iii) such amounts as may be from
time to time held in one or more trust accounts, which will be established and
maintained by the Trustee pursuant to the Agreement; (iv) any Enhancement issued
with respect to any Series; (v) all of the Transferor's rights under a
receivables purchase agreement (the "Receivables Receivables Purchase
Agreement"), dated as of December 1, 1996, among the Transferor and each
Originator and (vi) the proceeds of all of the foregoing. (Cover continued on
next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS NO
ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH IN "RISK FACTORS" COMMENCING ON PAGE
____.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF MELLON BANK, N.A., ANY OF THE ORIGINATORS OR ANY
AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES
NOR THE UNDERLYING RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Price to Underwriting Proceeds to
PUBLIC(1) DISCOUNT TRANSFEROR(1)(2)
Per Class A Certificate....
Per Class B Certificate....
Total..........
(1) Plus accrued interest, if any, at the Class A Rate or the Class B Rate, as
applicable, from ________ __, 1996.
(2) Before deduction of expenses estimated to be $_________.
The Certificates are offered by the Underwriters as specified herein, subject to
the Underwriters' right to reject orders in whole or in part. It is expected
that the Certificates will be offered globally and delivered in book-entry form
on or about ________ __, 1996 through the facilities of The Depository Trust
Company, Cedel
Bank, SocietJ Anonyme and the Euroclear System.
[ ] Mellon Financial Markets, Inc.
The date of this Prospectus is , , 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
(Cover continued from previous page)
In addition, the Collateral Interest will be issued to the Collateral Interest
Holder in the initial amount of $____ and will be subordinated to the
Certificates as described herein. The Transferor will also own the undivided
interest in the Trust not represented by the Certificates or other interests
issued by the Trust from time to time (the Transferor Interest"). The Transferor
may offer from time to time other Series of certificates which evidence
fractional undivided interests in certain assets of the Trust, which may have
terms significantly different from the Certificates. See "Description of New
Issuances." -New Issuances
Interest will accrue, subject to certain limitations described herein, on
the Class A Closing Date") through but excluding March 17, 1997 at a rate of __%
per annum and during each Interest Period (as defined herein) thereafter, at the
rate of _____% per annum above LIBOR"), determined as described herein,
prevailing on the LIBOR Determination Date (as Class A Rate. Interest will
accrue, subject to certain limitations described herein, on the Class B
Certificates from the Closing Date through but excluding March 17, 1997 at a
rate of ___% per annum and during each Interest Period thereafter, at the rate
of _____% per annum above LIBOR prevailing on the LIBOR Determination Date with
respect to each such Class B Rate. The initial LIBOR Determination Date is March
13, 1997. Interest with respect to the Certificates will be distributed
quarterly on the 15th day of March, June, September and December (or, if such
15th day is not a business day, the next business day) and on the Distribution
Date and ending on the related maturity date or, under certain limited
circumstances described herein, monthly, on or about the 15th day of each
calendar month. Principal on the Class A Certificates is scheduled to be
distributed on the ________ ____ Class A Scheduled Payment Date"), but may be
paid earlier or later under the circumstances described herein. Principal on the
Class B Certificates is scheduled to be distributed on Class B Scheduled Payment
Date"), but may be paid earlier or later under the circumstances described
herein. See "Maturity Assumptions."
The Class B Certificates will be subordinated to the Class A Certificates
and the Collateral Interest will be subordinated to the Class A Certificates and
the Class B Certificates, as described herein.
- --------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a Registration
Statement on Form S-3 Registration Statement"), of which this Prospectus is a
part, under the Securities Act of Commission") with respect to the Certificates
offered pursuant to this Prospectus. For further information, reference is made
to the Registration Statement which is available for inspection without charge
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048; and Midwest Regional Office, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the
Registration Statement may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates
and electronically through the Commission's Electronic Gathering and Retrieval
system at the Commission's Web site (http:\\www.sec.gov).
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly reports,
containing unaudited information concerning the Trust and prepared by the
Servicer, will be sent on behalf of DTC") and registered holder of the
Certificates, pursuant to the Agreement. See "Description of the
Certificates--Book-Entry Certificates," "--Reports to Certificateholders" and
"--Evidence as to Compliance." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The Agreement does not require the sending of, and the Transferor does not
intend to send, any of its financial reports to Certificateholders. Copies of
the monthly reports may be obtained free of charge by calling AFCO Credit
Corporation, at (212) 612-3540. The Servicer will file with the Commission such
periodic reports with respect to the Trust as Exchange Act"), and the rules and
regulations of the Commission thereunder. In furtherance of the foregoing, the
Servicer will file on behalf of the Trust a Form 8-K within 15 calendar days
following the end of each calendar month of the Trust, commencing January, 1997,
containing the information specified under the heading "Description of
Certificates -- Reports to Certificateholders" and such other material changes
to the characteristics of the Receivables (including Additional Receivables)
since the preceding calendar month. The obligation to file such periodic reports
may be suspended under the Exchange Act as soon as the year after the first year
of the Trust.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Servicer on behalf of the Trust referred to
herein with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act on or after the date hereof and prior to the termination of the
offering of the Certificates issued by the Trust shall be deemed to be
incorporated by reference herein and to be a part of this Prospectus from the
date of the filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for all purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or replaces
such statement. Any statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus.
The Transferor on behalf of the Trust will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Such request should be directed to: Mellon Bank
Corporation, One Mellon Bank Center, 500 Grant Street, Pittsburgh, Pennsylvania
15258 (Attention: Corporate Secretarial Services Department).
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used in this summary are defined elsewhere in this Prospectus. A listing of the
pages on which the terms are defined is found in the "Index of Terms."
Type of Securities............. Class A Floating Rate Asset Backed
Certificates, Series 1996-1 (the "Class A
Certificates") and Class B Floating
Rate Asset Backed Certificates, Series 1996-1
(the "Class B Certificates," and together with
the Class A Certificates, the "Certificates").
The Certificates initially will be represented
by Certificates registered in the name of Cede,
as the nominee of DTC. No Certificate Owner
will be entitled to receive a Definitive
Certificate, except under the limited
circumstances described herein. Holders may
elect to hold their Certificates through DTC
(in the United States) or Euroclear").
Transfers will be made in accordance with the
rules and operating procedures described
herein. See "Description of the
Certificates--Definitive Certificates".
Beneficial interests in the Certificates will
be offered for purchase in denominations of
$1,000, and integral multiples thereof.
Originators.................... AFCO Credit Corporation, a New York corporation
("AFCO Credit") and a wholly owned subsidiary
of Mellon Bank, N.A., was formed to originate
premium finance loans throughout the United
States, except California. AFCO Acceptance
Corporation, a California corporation ("AFCO
Acceptance") and a wholly owned subsidiary of
AFCO Credit, was formed to originate premium
finance loans in California. AFCO Credit and
AFCO Acceptance are collectively sometimes
referred to herein as the "Originators" or
"AFCO". See "Business of the
Originators--General."
Premium finance loans are typically installment
loans, generally made to a commercial insurance
buyer, the proceeds of which pay premiums which
are due to the insurance company. Financed
commercial insurance policies commonly (a) are
for a term of one year or less, (b) require the
full premium to be paid at or near inception of
the policy period and (c) provide for a return
of the unearned premium to the insured in the
event of cancellation.
Transferor..................... Mellon Bank, N.A., a national banking
association organized under the laws of the
United States of America (the "Transferor").
Servicer....................... Each of AFCO Credit and AFCO Acceptance
will service the Receivables which it
originates (each in such capacity, a
"Servicer" and collectively, the "Servicer").
Back-up Servicer............... Premium Financing Specialists, Inc., a
corporation ("PFSI") will act as back-up
servicer for AFCO Credit and , a
corporation ----------- ----------
(" ") will act as back-up servicer for AFCO
Acceptance (together with PFSI, the "Back-up
Servicer").
Trustee........................ The First National Bank of Chicago, a national
banking association, as trustee (the"Trustee").
Trust ......................... The Mellon Bank Premium Finance Loan Master
Trust (the "Trust") will be created as a master
trust under which one Series") will be issued.
The Certificates will be the
first Series issued. The Trust will be formed
pursuant to a pooling and servicing agreement
dated as of December 1, 1996 (the "Agreement"),
among the Transferor, each Servicer, each
Back-up Servicer and the Trustee, as
supplemented by the supplement relating to the
Class B Holders" refers to holders of the Class
B Certificates and the term "Agreement" (unless
the context requires otherwise) refers to the
Agreement as supplemented by the Series 1996-1
Supplement.
Trust Assets................... The assets of the Trust include (i) premium
finance agreements between either of the
Originators and commercial borrowers (each, a
"Premium Finance Agreement") to finance the
payment of insurance premiums on insurance
and related sums regarding insurance policies
under which the borrowers are the insureds
governed by the law of a State in the United
States of America or the District of
Columbia, which loans are transferred from
time to time by either of the Originators to
the Transferor and by the Transferor to the
Trustee for the benefit of the Trust
(the "Receivables"); (ii) all monies due or to
become due with respect to the Receivables,
including all monies received from insurance
companies and state insurance guaranty
funds representing returns of unearned portions
of insurance premiums, up to the amount of
principal, interest and other charges due on
the related Receivables; (iii) such amounts
as may be from time to time held in a
Collection Account, Interest Funding Account,
Distribution Account, Principal Account,
Finance Charge Account, Principal Funding
Account, Excess Funding Account and
Reserve Account established and maintained
by the Trustee pursuant to the Agreement,
funded by collections on
Receivables and investment earnings thereon;
(iv) any Enhancement issued with respect to
any Series; (v) all of the Transferor's rights
under a receivables purchase
agreement (the "Receivables Purchase
Agreement"), dated as of December 1, 1996,
among the Transferor and each of the
Originators, including rights to require the
Originators to repurchase certain Receivables
in the event of breaches of certain
representations and warranties and covenants
with respect thereto and the right to enforce
certain covenants (see "Description of the
Receivables Purchase Agreement --
Representations and Warranties" and
"--Certain Covenants") and (vi) the proceeds
of all of the foregoing. See "The Receivables."
Pursuant to the Receivables Purchase Agreement,
on the date of issuance of the Certificates
(the "Closing Date"), the Originators will
transfer and assign to the Transferor Premium
Finance Agreements from their portfolio of
Premium Finance Agreements on the day
immediately preceding the Closing Date (the
"Calculation Date") to borrowers whose stated
addresses in the related insurance premium
finance loan agreements are in one of the
Permitted States (as Identified Portfolio") and
that satisfy as of the Cut-off o Date (as
defined below) the eligibility criteria
specified in the Receivables Purchase Agreement
and the Agreement. The "Cut-off Date" is (x)
with respect to Premium Finance Agreements
originated prior to December 1, 1996, December
1, 1996 and (y) with respect to Premium
Financing Agreements originated after December
1, 1996 but through and including the
Calculation Date, the Calculation Date. See
"The Receivables" and "Description of the
Eligible Receivables." The selection of the
Permitted s States was based on state
regulatory considerations. Each of the
Originators will represent and warrant in the
Receivables Purchase Agreement, and the
Transferor will represent and warrant in the
Agreement, that the Identified Portfolio was
not selected in a manner adverse to
Certificateholders. Pursuant to the Agreement,
the Transferor will transfer and assign such
Premium Finance Agreements to the Trustee for
the benefit of the Trust. See "Description of
Certificates--Transfer and Assignment of
Receivables."
As of November 15, 1996 (the "Statistical
Calculation Date'), the Permitted States
consisted of the states set forth in the table
"Geographic Concentration" under the heading
"The Receivables" herein. As of the Statistical
Calculation Date, Aggregate Receivables (as
defined under "--The Receivables" below) in the
Identified Portfolio constitute approximately %
of the Aggregate Receivables in the
Originator's entire portfolio of Premium
Finance Agreements as of the Statistical
Calculation Date.
The statistical information presented in this
Prospectus is based on the Receivables as of
the Statistical Calculation Date. Receivables
transferred to the Trust on the Closing Date
will include certain other Premium Finance
Agreements originated by either of the
Originators after the Statistical Calculation
Date and on or prior to the Calculation Date.
In addition, the characteristics of the
Receivables included as of the Statistical
Calculation Date will vary as of the Cut-off
Date as a result of payments received by or on
behalf of borrowers after the Statistical
Calculation Date and prior to the Cut-off Date.
There will be no material permissible
deviations from the eligibility criteria used
for identifying the Premium Finance Agreements
in the Identified Portfolio as of the
Statistical Calculation Date from those applied
on the Closing Date. However, certain of the
Premium Finance Agreements in the Identified
Portfolio that satisfied the eligibility
criteria as of the Statistical Calculation Date
may not satisfy such criteria on the Closing
Date because of a change in circumstances and
therefore will not be permitted to be
transferred to the Trust. While the statistical
distribution of the characteristics of all
Receivables transferred to the Trust on the
Closing Date will vary from the statistical
information presented in this Prospectus, the
Transferor does not believe that the
characteristics of the Receivables as of the
Cut-off Date will vary materially from the
information presented herein with respect to
the Receivables as of the Statistical
Calculation Date.
Each Originator will be obligated pursuant to
the Receivables Purchase Agreement to transfer
and assign on each day following the Closing
Date all Premium Finance Agreements from the
Identified Portfolio originated by it after the
Cut-off Date which satisfy the eligibility
criteria set forth under "Description of the
Certificates--Eligible Receivables" (the
"Additional Additional Receivables") to the
Transferor, who in turn will be required
pursuant to the Agreement to transfer and
assign all such Additional Receivables to the
Trustee for the benefit of the Trust. See "Risk
Factors--Additional Receivables
Considerations." In the event that sufficient
Additional Receivables are not transferred to
the Trustee for the benefit of the Trust to
maintain the Minimum Transferor Interest as
required by the Agreement and as described
herein, a Pay Out Event would occur and the
Rapid Amortization Period will occur. See
"Description of the Certificates--Transfer and
Assignment of Additional Receivables" and
"--Pay Out Events."
Receivables.................... The Receivables are Rule of 78's Receivables
(as defined herein) and are short-term in
duration, generally with maturities under one
year. Each Receivable bears a fixed
interest rate that is established at the
time of origination. Such interest rate is
generally based on a spread over the estimated
London interbank offered rate at
the date of origination of the loan for
deposits with a maturity comparable to the
average life of the loan, which
currently is generally 4 1/2 months. The
principal amount of each Receivable is fully
amortized over a fixed number
of scheduled payments. The Originators assign
an account number (each, an "Account") for
the borrower under a Premium Finance
Agreement for the related insurance policy
period. A Premium Finance Agreement may
finance premiums relating to more than one
insurance policy or from one or
more insurance carriers. However, there is
only one monthly payment under a Premium
Finance Agreement and such payment is not
allocated to the repayment of the financing of
the premiums of any particular insurance
policy.
Each Premium Finance Agreement representing a
Receivable grants the related Originator a
security interest in the borrower's right to
receive any unearned premium from the insurance
company upon cancellation of the related
insurance policy prior to its expiration.
[Each] Premium Finance Agreement representing a
Receivable also contains a power of attorney
granting the related Originator the right to
cancel the insurance policy and collect such
unearned premium from the insurance company
following a payment default on the related
Receivable. Each Originator will assign its
security interests and related power of
attorney to the Transferor pursuant to the
Receivables Purchase Agreement, and the
Transferor will assign such security interest
and such powers of attorney to the Trustee
pursuant to the Agreement. With respect to
Receivables transferred to the Trust prior to
February 1, 1997, neither the Originators nor
the Transferor will notify the related
insurance carriers of the Trustee's security
interest in the related unearned premiums and
the Trustee's security interest in the related
unearned premium of such Receivables will not
be perfected. With respect to each Receivable
transferred to the Trust on or after February
1, 1997, the Originators and the Transferor
will represent that a notice of finance premium
has been delivered to the related insurance
carrier notifying it of the Trustee's security
interest in the unearned premium and that the
Trust has a first priority perfected security
interest in such unearned premiums. See
"Risk-Factors--Lack of Perfected Security
Interest in Unearned Premiums" and "Certain
Legal Aspects--Lack of Perfected Security
Interest in Unearned Premiums."
The Aggregate Receivables as of the Statistical
Calculation Date was $ ,consisting
of $ of Finance Charge Receivables and $
of Principal Receivables. "Aggregate
Receivables" means as of any date of
determination an amount equal to the aggregate
amount of payments owed on the Receivables from
such date through the respective scheduled
final payment dates of such Receivables
(exclusive of late fees and administrative
charges) less certain net payables as of such
date of determination.
"Finance Charge Receivables" means, with
respect to the Receivables as of the beginning
of any Monthly Period (as defined below), an
amount equal to the aggregate amount of
unearned interest with respect to such
Receivables calculated in accordance with the
Rule of 78s Method. "Monthly Period" means each
calendar month, commencing December, 1996.
"Principal Receivables" means as of any date of
determination, an amount equal to the product
of (x) Aggregate Receivables as of such date of
determination and (y) a fraction, the number of
which is Beginning of Monthly Principal
Receivables and the denominator of which is the
Aggregate Receivables as of the first day of
the current Monthly Period.
"Beginning of Month Principal Receivables"
means, with respect to the Receivables and any
Monthly Period, an amount equal to the
Aggregate Receivables as of the first day of
such Monthly Period (or, in the case of the
Monthly Period commencing December, 1996, as of
the Cut-off Date) minus Finance Charge
Receivables as of such date.
Additional Receivables......... All Additional Receivables originated by the
Originators in the Identified Portfolio will
be transferred to the Trust from time to time
following the Closing Date. Such
Additional Receivables may be of different
credit quality than previously transferred
Receivables but must be underwritten in
accordance with the Originators' customary
credit policies and procedures. Except for
the criteria described under "Description of
Certificates--Eligible Receivables" and
"--Transfer and Assignment of
Receivables," there are no required
characteristics of Additional Receivables.
Because the latest scheduled
maturity date of any Receivable included in
the Trust as of the Statistical Calculation
Date is , 199 , it -- is expected that
following such date substantially all of
the Receivables in the Trust will consist of
Additional Receivables. Additional Receivables
transferred to the Trust may have
characteristics materially different from
the characteristics of the previously
transferred Receivables. See "Risk Factors --
Additional Receivables Considerations" and
"Reports to Certificateholders."
Certificate Interest and
Principal...................... Each of the Certificates represents the right
to receive certain payments from the assets
of the Trust. The Trust assets will be
allocated among the Class A Holders (the
Class B Investor Interest"), the Collateral
Interest Holder (the "Collateral Interest,"
and together with the Class A Investor
Interest and the Class Investor Interest"),
the interest of the holders of other undivided
interests in the Trust issued pursuant to the
Agreement and applicable Series
Supplements and the Transferor (the
"Transferor Interest"), as described below.
The Collateral Interest in
the initial amount of $_____ (which amount
represents ___% of the amount of the initial
Investor Interest) constitutes Credit
Enhancement for Certificates. The provider
of such Credit Enhancement is referred to
herein Collateral Interest Holder").
Allocations will be made to the Collateral
Interest and the Collateral Interest Holder
will have voting and certain other rights
as if the Collateral Interest were a
subordinated class of Certificates.
The Collateral Interest is not being offered
hereby and any information contained herein
relating to the Collateral Interest is
included in the Prospectus solely for the
purpose of facilitating an understanding of
the Certificates.
The Transferor Interest will represent the
right to the assets of the Trust not allocated
to the Investor Interest or the holders of
other undivided interests in the Trust. The
principal amount of the Transferor Interest
will fluctuate as the amount of Principal
Receivables and the amount on deposit in the
Excess Funding Account change Enhancement"
means, with respect to any Series or Class, any
Credit Enhancement, guaranteed rate agreement,
maturity liquidity facility, interest rate cap
agreement, interest rate swap agreement or
other similar arrangement for the benefit of
the certificateholders of that Series or Class.
The term Credit Enhancement" means with
respect to any Series or Class, any cash
collateral guaranty or account, collateral
interest, letter of credit, surety bond,
insurance policy, spread account, reserve
account or other similar arrangement for the
benefit of the certificateholders of that
Series or Class. Credit Enhancement may also
take the form of subordination of one
or more Classes of a Series to any other Class
or Classes of a Series or a cross-support
feature which requires collections on
Receivables of one Series to be paid as
principal and/or interest with respect to
another Series.
The Class A Certificates will represent the
right to receive, from the assets of the Trust
allocated to the Class A Certificates, funds up
to (but not in excess of) the amounts required
to make (a) payments of interest accruing from
the Closing Date through ________ __, 1997 at
the rate of ___% per annum, subject to certain
limitations described under "--Interest" below,
and during each Interest Period thereafter, at
the rate of ____% per annum above the London
interbank offered rate for three month United
States dollar deposits ("LIBOR"), determined as
described herein, prevailing on the related
LIBOR Determination Date, subject to certain
limitations described under "--Interest" below,
(such rate, the "Class A LIBOR Rate"), and (b)
payments of principal on the Class A Scheduled
Payment Date or, under certain limited
circumstances, during the Rapid Amortization
Period, to the extent of the Class A Investor
Interest, which may be less than the unpaid
principal balance of the Class A Certificates
in certain circumstances described herein. If
the Class A Investor Interest is less than the
unpaid balance of the Class A Certificates, the
holders of the Class A Certificates will incur
a loss.
The Class B Certificates will represent the
right to receive, from the assets of the Trust
allocated to the Class B Certificates, funds up
to (but not in excess of) the amounts required
to make (a) payments of interest accruing from
the Closing Date through ________ __, 1997 at
the rate of ___% per annum, subject to certain
limitations described under "--Interest" below,
and during each Interest Period thereafter, at
the rate of _____% per annum above LIBOR,
determined as described herein, prevailing on
the related LIBOR Determination Date (such
rate, the "Class B LIBOR Rate") and (b)
payments of principal on the Class B Scheduled
Payment Date or, under certain limited
circumstances, during the Rapid Amortization
Period, to the extent of the Class B Investor
Interest, which may be less than the unpaid
principal balance of the Class B Certificates
in certain circumstances described herein. No
principal will be paid to the Class B Holders
until the Class A Investor Interest is paid in
full. If the Class B Investor Interest is less
than the unpaid balance of the Class B
Certificates, the holders of the Class B
Certificates will incur a loss.
The aggregate principal amount of the Class A
Investor Interest and the Class B Investor
Interest will, except as otherwise provided
herein, remain fixed at $__________ and
$__________, respectively. The Class A Investor
Interest will decline in certain circumstances
if the Default Amounts allocated to the Class A
Certificates exceed funds allocable thereto as
described herein and the Class B Investor
Interest and the Collateral Interest are zero.
The Class B Investor Interest will decline in
certain circumstances as a result of (a) the
reallocation of collections of Principal
Receivables otherwise allocable to the Class B
Investor Interest to fund certain payments in
respect of the Class A Certificates and (b) the
allocation to the Class B Investor Interest of
certain Default Amounts, including such amounts
otherwise allocable to the Class A Investor
Interest when the Collateral Interest is zero.
During the Controlled Accumulation Period, for
the sole purpose of allocating collections of
Finance Charge Receivables and Default Amounts
with respect to each Monthly Period, the Class
A Investor Interest will be further reduced by
the amount on deposit in the Principal Funding
Account from time to time Class A Adjusted
Investor Interest" and together with the Class
B Investor Interest and the Adjusted Investor
Interest"). See "Description of
Certificates--Reallocation of Cash
Flows," "--Receivables in Defaulted Accounts;
Investor Charge-offs" and "--Principal Funding
Account."
The Class A Certificates, the Class B
Certificates and the Collateral Interest will
each include the right to receive (but only to
the extent needed to make required payments
under the Agreement) varying percentages of
collections of Finance Charge Receivables and
Principal Receivables and will be allocated
varying percentages of the amount of
Receivables which are written off as
uncollectible by a Receivables in Defaulted
Accounts" and the Principal Receivables in
Defaulted Accounts Monthly Period").
Collections of Finance Charge Receivables and
Default Amounts at all
times, and collections of Principal Receivables
during the Revolving Period, will be allocated
to the Investor Interest based on the Floating
Investor Percentage and will be further
allocated among the Class A Investor Interest,
the Class B Investor Interest and the
Collateral Class A Floating Allocation, the
Class B Floating Allocation and the Collateral
Floating Allocation, respectively, applicable
during the related Monthly Period. Collections
of Principal Receivables during the Controlled
Accumulation Period and the Rapid
Amortization Period will be allocated to
the Investor Interest based on the Fixed
Investor Percentage and will be further
allocated among the Class A Investor Interest,
the Class B Investor Interest and the
Collateral Interest Class A Fixed Allocation,
the Class B Fixed Allocation and the Collateral
Fixed Allocation, respectively. See
"Description of the Certificates--Allocation
Percentages" and "--Pay Out Events".
Interest....................... Interest on the Class A Certificates and the
Class B Certificates will accrue from the
Closing Date on the outstanding principal
balance of the Class A Certificates
and the Class B Certificates at the Class A
LIBOR Rate and Class B LIBOR Rate,
respectively, subject to the limitations
described below. Interest will be distributed
quarterly on the 15th day of March, June,
September, and December,(or if any such day is
not a business day, the next succeeding
business day) and on the Scheduled Class B
Payment Date, commencing on the March 17, 1997
Distribution Date and, following the occurrence
of a Pay Out Event, on each Special Payment
Date. Interest for any Interest Payment Date
or Special Payment Date will accrue
from and including the preceding Interest
Payment Date or Special Payment Date (or in
the case of the first Interest Payment Date,
from and include the Closing Date) to but
exclude the next Interest Payment Date or
Special Payment Interest Period").
Interest payments or deposits with respect to
the Class A Certificates for each Distribution
Date will be calculated on the outstanding
principal balance of the Class A Certificates
as of the preceding Record Date (or in the case
of the initial Distribution Date, as of the
Closing Date) based upon, subject to certain
limitations described below, the Class A LIBOR
Rate. The initial Distribution Date will be
__________, __, 1996. Interest payments or
deposits with respect to each Distribution Date
will be calculated on the basis of the actual
number of days in the period (each, a "Monthly
Interest Period") from and including the
preceding Distribution Date (or in the case of
the initial Distribution Date, the Closing
Date) to but excluding such Distribution Date
and a 360-day year. On Class
A Monthly Interest (as defined below) and Class
A Monthly Interest previously due but not
deposited in the Class A Interest Funding
Account (as defined below) or paid to the Class
A Certificateholders Class A Additional
Interest will be (i) paid to the Class A
Certificateholders, if such Distribution Date
is an Interest Payment Date or a Special
Payment Date, or (ii) deposited in an
eligible trust account in the name of Trustee
and for the benefit of the
Class A Certificateholders (the "Class A
Interest Funding Account"), if such
Distribution Date is not an Interest
Payment Date or a Special Payment Date.
Payments to the Class A Certificateholders
or deposits into the Class A
Interest Funding Account in respect of
interest on the Class A Certificates on any
Distribution Date will be Class A
Available Funds for the related Monthly Period.
Interest payments or deposits with respect to
the Class B Certificates for each Distribution
Date will be calculated on the Class B Invested
Amount as of the preceding Record Date (or in
the case of the initial Distribution Date, on
the Class B Initial Invested Amount) based upon
the Class B LIBOR Rate and the actual number of
days in the period from and including the
previous Distribution Date (or in the case of
the initial Distribution Date, the Closing
Date) to but excluding such Distribution Date
and a 360-day year. On each Distribution Date,
Class B Monthly Interest and Class B Monthly
Interest previously due but not deposited in
the Interest Funding Account or paid to the
Class B Certificateholders and any Class B
Additional Class B Additional Interest will be
(i) paid to the Class B Certificateholders, if
such Distribution Date is an Interest Payment
Date or a Special Payment Date, or (ii)
deposited in the Class B Interest
Funding Account, if such Distribution Date
is not an Interest Payment Date or a Special
Payment Date. Payments to the Class B
Certificateholders or deposits into the
Interest Funding Account in respect of
interest on the Class B Certificates on any
Distribution Date will be
funded from Class B Available Funds for the
related Monthly Period. Class A Monthly
Interest and Class B Monthly Interest
for any Distribution Date due but not
paid on such Distribution Date will be payable
on the next succeeding Distribution Date,
together with additional
interest on such amount at the applicable
Class A LIBOR Rate or Class B LIBOR Rate plus
2% per annum (such amount, as applicable,
"Additional Interest"). Any such amounts
will not be distributed until the related
Interest Payment Date.
"Class A Monthly Interest" means for any
Distribution Dates an amount equal to the
lesser of (x) the product of (i) the actual
number of days in the period from the prior
Distribution Date (or with respect to the
initial Distribution Date, the Closing Date) to
and excluding such Distribution Date divided by
360, (ii) the Class A LIBOR Rate and (iii) the
outstanding principal balance of the Class A
Certificates as of the preceding Record Date
(or in the case of the first Distribution Date,
as of the Closing Date) and (y) the Class A
Available Funds Cap for the related Monthly
Period.
Class B Monthly Interest" means for any
Distribution Date, an amount equal to the
lesser of (x) the product of (i) the actual
number of days in the related Interest
Period divided by 360, (ii) the Class B
Rate and (iii) the outstanding principal
balance of the Class B Certificates as of the
preceding Record Date (or
in the case of the first Distribution
Date, as of the Closing Date) and (y) the
Class B Available Funds Cap for the related
Monthly Period.
"Class A Available Funds" means, with respect
to any Monthly Period, an amount equal to the
sum of (a) the Class A Floating Allocation of
collections of Finance Charge Receivables
accrued and allocated to the Investor Interest
with respect to such Monthly Period, (b)
Principal Funding Investment Proceeds, if any,
with respect to the related Transfer Date and
(c) amounts, if any, to be withdrawn from the
Reserve Account which are required to be
included in Class A Available Funds pursuant to
the Series 1996-1 Supplement with respect to
such Transfer Date.
"Class A Available Funds Cap" means, with
respect to any Monthly Period, Class A
Available Funds for such Monthly Period less,
if the Originators are not the Servicer, the
Class A Servicing Fee for such Monthly Period.
Class B Available Funds" means, with respect to
any Monthly Period, an amount equal to the
Class B Floating Allocation of collections of
Finance Charge Receivables accrued and
allocated to the Investor Interest with respect
to such Monthly Period.
"Class B Available Funds Cap" means, with
respect to any Monthly Period, Class B
Available Funds for such Monthly Period less,
if the Originators are not the Servicer, the
Class B Servicing Fee for such Monthly Period.
Interest payments or deposits on each
Distribution Date (other than any payments or
deposits relating to any Shortfall Amounts or
Carry Over Amounts) will be funded from the
portion of Finance Charge Receivables collected
during the preceding Monthly Period [(or with
respect to the first Distribution Date, from
and including the Closing Date through
__________ __, 1996)] and certain other
available amounts (a) with respect to the Class
A Certificates, allocated to the Class A
Investor Interest, and, if necessary, from
Excess Spread and Reallocated Principal
Collections (to the extent available), (b) with
respect to the Class B Certificates, allocated
to the Class B Investor Interest and, if
necessary, from Excess Spread and Reallocated
Principal Collections (to the extent available)
and (c) with respect to the Collateral
Interest, from Excess Spread. See "Description
of the Certificates--Reallocation of Cash
Flows" and "--Application of
Collections--Payment of Interest, Fees and
Other Items" and "Risk Factors--Risk of
Limitations on Subordination."
If and to the extent on any Distribution Date,
the amount of interest payable on the Class A
Certificates based on the Class A LIBOR for the
related Monthly Interest Period Class A exceeds
the Class A Available Funds Cap for the related
Monthly Period, then such excess (the "Class A
Shortfall Amount") will be carried forward to
the next Distribution Date together with
interest thereon at the applicable Class A
LIBOR Rate plus 2% per annum (the "Class A
Carry Over Amount") and will be funded on a
subordinated basis solely from Excess Spread,
if any, available therefor as described under
"Description of the Certificates -- Application
of Collections -- Excess Spread."
If and to the extent on any Distribution Date,
amount of interest payable on the Class B
Certificates based on the Class B LIBOR Rate
for the related Monthly Interest Period exceeds
the Class B Available Funds Cap for the related
Monthly Interest Period, then such excess (the
"Class B Shortfall Amount") will be carried
forward to the next Distribution Date together
with interest thereon at the applicable Class B
LIBOR Rate plus 2% per annum (the "Class B
Carry Over Amount") and will be funded on a
subordinated basis solely from Excess Spread,
if any, available therefor as described under
"Description of the Certificates -- Application
of Collections -- Excess Spread." The Class B
Carry Over Amount is subordinated to the Class
A Carry Over Amount. The Class A Carry Over
Amount and Class B Carry Over Amount are
subordinated to payments in respect of the
Collateral Interest. See "Risk Factors -- Basis
Risk."
Revolving Period............ The "Revolving Period" for the Certificates
means the period from and including the Closing
Date to, but not including, the commencement
of the earlier of (a) the Controlled
Accumulation Period and (b) the Rapid
Amortization Period. During the Revolving
Period, collections on Principal Receivables
otherwise allocable to the Investor Interest
will, subject to certain
limitations and unless a reduction in the
required Collateral Interest has occurred,
be treated as Shared Principal Collections
and allocated to the holders of
other Series of certificates issued and
outstanding or, subject to certain
limitations, paid to the Transferor or
deposited into the Excess Funding
Account. See "Description of the
Certificates--Principal Payments." See
"Description of the Certificates--Pay Out
Events" for a discussion of the events
which might lead to the
termination of the Revolving Period prior
to the commencement of the Controlled
Accumulation Period.
Controlled Accumulation
Period ........................ Unless a Pay Out Event occurs, the controlled
accumulation period for the Certificates
(the "Controlled Accumulation Period") is
scheduled to begin at the close of business on
_______ __, 19__. Subject to the
conditions set forth under
"Description of the Certificates--Postponement
of Controlled Accumulation Period," the day
on which the Revolving Period ends and the
Controlled Accumulation Period begins may be
delayed to not later than the close
of business on _________ __, ____. The
Controlled Accumulation Period will end on the
earliest of (i) the commencement of the Rapid
Amortization Period, (ii) payment of the
Investor Interest in full and (iii) the
Series 1996-1 Termination Date.
On the business day preceding each
Distribution Date (each a "Transfer Date")
during the Controlled Accumulation
Period, prior to the payment of the Class A
Investor Interest in full, amounts equal to the
least of (a) Available Investor Principal
Collections for the related Monthly Period, (b)
the sum of the Controlled Accumulation Amount
for such Monthly Period and any portion of the
Controlled Accumulation Amount for any prior
Monthly Period that has not yet been deposited
(such Controlled Deposit Amount" for such
Monthly Period) and (c) the Class A Investor
Interest on such Transfer Date will be
deposited monthly in a trust account
established by the Servicer (the "Principal
Principal Funding Account") on each Transfer
Date beginning with the Transfer Date in the
month following the commencement of the
Controlled Accumulation Period until the
Principal Funding Account Balance is equal to
the Class A Investor Interest. On each
Transfer Date during the Controlled
Accumulation Period after the Distribution Date
on which the Class A Investor Interest has been
paid in full, an amount equal to the
lesser of (a) Available Investor Principal
Collections for the related Monthly Period
and (b) the Class B Investor
Interest on such Transfer Date will be
deposited into the Distribution Account for
distribution to the Class B
Holders on the Class B Scheduled Payment
Date. If, for any Monthly Period, the
Available Investor Principal
Collections for such Monthly Period exceed the
applicable Controlled Deposit Amount, the
amount of such excess will be first paid to the
Collateral Interest Holder to the
extent that the Collateral Interest exceeds the
Required Collateral Interest and then will be
treated as Shared Principal Collections and
allocated to the holders of
other Series of certificates issued and
outstanding or, subject to certain limitations,
paid to the Transferor or
deposited into the Excess Funding Account.
See "Description of the Certificates--
Application of Collections."
" Available Investor Principal Collections"
means, with respect to any Monthly Period in the
Controlled Accumulation Period or the Rapid
Amortization Period, an amount equal to the
sum of (a) (i) the Fixed Investor Percentage
of collections of Principal
Receivables received during such Monthly
Period and certain other amounts allocable to
the Investor Interest, minus (ii) the amount
of Reallocated Principal Collections
with respect to such Monthly Period used to
fund interest on the Certificates or the
Servicing Fee, plus (b) any Shared Principal
Collections with respect to other Series
that are allocated to Series 1996-1.
Unless a Pay Out Event occurs, prior to the
payment of the Class A Investor Interest in
full, all funds on deposit in the Principal
Funding Account will be invested at the
direction of the Servicer by the Trustee in
certain Permitted Investments. Investment
earnings (net of investment losses and
expenses) on funds on deposit in the
Principal Funding Account (the
Principal Funding Investment Proceeds")
during the Controlled Accumulation Period
will be used to pay interest on the Class A
Certificates in an amount up to, for each
Transfer Date, the product of (a) a
fraction, the numerator of which is the
actual number of days in the related Interest
Period and the denominator of
which is 360, [(b) the Class A LIBOR Rate]
in effect with respect to the related
Interest Period and (c) the
Principal Funding Account Balance as of the
Record Date Class A Covered Amount"). If, for
any Transfer Date,
the Principal Funding Investment ount Proceeds
are less than the Class A Covered Amount, the
amount of such deficiency (the "Class A
Principal Funding Class
A Principal Funding Investment Shortfall")
shall be paid, to the extent available, from
the Reserve Account and, if necessary, from
Excess Spread and Reallocated Principal
Collections. See "Description of the
Certificates--Principal Funding
Account."
Funds on deposit in the Principal Funding
Account will be available to pay the Class A
Holders in respect of the Class A Investor
Interest on the Class A Scheduled Payment Date.
If the aggregate principal amount of deposits
made to the Principal Funding Account is
insufficient to pay the Class A Investor
Interest in full on the Class A Scheduled
Payment Date, the Rapid Amortization Period
will commence. Although it is anticipated that
during the Controlled Accumulation Period prior
to the payment of the Class A Investor Interest
in full, funds will be deposited in the
Principal Funding Account in an amount equal to
the applicable Controlled Deposit Amount on
each Transfer Date and that scheduled principal
will be available for distribution to the Class
A Holders on the Class A Scheduled Payment
Date, no assurance can be given in that regard.
See "Maturity Assumptions."
On the Class B Scheduled Payment Date, provided
that the Class A Investor Interest is paid in
full on the Class A Scheduled Payment Date and
the Rapid Amortization Period has not
commenced, Available Investor Principal
Collections will be used to pay the Class B
Holders in respect of the Class B Investor
Interest as described herein. If the Available
Investor Principal Collections are insufficient
to pay the Class B Investor Interest in full on
the Class B Scheduled Payment Date, the Rapid
Amortization Period will commence. Although it
is anticipated that scheduled principal will be
available for distribution to the Class B
Holders on the Class B Scheduled Payment Date,
no assurance can be given in that regard. See
"Maturity Assumptions".
If a Pay Out Event occurs during the Controlled
Accumulation Period, the Rapid Amortization
Period will commence, and any amounts on
deposit in the Principal Funding Account will
be paid to the Class A Holders on the
Distribution Date in the month following the
commencement of the Rapid Amortization Period.
Other Series offered by the Trust may or may
not have amortization or accumulation periods
like the Controlled Accumulation Period for the
Certificates, and such periods may have
different lengths and begin on different dates
than such Controlled Accumulation Period. Thus,
certain Series may be in their revolving
periods while others are in periods during
which collections of Principal Receivables are
distributed to or held for the benefit of
certificateholders of such other Series. In
addition, other Series may allocate Principal
Receivables based upon different investor
percentages. See "Description of the
Certificates--New Issuances."
Rapid Amortization Period...... During the period from the day on which a
Pay Out Event has occurred and ending on the
earlier of (a) the payment of the Investor
Interest in full and (b) the Series 1996-1
Rapid Amortization Period"), Available
Investor Principal Collections will be
distributed monthly on each Distribution
Date to the Class A Holders
and, following payment of the Class A Investor
Interest in full, to the Class B Holders and,
following payment of the Class B Investor
Interest in full, to the Collateral
Interest Holder beginning with the
Distribution Date in the month following the
commencement of the Rapid
Amortization Period. See "Description of
the Certificates--Pay Out Events" for a
discussion of the events which might lead
to the commencement of the Rapid
Amortization Period.
Subordination of the Class B
Certificates and the
Collateral Interest ......... The Class B Certificates and the Collateral
Interest will be subordinated, as described
herein, to the extent necessary to fund
certain payments with respect to the
Class A Certificates as described herein.
In addition, the Collateral Interest will be
subordinated to the extent
necessary to fund certain payments with
respect to the Class B Certificates. If the
Class B Investor Interest and
the Collateral Interest are reduced to zero,
the Class A Holders will bear directly the
credit and other risks
associated with their interest in the Trust.
If the Collateral Interest is reduced to zero,
the Class B Holders will bear directly the
credit and other risks
associated with their interest in the Trust.
To the extent the Class B Investor Interest
is reduced, the percentage of collections of
Finance Charge Receivables [accrued and]
allocable to the Class B Holders in
subsequent Monthly Periods will be reduced.
Such reductions of the Class B
Investor Interest will thereafter be
reimbursed and the Class B Investor
Interest increased on each Transfer Date
by the amount, if any, of Excess Spread for
such Transfer Date available for that purpose.
To the extent the amount of such reduction in
the Class B Investor Interest is not
reimbursed, the amount of principal and
interest distributable to the Class B Holders
will be reduced. See "Risk Factors--
Limitations on Subordination" and
"Description of the Certificates--Subordination."
Additional Amounts Available
to Holders .................. With respect to any Transfer Date, Excess
Spread will be Class A Required Amount and
the Class B Required Amount, if any. The
"Class A Required Amount" means the amount, if
any, by which the
sum of (a) the Class A Monthly Interest due on
the related Distribution Date and any overdue
Class A Monthly Interest and Class A Additional
Interest thereon, (b) the Class A Servicing Fee
for the related Monthly Period and any overdue
Class A Servicing Fee and (c) the Class A
Investor Class A Investor Default Amount, if
any, for the related Monthly Period exceeds
the Class A Available Funds for the related
Monthly Period. The "Class Class B Required
Amount" means an amount, if any, equal to the
sum of (a) the amount, if any, by which the
sum of (i) Class B Monthly Interest due
on the related Distribution Date and any
overdue Class B Monthly Interest and Class B
Additional Interest thereon,
and (ii) the Class B Servicing Fee for the
related Monthly Period and any overdue Class B
Servicing Fee exceeds the Class B
Available Funds for the related Monthly Period
and (b) the Class B Investor Default Amount,
if any, for the Excess Spread" for any
Transfer Date will equal the sum of (1) the
excess of (A) Class A Available Funds for the
related Monthly Period over (B)
the sum of the amounts referred to in clauses
(a), (b), and (c) in the definition of
"Class A Required Amount" above, (2) the
excess of (A) Class B Available Funds for
the related Monthly Period over (B) the sum
of the amounts referred to in clauses (a)(i)
and (a)(ii) in the definition of "Class B
Required Amount" above and (3)
Collateral Available Funds for the related
Monthly Period not used under certain
circumstances to pay the Collateral
Interest Servicing Fee, as described herein.
If, on any Transfer Date, Excess Spread is less
than the Class A Required Amount, Reallocated
Principal Collections allocable first to the
Collateral Interest and then to the Class B
Investor Interest with respect to the related
Monthly Period will be used to fund the
remaining Class A Required Amount. If
Reallocated Principal Collections with respect
to such Monthly Period are insufficient to fund
the remaining Class A Required Amount for the
related Transfer Date, then the Collateral
Interest (after giving effect to reductions for
any Collateral Charge-Offs and any Reallocated
Principal Collections allocable to the
Collateral Trust on such Transfer Date) will be
reduced by the amount of such deficiency (but
not by more than the Class A Investor Default
Amount for such Monthly Period). In the event
that such reduction would cause the Collateral
Interest to be a negative number, the
Collateral Interest will be reduced to zero and
the Class B Investor Interest (after giving
effect to reductions for any Class B
Charge-Offs and Reallocated Principal
Collections allocable to the Class B Investor
Interest) will be reduced by the amount by
which the Collateral Interest would have been
reduced below zero (but not by more than the
excess of the Class A Investor Default Amount,
if any, for such Monthly Period over the
amount, if any, of the Collateral Interest with
respect to such Monthly Period). In the event
that such reduction would cause the Class B
Investor Interest to be a negative number, the
Class B Investor Interest will be reduced to
zero and the Class A Investor Interest will be
reduced by the amount by which the Class B
Investor Interest would have been reduced below
zero (but not by more than the excess, if any,
of the Class A Investor Default Amount for such
Monthly Period over such reductions in the
Collateral Interest and the Class B Investor
Interest with respect to such Monthly Period)
(such reduction, a "Class A Investor Class
A Investor Charge-Off"). If the Collateral
Interest and the Class B Investor Interest are
reduced to zero, the Class A Holders will bear
directly the credit and other risks associated
with their undivided interest in the Trust. See
"Description of the Certificates--Reallocation
of Cash Flows" and "--Receivables in Defaulted
Accounts; Investor Charge-Offs."
If, on any Transfer Date, Excess Spread not
required to pay the Class A Required Amount and
to reimburse Class A Investor Charge-Offs is
less than the Class B Required Amount,
Reallocated Principal Collections allocable to
the Collateral Interest for the related Monthly
Period not required to pay the Class A Required
Amount will be allocated to fund the remaining
Class B Required Amount. If such remaining
Reallocated Principal Collections allocable to
the Collateral Interest with respect to such
Monthly Period are insufficient to fund the
remaining Class B Required Amount for the
related Transfer Date, then the Collateral
Interest (after giving effect to reductions for
any Collateral Charge-Offs, Reallocated
Principal Collections allocable to the
Collateral Interest and any adjustments made
thereto for the benefit of the Class A Holders)
will be reduced by the amount of such
deficiency (but not by more than the Class B
Investor Default Amount for such Monthly
Period). If such reduction would cause the
Collateral Interest to be a negative number,
the Collateral Interest will be reduced to
zero, and the Class B Investor Interest will be
reduced by the amount by which the Collateral
Interest would have been reduced below zero
(but not by more than the excess, if any, of
the Class B Investor Default Amount for such
Monthly Period over such reduction in the
Collateral Interest with respect to such
Monthly Period) (such Class B Investor
Charge-Off"). In the event of a reduction
of the Class A Investor Interest, the Class
B Investor Interest or the Collateral
Interest, the amount of principal and interest
available to fund payments with respect to
the Class A Certificates and the Class B
Certificates will be decreased. See
"Description of the Certificates--
Reallocation of Cash Flows" and
"--Receivables in Defaulted Accounts;
Investor Charge-Offs."
Required Collateral
Interest.................... The " Required Collateral Interest" with
respect to any Transfer Date means (a)
initially, Initial Collateral Interest") and
(b) on any Transfer Date thereafter, an amount
equal to __% of the Adjusted Investor Interest
on such Transfer Date, after taking into
account deposits into the Principal Funding
Account on such Transfer Date and payments to
be made on the related Distribution Date, and
the Collateral Interest on the prior Transfer
Date after any adjustments made on such
Transfer Date, but not less than $_____;
provided however, (i) that if certain
reductions in the Collateral Interest occur or
if a Pay Out Event occurs, the Required
Collateral Interest for
such Transfer Date shall equal the Required
Collateral Interest for the Transfer Date
immediately preceding the occurrence of such
reduction or Pay Out Event; (ii) in no event
shall the Required Collateral Interest exceed
the unpaid principal amount of the Certificates
as of the last day of the Monthly Period
preceding such Transfer Date after taking into
account payments to be made on the related
Distribution Date; and (iii) the Required
Collateral Interest may be reduced at any time
to a lesser amount if the Rating Agency
Condition is satisfied. See "Description of the
Certificates--Required Collateral Interest."
If on any Transfer Date, the Collateral
Interest is less than the Required Collateral
Interest, certain Excess Spread amounts, if
available, will be used to increase the
Collateral Interest to the extent of such
shortfall. If on any Transfer Date the
Collateral Interest equals or exceeds the
Required Collateral Interest, any such Excess
Spread amounts will first be deposited into the
Reserve Account as described herein and second,
to the extent available, be applied in
accordance with the Loan Agreement among the
Trustee, the Transferor, each Servicer [each
Back-up Servicer] and the Collateral Interest
Holder Loan Agreement") and will not be
available to the Holders.
Shared Excess Finance
Charge Collections .......... To the extent that collections of Finance
Charge Receivables allocated to the Investor
Interest (and certain other amounts that are to
be treated as collections of Finance Charge
Receivables allocated to the Investor Interest)
are not needed to make payments in
respect of the Investor Interest as described
herein under "Description of the Certificates
--Application of Collections," such Excess
Finance Charge Collections will
be applied to make payments with respect to
other Series entitled to share therein in
accordance with the Agreement. In addition,
Excess Finance Charge Collections
otherwise allocable to certain other Series,
to the extent not required to make payments
in respect of such Series,
may be applied to cover shortfalls in amounts
payable from Excess Spread as described herein
under "Description of
the Certificates--Application of Collections."
Shared Principal
Collections.................... To the extent that collections of Principal
Receivables allocated to the Investor Interest
are not needed to make payments on the Investor
Interest or to be deposited in
the Principal Funding Account, such collections
("Shared Shared Principal Collections") will
be allocated to cover certain principal payments
due to or for the benefit of certificateholders
of other Series or, under certain circumstances,
deposited into the Excess
Funding Account or paid to the Transferor.
Any such reallocation or deposit will not result
in a reduction in the Investor Interest with
respect to Series 1996-1. In
addition, collections of Principal
Receivables and certain other amounts otherwise
allocable to other Series, to the
extent such collections are not needed to make
payments to or deposits for the benefit of the
certificateholders of such other Series, may be
applied to cover principal
payments due to or for the benefit of the
holders of the Certificates or the holder of the
Collateral Interest. See "Description of the
Certificates--Shared Principal Collections."
Servicing Fee.................. The Servicers will receive a monthly fee
as servicing compensation from the Trust on
each Transfer Date. On each Transfer Date,
the Class A Servicing Fee, the Class B
Servicing Fee and the Collateral Interest
Servicing Fee will be paid as described
under "Description of the
Certificates--Servicing Compensation and
Payment of Expenses."
Optional Repurchase ........... The Investor Interest will be subject to
optional repurchase by the Transferor on any
Distribution Date on or after the
Distribution Date on which the Investor
Interest is reduced to an amount less than
or equal to $__________ (_% of the initial
Investor Interest), if certain conditions
set forth in the Agreement are met. The
repurchase price will be equal to the sum of
the Investor Interest and all accrued and
unpaid interest on the Certificates and the
Collateral Interest through the day
preceding the Distribution Date on which the
repurchase occurs. See "Description of the
Certificates--Final Payment of Principal;
Termination."
New Issuances.................. Pursuant to any one or more supplements to the
Agreement Series Supplement"), the Transferor
may require the Trustee to issue one or more
new Series in exchange
for a reduction in the Transferor
Interest. In addition, if provided in the
relevant Series Supplement (and subject to any
applicable requirements under the Exchange Act
and the rules and regulations thereunder,
including Rule 13E-4), Certificates
representing any Series issued by that trust
may be tendered to the trustee in exchange for
one or more new Series. Any issuance or tender
and issuance pursuant to either of the above
procedures is referred to as a "New Issuance."
A New Issuance may occur only upon delivery to
the trustee of the following: (i) a Series
Supplement specifying the Principal Terms")
of the new Series, (ii) (a) an opinion of
counsel to the effect that, unless otherwise
stated in the related Series Supplement,
the certificates of that Series will be
characterized as indebtedness for Federal
income tax purposes and (b) an
opinion of counsel to the effect that, for
Federal income tax purposes, (1) such issuance
will not adversely affect the tax
characterization as debt of Certificates of
any outstanding Series or Class that were
characterized as debt at the time of their
issuance, (2) such issuance will
not cause the Trust to be classified as an
association (or publicly traded partnership)
taxable as a corporation and
(3) such issuance will not cause or constitute
an event in which gain or loss would be
recognized by any Certificateholder (an
opinion of counsel to this effect
Tax Opinion"), (iii) if required by the
related Series Supplement, the form of
Credit Enhancement, (iv) if Credit Enhancement
is required by the Series Supplement, an
appropriate Credit Enhancement
agreement with respect thereto, (v) written
confirmation from each Rating Agency that the
New Issuance will not result in that Rating
Agency reducing or withdrawing its
rating on any then outstanding Series rated
by it, (vi) an officer's certificate of the
Transferor to the effect that
after giving effect to the New Issuance
the Transferor Interest would be at least equal
to the Minimum Transferor Interest and (vii)
the Certificates representing the
Series to be exchanged, if applicable.
See "Description of the Certificates --
New Issuances."
The Transferor also may from time to time cause
the Trustee to sell purchased interests in the
Receivables and other assets of the Trust to
one or more purchasers. Any purchased interest
will represent an interest in the Trust's
assets similar to the interest of a Series of
Certificates, and will represent a reduction in
the Transferor Interest, and will not reduce
the Investor Interest. No Series will be
subordinated to any purchased interest, and no
purchased interest will have any interest in
the Enhancement or series accounts specified
for any Series, except as specified in the
prospectus relating to that Series. Any such
sale will take place pursuant to one or more
agreements which will specify terms similar to
Principal Terms for the applicable purchased
interests and may grant the purchasers of such
interests notice and consultation rights with
respect to rights or actions of the Trustee.
Any sale of purchased interests in the assets
of a Trust will be subject to the satisfaction
of the same conditions (including Rating Agency
confirmations) as for a New Issuance, as
appropriately modified to refer to a purchased
interest rather than a New Issuance. The
modification of conditions would not result in
any substantive change in such conditions, but
would simply change the conditions to refer to
the contemplated sale of a purchased interest
rather than a New Issuance. See "Risk
Factors--Master Trust Considerations."
Tax Status .................... Special Tax Counsel to the Transferor will
opine on the Closing Date that under existing
law the Certificates will be characterized
as debt for Federal income tax purposes
and the Trust will not be an association
or publicly traded partnership taxable as a
corporation. Under the Agreement, the
Transferor, the Servicer, the Holders and
the Certificate Owners will agree to
treat the Certificates as debt for Federal,
state, local and foreign income and franchise
tax purposes. See "U.S. Federal
Income Tax Consequences" for additional
information concerning the application of
Federal income tax laws.
ERISA Considerations........... Under a regulation issued by the Department of
Labor, the Trust's assets would not be deemed
"plan assets" of an employee benefit plan
holding the Class A Certificates if
certain conditions are met, including that
the Class A Certificates must be held, upon
completion of the public offering made hereby,
by at least 100 investors who are
independent of the Transferor and of one
another. No assurance can be given that the
Class A Certificates will be held by at least
100 such persons. The Transferor
anticipates that, if the Class A Certificates
are held by at least 100 such persons, the
other conditions of the regulation will be met.
No monitoring or other measures
will be taken to ensure that any such
conditions will be met. If the Trust's assets
were deemed to be "plan assets"
of an employee benefit plan investor (e.g.,
if the 100 independent investor criterion is
not satisfied), violations of the "prohibited
transaction" rules of the
Employee Retirement Income Security Act
of 1974, as ERISA"), could result and generate
excise tax and other liabilities under ERISA
and section 4975 of the Internal Revenue Code
of 1986, as amended (the Code"), unless a
statutory, regulatory or administrative
exemption is available. It is
uncertain whether existing exemptions from the
"prohibited transaction" rules of ERISA would
apply to all transactions involving the
Trust's assets. Accordingly, fiduciaries or
other persons contemplating purchasing the
Certificates on behalf or with "plan
assets" of any employee benefit plan should
consult their counsel before
making a purchase. See "ERISA Considerations".
The Underwriters currently do not expect that
the Class B Certificates will be held by at
least 100 such persons and, therefore, do not
expect that such Class B Certificates will
qualify as publicly-offered securities under
the regulation referred to in the preceding
paragraph. Accordingly, the Class B
Certificates may not be acquired by (a) any
employee benefit plan that is subject to ERISA,
(b) any plan or other arrangement (including an
individual retirement account or Keogh plan)
that is subject to section 4975 of the Code or
(c) any entity whose underlying assets include
"plan assets" under the regulation by reason of
any such plan's investment in the entity. By
its acceptance of a Class B Certificate or an
interest therein, each Class B Holder and
Certificate Owner will be deemed to have
represented and warranted that it is not
subject to the foregoing limitation.
Ratings........................ It is a condition to the issuance of the
Class A Certificates that they be rated in the
highest rating category by at least one Rating
Agency. The rating of the Class A Certificates
is based primarily on the value of
the Receivables and the terms of the Class B
Certificates and the Collateral Interest.
It is a condition to the issuance of the Class
B Certificates that they be rated in
one of the three highest rating categories by
at least one Rating Agency. The rating of the
Class B Certificates is based primarily on
the value of the Receivables and the
terms of the Collateral Interest.
A rating will reflect the Rating Agency's
assessment of the likelihood that
Certificateholders will receive the payments of
interest, subject to the Class A Available
Funds Cap in the case of the Class A
Certificates and the Class B Available Funds
Cap in the case of the Class B Certificates,
and principal required to be made under the
Agreement. However, a rating will not address
the likelihood that the principal of, or
interest on, any Certificates will be paid on a
scheduled date. In addition, the rating will
not address the likelihood of payment of any
Class A Shortfall Amount, Class A Carry Over
Amount, Class B Shortfall Amount or Class B
Carry Over Amount. The rating will not be a
recommendation to purchase, hold or sell
Certificates, and will not comment as to the
marketability of such Certificates, any market
price or suitability for a particular investor.
<PAGE>
RISK FACTORS
LIMITED LIQUIDITY. There is currently no market for the Certificates. The
Underwriters intend to make a market in the Certificates but are not obligated
to do so. There is no assurance that a secondary market will develop or, if it
does develop, that it will provide Certificateholders with liquidity of
investment or that it will continue until the Certificates are paid in full.
NONRECOURSE OBLIGATIONS. No Certificateholder will have recourse for
payment of its Certificates to any assets of the Originators, the Transferor or
any of their affiliates. Consequently, Certificateholders must rely solely upon
payments on or in respect of the Receivables for the payment of principal of and
interest on the Certificates and the Collateral Interest. Furthermore, under the
Agreement, the Certificateholders will have an interest in the Receivables and
collections with respect thereto only to the extent of the Invested Amount.
Should the Certificates not be paid in full on a timely basis,
Certificateholders may not look to any assets of the Originators, the Transferor
or any of their affiliates to satisfy their claims.
LACK OF PERFECTED SECURITY INTERESTS IN UNEARNED PREMIUMS. Each Receivable
includes a grant by the borrower to the applicable Originator of a security
interest in the unearned portion of the premium of the financed commercial
insurance policy (the "Unearned PremiumUnearned Premium"). The perfection of a
security interest in an unearned premium is not governed by the Uniform
Commercial Code ("UCC"). State statutes, common law and industry practice govern
the perfection of a security interest in the unearned premiums and generally
require for the perfection of such security interest, a notice informing the
applicable insurance company of the identity of the person entitled to the
payment of such unearned premium. It is standard practice for the Originators to
send such a notice to the applicable insurance company at or about the time the
insurance policy premium is financed. Each Originator will represent and warrant
in the Receivables Purchase Agreement to the Transferor and the Transferor will
represent and warrant to the Trust, in each case, as of the date of transfers,
that the applicable Originator that has a first priority perfected security
interest in the Unearned Premiums relating to the Receivables so transferred.
Each Originator will assign its security interest in the Unearned Premiums
to the Transferor, who will in turn assign its security interest in the Unearned
Premiums to the Trust. Due to the administrative burden and expense of mailing a
notice for each Receivable to the applicable insurance company and the
administrative burden and expense of the related insurance companies, which
would have to process such notices, neither the Transferor nor the Trustee will
send notices to the related insurance companies, with respect to the Trust's
security interests in the Unearned Premiums relating to the Receivables
transferred to the Trust on or prior to February 1, 1997. In the absence of such
procedures neither the Transferor nor the Trust will have a perfected security
interest in the Unearned Premiums relating to such Receivables.
With respect to the Receivables transferred to the Trust on or after
February 1, 1997, the applicable Originator will represent and warrant in the
Receivables Purchase Agreement to the Transferor and the Transferor will
represent and warrant in the Agreement that a notice of finance premium has been
delivered to the related insurance carrier notifying it of the Trustee's
security interest in the Unearned Premium and that the Trust has a perfected
security interest in such Unearned Premiums.
In the event the representations and warranties relating to the perfection
of security interests in Unearned Premiums is breached and as a result of such
breach the related Account becomes a Defaulted Account or the Trust's rights in,
to or under the Receivables or its proceeds are impaired or the proceeds of such
Receivable are not free and clear of any lien, then upon the expiration of the
applicable grace period such Receivable shall be removed from the Trust as
described under "Description of the Certificates Representations and
Warranties."
If an Originator becomes the subject of a bankruptcy or insolvency
proceeding and the Trust does not have a perfected security interest in the
Unearned Premium, the Trust's interest in such Unearned Premium would be
subordinate to the interest of a bankruptcy trustee of such Originator. As a
result, Certificateholders might not be able to obtain the proceeds of any
returned Unearned Premiums.
TRANSFEROR BANKRUPTCY RISK. While the Transferor will transfer Receivables
to the Trust, a court could treat such transfers as an assignment of collateral
as security for the benefit of holders of certificates issued by the Trust. The
Transferor represents and warrants in the Agreement that the transfer of the
Receivables to the Trust is either a valid transfer and assignment of the
Receivables to the Trust or the grant to the Trust of a security interest in the
Receivables. The Transferor has taken and will take certain actions as are
required to perfect the Trust's security interest in the Receivables and
warrants that if the transfer to the Trust is deemed to be a grant to the Trust
of a security interest in the Receivables, the Trustee will have a first
priority perfected security interest therein. Nevertheless, if the transfer of
the Receivables to the Trust is deemed to create a security interest therein, a
tax or government lien on property of the Transferor arising before Receivables
come into existence may have priority over the Trust's interest in such
Receivables, and, if the FDIC were appointed receiver of the Transferor, the
receiver's administrative expenses may also have priority over the Trust's
interest in such Receivables. See "Certain Legal Aspects of the
Receivables--Transfer of Receivables."
To the extent that the Transferor has granted a security interest in the
Receivables to the Trust and that security interest was validly perfected before
any insolvency of the Transferor and was not granted or taken in contemplation
of insolvency or with the intent to hinder, delay or defraud the Transferor or
its creditors, that security interest should not be subject to avoidance in the
event of insolvency and receivership, and payments to the Trust with respect to
the Receivables should not be subject to recovery by a conservator or receiver
for the Transferor. If, however, the conservator or receiver were to assert a
contrary position, or were to require the Trustee to establish its right to
those payments by submitting to and completing the administrative claims
procedure established under the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREAFIRREA"), or the conservator or receiver were to
request a stay of proceedings with respect to the Transferor as provided under
FIRREA, delays in payments on the Certificates and possible reductions in the
amount of those payments could occur. If a conservator or receiver were
appointed for the Transferor pursuant to the Agreement, new Receivables would
not be transferred to the Trust and the Trustee would sell the portion of the
Receivables allocable in accordance with the Agreement to each Series (unless
holders of more than 50% of the principal amount of each class of such Series
instruct otherwise), thereby causing early termination of the Trust and a loss
to the Certificateholders if the net proceeds allocable to the
Certificateholders from such sale, if any, were insufficient to pay the
Certificateholders in full. Upon the occurrence of a Pay Out Event, if a
conservator or receiver is appointed for the Transferor and no Pay Out Event
other than such conservatorship, receivership or insolvency of the Transferor
exists, the conservator or receiver may have the power to prevent the early
sale, liquidation or disposition of the Receivables and the commencement of the
Rapid Amortization Period. In addition, a conservator or receiver for the
Transferor may have the power to cause early payment of the Certificates. See
"Certain Legal Aspects of the Receivables-Certain Matters Relating to
Receivership."
PREMIUM FINANCE LOAN CREDIT AND RELATED RISKS. Commercial premium finance
loans entail several different risks, including (a) the creditworthiness of the
borrower, (b) the creditworthiness of the insurance company, and (c) the
capabilities and operating procedures of the insurance agent or broker that (i)
places the insurance policy, (ii) serves as a source of significant information
concerning the loan transaction and (iii) may pay the loan proceeds to insurance
companies or their agents or collect unearned premium funds. Application of
federal and state bankruptcy, debtor relief or insolvency laws to an insolvency
of a borrower, insurance company or insurance agent or broker involved with a
loan would affect the interests of the Certificateholders in the Receivables if
such laws result in any Receivables being written off as uncollectible or
prevent the cancellation of such borrower's insurance policy or the collection
of related Unearned Premium, if any, which may serve as collateral for such
borrower's loan. Moreover, the amount of the unearned premium required to be
returned to the insured is dependent on state law and varies depending on when
the notice of cancellation becomes effective. Additionally, at the time of the
origination of a Receivable, the Unearned Premium will not fully collateralize
the borrower's obligations. Generally, depending on the amount of the borrower's
downpayment, the payment terms of the Receivable and applicable state law, the
Unearned Premium will fully collateralize the Receivable after four or five
scheduled payments have been made; although in some circumstances the Unearned
Premium may never fully collateralize the Receivable. Consequently, in certain
circumstances, the Trust will have to rely on payments and recoveries from
borrowers as its sole source of payment on the Receivables. See "Business of the
Originators-Premium Finance Loan Underwriting Procedures" and "Description of
the Certificates-Receivables in Defaulted Accounts; Charge-Offs."
DEPENDENCE ON BUSINESS OF ORIGINATORS. The premium finance loan industry
is competitive and includes banks as well as other premium finance lending
companies that offer financing to companies that purchase commercial insurance.
Insurance premium lenders may compete on the basis of loan pricing and terms,
underwriting criteria and servicing quality. If commercial insurance consumers
choose to utilize competing sources of credit, the amount of available
Additional Receivables generated may be reduced. The size of the Trust will be
dependent upon the Originators' continued ability to generate and transfer
Additional Receivables to the Transferor, who in turn will transfer such
Receivables to the Trustee for the benefit of the Trust. While the Receivables
only represent a portion of the Originators' total portfolio and the Originators
have generated a relatively stable dollar volume of premium finance loans on a
year-to-year basis over the past five fiscal years, due to state regulatory
considerations, the Additional Receivables eligible to be transferred to the
Trustee for the benefit of the Trust must be originated with borrowers located
in Permitted States. As of the Statistical Calculation Date Premium Finance
Agreements in the Identified Portfolio constitute approximately ___% (of the
aggregate receivables) of all Premium Finance Agreements in the Originators'
portfolio. In addition, certain eligibility criteria relating to concentration
limits on insurance carriers or obligors may further limit that portion of the
Originators portfolio that is eligible for transfer to the Trust. See "The
Receivables." If the amount of Additional Receivables originated with borrowers
located in Permitted States declines significantly or the concentration of
certain insurance carriers or obligors in the Originators' portfolio materially
changes, Additional Receivables available to be transferred to the Trustee for
the benefit of the Trust will decline. If the amount of Additional Receivables
originated declines to such an extent that the Transferor is unable to maintain
the Minimum Transferor Interest as required by the Agreement and described
herein, a Pay Out Event would occur, in which event the Rapid Amortization
Period would commence. If the Rapid Amortization Period commences,
Certificateholders are likely to be repaid principal on the Certificates earlier
than anticipated which would affect the anticipated average life of the
Certificates and could result in reinvestment risk with respect to such earlier
repayments. See "Description of the Certificates--Pay Out Events."
RISK OF LIMITATIONS ON SUBORDINATION. Although the probability of payment
of amounts due with respect to the Certificates is intended to be enhanced by
the subordination described herein of payments on the Collateral Interest as
described herein and, in the case of the Class A Certificates, also by the
subordination of payments on the Class B Certificates to the Class A
Certificates as described herein, the amount of such enhancement is limited and
may decline during any Rapid Amortization Period or as a result of Receivables
in Defaulted Accounts. If the subordination of payments on the Collateral
Interest are insufficient to protect the Class B Certificates from shortfalls or
delays in collections on the Receivables, then the Class B Certificateholders
will bear directly the credit risk associated with their undivided interests in
the Trust. If the subordination of payments on the Collateral Interest and the
Class B Certificates are insufficient to protect the Class A Certificates from
shortfalls or delays in collections on the Receivables, then the Class A
Certificateholders will bear directly the credit risk associated with their
undivided interests in the Trust. The credit risk associated with the
Certificateholders' undivided interests in the Trust is the risk that the Trust
will not receive full and timely payment of the Receivables. Series of
certificates issued in the future may share with the Class A Certificates and
the Class B Certificates in the benefits of the subordination of the Collateral
Interest, and any amounts deposited into the Excess Funding Account. See
"Description of the Certificates--Subordination," "--Certificate Interest and
Principal" and "--Excess Funding Account."
GEOGRAPHIC CONCENTRATION AND ADVERSE ECONOMIC FACTORS. As of the
Statistical Calculation Date, ___% of the Aggregate Receivables were related to
Premium Finance Agreements with borrowers whose stated addresses in the related
insurance premium loan agreements is in California. After giving effect to the
transfer of Additional Receivables this percentage may increase or decrease.
Economic factors, including the occurrence of a recession, the rate of
inflation, and relative interest rates, may have an adverse impact upon the
performance of the Receivables and on the Originators' ability to generate
Additional Receivables. In particular, negative economic developments in
California could have an adverse impact on the timing and amounts of payments
made by borrowers in respect of Receivables and could cause such borrowers to
become bankrupt or insolvent. See "--Premium Finance Loan Credit and Related
Risks" and "Maturity Considerations."
ADDITIONAL RECEIVABLES CONSIDERATIONS. Each Originator will be obligated
pursuant to the Receivables Purchase Agreement to transfer all Additional
Receivables originated by it in the Identified Portfolio to the Transferor, who
in turn will be obligated pursuant to the Agreement to transfer such Additional
Receivables to the Trustee for the benefit of the Trust. Such Additional
Receivables may include Receivables originated using criteria different from
those which were applied to the Receivables assigned to the Trustee for the
benefit of the Trust on the Closing Date or to previously transferred Additional
Receivables, because such Receivables were originated at a different date.
Consequently there can be no assurance that Additional Receivables transferred
to the Trust in the future will be of the same credit quality as previously
transferred Receivables. The transfer of Additional Receivables will be subject
to the satisfaction of certain criteria described herein under "Description of
Certificates--Eligible Receivables" and "--Transfer and Assignment of
Receivables." Except for the criteria described thereunder, there are no
required characteristics of Additional Receivables. Additionally, because the
latest scheduled maturity date of any Receivable included in the Trust as of the
Statistical Calculation Date is _____, 199_, it is expected that following such
date substantially all of the Receivables in the Trust will consist of
Additional Receivables. Following the transfer of Additional Receivables to the
Trust, the aggregate characteristics of the entire pool of Receivables included
in the Trust may vary from those of the Receivables included in the Trust on the
Closing Date. See "The Receivables."
BASIS RISK. Each Receivable bears a fixed rate of interest that is
established at the time of origination. Such interest rate is based on a spread
over the estimated London interbank offered rate at the date of origination of
the loan for deposits with a maturity comparable to the average life of the
loan, which currently is generally 4 1/2 months. ThE Class A LIBOR Rate and
Class B LIBOR Rate are established for each quarterly Interest Period once on
the LIBOR Determination Date. As a result, there may be a mismatch between
collections of Finance Charge Receivables and interest accruing at the Class A
LIBOR Rate or Class B LIBOR Rate, as applicable, on the Certificates. If as a
result there exists a Class A Carry Over Amount or Class B Carry Over Amount
such amounts will be funded on a subordinated basis from Excess Spread, if any,
available therefor as described under "Description of the Certificates
- --Application of Collections -- Excess Spread." The Class B Carry Over Amount is
subordinated to the Class A Carry Over Amount. Interest on the Collateral
Interest is not subject to any similar available funds cap. Payments of the
Class A Carry Over Amount and Class B Carry Over Amount are subordinated to
payments in respect of the Collateral Interest.
RISK OF STATE REGULATION OF PREMIUM FINANCE LENDING. On occasion, Congress
has introduced bills that would limit the fees and finance charges that
financial institutions may impose on the purchase of insurance policies, or
which would require additional disclosure to borrowers. In some cases, the rates
proposed have been substantially below the rate at which the Originators assess
fees and finance charges on most of the Receivables. In addition, the
Originators are subject to state laws and regulations which impose requirements
on the making, enforcement and collection of insurance premium loans. The states
may enact additional laws and regulations and amendments to existing laws and
regulations to regulate further the premium loan industry or to reduce finance
charges or other fees or charges applicable to insurance premium loans.
Currently the Originators do not expect the enactment of any such legislation.
However, if any such laws were adopted, the Servicer's ability to collect on the
Receivables or maintain the required level of finance charges and other fees and
charges and the ability of the Trust to obtain a successor servicer in the event
an Originator shall cease for any reason to continue as a Servicer may be
adversely affected. In addition, if one of the Permitted States in which the
Transferor, the Trustee or the Trust was exempt from licensing laws relating to
the acquisition, transfer, ownership or servicing of insurance premium finance
loans were to subsequently require any of the Transferor, the Trustee or the
Trust to be licensed under such laws and such entity failed to become so
licensed within the period specified in the Agreement, a Pay Out Event would
occur and the Rapid Amortization Period would commence.
LIMITATIONS ON STATE INSURANCE GUARANTY FUNDS. All states have state
insurance guaranty funds that support the obligations of insurance companies
regulated by that state, including the obligation of such insurance companies to
return unearned premiums to their insureds upon cancellation of the related
insurance policies. Some state insurance guaranty funds impose dollar limits,
exclude certain types of coverage and do not operate with reference to surplus
and excess lines insurance companies, including in most states, foreign
insurance companies (the "State Fund RefundState Fund Refund"). Additionally,
state legislation may be enacted imposing additional limitations or restrictions
on State Funds Refunds. There is also a possibility that a state insurance
guaranty fund will become underfunded which could cause an additional delay in
the Trust receiving a State Fund Refund, or could ultimately result in a failure
by the state insurance guaranty fund to pay to the Trust any State Fund Refund.
See "Certain Legal Aspects of the Receivables--State Insurance Guaranty Funds."
COMMINGLING RISK. For as long as an Originator remains a Servicer under
the Agreement and (a) (i) such Servicer provides to the Trustee a letter of
credit or other credit enhancement covering the risk of collection of such
Servicer acceptable to the Rating Agencies and (ii) the Transferor shall not
have received a notice from the Rating Agency that reliance on such letter of
credit or other credit enhancement would result in the lowering of such Rating
Agency's then-existing rating of any Series then outstanding or (b) the
certificates of deposit or unsecured short-term debt obligations of such
Servicer (or, if neither such certificates of deposit nor obligations of such
Servicer are rated by Moody's or Standard & Poor's, then the certificates of
deposit or unsecured short-term debt obligations of Mellon Bank, N.A.) are rated
P-1 by Moody's and at least A-1 by Standard & Poor's and insured by either BIF
or SAIF or such Servicer makes other arrangements satisfactory to each Rating
Agency rating any Series then outstanding, then such Servicer may make deposits
and payments described in "Description of the Certificates--Application of
Collections" on the business day immediately prior to the Distribution Date (the
"Transfer Date") in an amount equal to the net amount of such deposits and
payments which would have been made during the related Monthly Period had the
conditions set forth above not applied. In the event that a Servicer commingles
collections, the Certificateholders will be subject to the risk of loss of such
collections, including as a result of the bankruptcy or insolvency of such
Servicer. Because Mellon Bank, N.A.'s unsecured short-term debt obligations are
currently rated P-1 by Moody's and A-1 by Standard & Poor's, the Servicer will
initially make such deposits and payments monthly on a net basis and expects to
continue to do so (subject to the requirements described above) for as long as
the Certificates are outstanding. See "Description of the
Certificates--Application of Collections."
MASTER TRUST CONSIDERATIONS. The Trust, as a master trust, will issue the
Certificates, and may issue additional Series of certificates. While the
principal terms of any Series will be specified in a Series Supplement, the
provisions of a Supplement and, therefore, the terms of any additional Series,
will not be subject to the prior review or consent of holders of the
certificates of any previously issued Series, including Series 1996-1. Such
principal terms may include methods for determining applicable investor
percentages and allocating collections, provisions creating different or
additional security or other Enhancement, provisions subordinating such Series
to another Series (if the Series Supplement relating to such Series so permits;
the Series 1996-1 Supplement will not permit the subordination of the
Certificates to any other Series). It is a condition precedent to the issuance
of any additional Series that either (A) each Rating Agency deliver written
confirmation to the Trustee that such New Issuance will not result in such
Rating Agency reducing or withdrawing its then-existing rating on any
outstanding Series or (b) if at the time of the New Issuance there is no
outstanding Series which is currently rated by a Rating Agency, a nationally
recognized investment banking firm or commercial bank delivers a certificate to
the trustee to the effect that the New Issuance will not have an adverse effect
on the timing or distribution of payments to such other Series. There can be no
assurance, however, that the principal terms of any Series issued from time to
time hereafter might not have an impact on the timing and amount of payments
received by a Certificateholder, including as a result of the refixing of the
percentage utilized with respect to the allocation of the Principal Receivables.
See "Description of the Certificates-New Issuances" and "--Allocation
Percentages."
If the Trust issues any additional Series in a future public offering, the
Trust will do so pursuant to a registration statement (and prospectus) under the
Securities Act that is separate from this Prospectus and its related
registration statement.
CERTIFICATEHOLDER CONTROL LIMITATIONS. Subject to certain exceptions, the
certificateholders of each Series may take certain actions, or direct certain
actions to be taken, under the Agreement or the related Series Supplement.
However, under certain circumstances, the consent or approval of a specified
percentage of the aggregate certificateholders ownership interest of all Series
or of the certificateholders ownership interest of each Series or of Classes
within a Series will be required to take or direct certain actions, including
requiring the appointment of a successor Servicer following a Servicer Default,
amending the Agreement in certain circumstances and directing a repurchase by
the Transferor of all outstanding Receivables upon the breach of certain
representations and warranties by the Transferor. In such instances, the
interests of the holders of the Certificates may not be aligned with the
interests of the holders of certificates of such other Series. Thus, even if the
requisite majority of Certificateholders votes to take or direct such action,
the certificateholders of such other Series may control whether or not such
action occurs.
LIMITATIONS ON CERTIFICATE RATING; RISK OF DOWNGRADE. Any rating assigned
to the Certificates by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders will receive the payments
of interest and principal required to be made under the Agreement and will be
based primarily on the value of the Receivables in the Trust and the Collateral
Interest. However, any such rating will not, unless otherwise specified herein
with respect to any Class offered hereby, address the likelihood that the
principal of, or interest on, any Certificates will be paid on a scheduled date.
In additional, any such rating will not address the possibility of the
occurrence of a Pay Out Event with respect to such Class or the possibility of
the imposition of the United States withholding tax with respect to non-U.S.
Certificateholders. The rating will not be a recommendation to purchase, hold or
sell Certificates, and such rating will not comment as to the marketability of
such Certificates, any market price or suitability for a particular investor.
There is no assurance that any rating will remain for any given period of time
or that any rating will not be lowered or withdrawn entirely by a Rating Agency
if in such Rating Agency's judgment circumstances so warrant.
The Transferor will request a rating of the Certificates offered hereby by
each of the Rating Agencies. There can be no assurance as to whether any rating
agency not requested to rate the Certificates will nonetheless issue a rating
with respect to any Certificates, and, if so, what such rating would be. A
rating assigned to any of the Certificates by a rating agency that has not been
requested by the Transferor to do so may be lower than the rating assigned by
the Rating Agencies pursuant to the Transferor's request.
BOOK-ENTRY REGISTRATION. The Certificates initially will be represented by
one or more certificates registered in the name of Cede, the nominee for DTC,
and will not be registered in the names of the Certificate Owners or their
nominees. Unless and until Definitive Certificates are issued for a Series, the
owners of the beneficial interests of the Certificates ("Certificate
OwnersCertificate Owners") will not be recognized by the Trustee as
Certificateholders. Hence, until such time, Certificate Owners will only be able
to exercise the rights of Certificateholders indirectly through DTC, Cedel or
Euroclear and their participating organizations. See "Description of the
Certificates--Book-Entry Registration" and "--Definitive Certificates."
BUSINESS OF THE ORIGINATORS
GENERAL
AFCO Credit Corporation, a New York corporation ("AFCO Credit"), was
formed in 1954 as a wholly owned subsidiary of Continental Insurance Company and
was subsequently purchased by Mellon Bank, N.A. in 1993. The principal business
of AFCO Credit consists of making loans to commercial borrowers to finance
property and casualty insurance premiums throughout the United States, other
than in California. AFCO Acceptance Corporation ("AFCO Acceptance") was formed
in California in 1968 for the purpose of making loans to commercial borrowers to
finance property and casualty insurance premiums in California For the purpose
of this "Business of the Originators" section AFCO Credit and AFCO Acceptance
will be referred to collectively as "AFCO". AFCO finances premiums for most
lines of property and casualty insurance and is the largest insurance premium
finance company in the United States. AFCO financed insurance premiums during
1995 in excess of $____, and during the first six months of 1996, in excess of
$_____. The principal executive offices of AFCO Credit are located at 10 Hanover
Street, New York, New York 10004, telephone number (212) 612-3500 and of AFCO
Acceptance Corporation are located at __________, telephone number
- -----------.
A commercial Premium Finance Agreement typically is an installment loan
made to a commercial insurance buyer, the proceeds of which pay premiums which
are due to the insurance company. Financed commercial insurance policies
commonly (a) are for a term of one year or less, (b) require the full premium to
be paid at or near inception and (c) provide for a return of the unearned
premium to the insured in the event of cancellation. Borrowers generally make
fixed scheduled payments which include a finance charge that is established at
the time of origination of the loan. Such finance charge is based on a spread
over the estimated London interbank offered rate at the date of origination of
the loan for deposits with a maturity comparable to the average life of the
loan, which currently is generally 4 1/2 months.
The finance charges on Premium Finance Agreements made by AFCO may vary
considerably, depending on the term and amount of the loan, the insured's credit
payment history, the size of the premium down payment and other considerations.
For additional information concerning the calculation of AFCO's finance charges,
see "Description of the Certificates--Allocation Percentages".
AFCO utilizes standardized premium finance loan agreements that give AFCO
a limited power of attorney allowing it to cancel the insurance coverage upon
non-payment of a loan installment by the borrower, to collect from the insurance
company any unearned premium that may secure the loan and to take certain
limited actions in furtherance of the Premium Finance Agreement. Depending on
the terms of the loan and of the related insurance policy, the unearned premium
may or may not be sufficient to pay off the outstanding balance of the loan.
AFCO also has a right to recover any unpaid loan balance directly from the
borrower if any returned premium is insufficient.
A common premium finance loan structure may include a 20% down payment on
the premium paid by the borrower with the remaining 80% funded by a loan from
the insurance premium finance company to be repaid by the borrower in nine equal
monthly installments. AFCO's premium finance loans generally have terms that
range from 6 to 12 months with higher or lower down payment percentages
depending upon insured's needs and AFCO's applicable credit and underwriting
policies. Certain loans do not have level repayment requirements, usually to
accommodate a borrower's cash flow. Given the relatively short duration of most
premium finance loans, such loans are generally not prepaid prior to the
scheduled payment dates although the loan terms and controlling regulations do
not prohibit prepayments or provide for penalties in the event of prepayment.
Financed commercial insurance policies usually require that the full
insurance premium be paid at the commencement of the policy period. The
insurance company customarily earns the full premium over the course of the
policy period. If the insured cancels the policy prior to the end of the policy
period, the insured is commonly entitled to a repayment of the portion of
premium payment that is unearned by the insurance company at the time of
cancellation. Depending on the type of insurance coverage and the terms of the
particular insurance policy, the amount of unearned premium available upon
cancellation will vary in light of relevant factors such as (a) the applicable
method for measuring unearned premium which may be by proration over the policy
term or, as required by some states, by an accelerated method under which more
premium is earned in the earlier portion of the policy period, (b) the extent of
the policy period that has expired at the time of cancellation, (c) the loss
experience under the policy prior to cancellation and (d) variations after the
commencement of the policy period in the scope of the risks covered. The
insurance company may, depending on the terms of the policy, be entitled to
retroactively review and evaluate factors (c) and (d) above after cancellation
which may result in a reduction of the amount, and affect the timing, of
repayment of any unearned premiums. Also, in certain cases the insurance company
may earn the entire premium or a portion thereof at inception of the policy or
upon the occurrence of an insured loss under the policy, in either of which case
there would be either less or no unearned premium to be returned.
Premium finance lending activities are regulated by most states. Among
other matters, many states regulate various terms of the premium finance loans
such as refund policies and rates of interest and late charges that may be
charged an insured. Premium finance loans are made by AFCO on standardized loan
forms, the provisions and format of which are also usually subject to state
regulation. AFCO regards its relations with state regulatory agencies as good.
See "-State Regulation of Premium Finance Lending Activities."
PREMIUM FINANCE LOAN ORIGINATION; COLLECTION POLICY
AFCO generally locates premium finance borrowers through independent
insurance agents and brokers that are licensed under state laws, who offer
premium loan programs to enable their commercial customers to purchase the full
amount of insurance coverage needed and spread out the premium payments over
time. Thus, origination is usually dependent on relationships with insurance
brokers and agents and knowledge of the insurance marketplace. The origination
by AFCO of insurance premium finance loans is commonly commenced by an agent or
broker contacting AFCO to initiate the premium loan process and outlining to
AFCO the proposed loan transaction, including borrower and insurance company
information and coverage types and amounts. AFCO then reviews the information
submitted by such agent or broker in light of its underwriting procedures. See
"-Premium Finance Loan Underwriting Procedures" below. After AFCO approval, the
borrower executes a standard premium finance loan agreement which contains a
limited power of attorney giving AFCO the authority in the event of default on
the loan to contact the insurance company directly and cancel coverage, and a
collateral assignment to AFCO of the unearned insurance premium, if any,
returnable following such cancellation or for any other reason.
Following receipt and acceptance of the signed Premium Finance Agreement,
AFCO either sends the loan proceeds to the insurance company to pay the premium
balance due or releases funds to the insurance agent or broker who then pays the
insurance company. AFCO bills the borrower directly. Each borrower is directed
to remit payments to the appropriate regional lockbox account maintained by AFCO
or in some cases to one of AFCO's processing centers. While most premium finance
loans are repaid in equal monthly installments, AFCO may enter into transactions
in which payments are to be made quarterly or in some other fashion.
Since the insurance company generally earns a portion of the premium each
day, thereby reducing unearned premium amounts for loans secured by such
collateral, prompt action on loan defaults is important. On defaulted loans,
most states require premium finance companies such as AFCO to issue to the
borrower a "Notice of Intent to Cancel" the related insurance policy after the
premium loan installment due date on which the borrower defaulted. A "Notice of
Cancellation" can then be issued to the applicable insurance company generally
ten days after a Notice of Intent to Cancel has been mailed. AFCO's policy for
defaulted loans is to mail a Notice of Intent to Cancel 10 days after the loan
installment due date and to mail a notice of cancellation 28 days after the loan
installment due date. Once a Notice of Cancellation has been issued, AFCO will
customarily proceed to collect any unearned premium available from the insurance
company and apply it to the loan balance and to seek direct collection from the
borrower.
Generally, the policy cancellation date occurs within one month of the
related loan installment default. The current policy of AFCO is to generally
charge off as a loss the unpaid defaulted loan balance 270 days after the
effective date of the cancellation. Following cancellation, AFCO will process
the collection of any unearned premium with the appropriate insurance company
and may pursue collection against the borrower. Under the terms of the
Agreement, any recoveries with respect to Receivables that have been written off
will be included in the assets of the Trust and considered Finance Charge
Receivables. See "The Receivables."
PREMIUM FINANCE LOAN UNDERWRITING PROCEDURES
AFCO considers and evaluates a variety of risks in evaluating each
insurance premium finance loan transaction. These include (a) the loan structure
(the loan term, the amount of down payment and the availability of unearned
premium as collateral), (b) the creditworthiness of the borrower, (c) the
creditworthiness of the insurance company, and (d) the capabilities and
operating procedures of the insurance agent or broker that (i) places the
insurance policy, (ii) serves as a source of significant information regarding
the loan transaction, and (iii) may pay the loan proceeds or collect unearned
premium funds for AFCO. These factors may be given different weight in the case
of any particular loans. See "Risk Factors--Premium Finance Loan Credit and
Related Risks."
If a prospective loan is less than $150,000, the amount of down payment
made by the prospective borrower is at least 10% of the financed premium,
unearned premium under the insurance policy is available as collateral, and the
insurance carrier is acceptable, AFCO sales representatives can approve the loan
without additional action. If the loan fails to meet one or more of these
criteria, analysis of the transaction is conducted by AFCO's home or regional
office depending on the amount of the unsecured exposure. If the loan amount is
$150,000 [or more], an AFCO regional manager will conduct a detailed credit
review of the borrower before approval of the loan. If the loan amount is more
than $500,000, credit review of the borrower is conducted by AFCO's New York
office, including obtaining a Dun & Bradstreet report on the borrower and
financial statements, as needed and under certain circumstances the
creditworthiness of the borrower is reviewed by representatives of Mellon Bank,
N.A.
In addition to AFCO's internal review of the credit of an insurance
carrier, AFCO's general guideline for approval of an insurance carrier is a
rating of at least B+ by A.M. Best Company. No insurance carrier group accounted
for more than ___% (by principal balance) of the outstanding insurance premium
finance loans in the Identified Portfolio as of the Cut-off Date. Based upon
AFCO's own credit determination, it may finance insurance policies issued by
insurance carriers that have a lower rating or, in the case of foreign insurers
and certain domestic insurers that meet AFCO credit requirements, that are
unrated. As of the Cut-off Date, __% of the aggregate outstanding principal
balance of the Receivables in the Identified Portfolio represented loans
originated by AFCO to finance premiums on policies issued by domestic unrated
insurers. On an annual basis AFCO sets an exposure limit with respect to each
insurance carrier and in cases where AFCO's approved exposure with respect to a
particular insurance carrier exceeds $25 million, a credit committee will
conduct a special review of the insurance carrier.
STATE REGULATION OF PREMIUM FINANCE LENDING ACTIVITIES
The making, enforcement and collection of insurance premium loans is
subject to extensive regulation by many states' laws. Such laws vary widely by
state, but often (i) require that premium finance lenders be licensed by the
state, (ii) restrict the content of premium finance loan agreements, and impose
certain disclosure requirements on such agreements, (iii) limit the amount of
finance charges that may be lawfully imposed, (iv) regulate the amount of
refunds due an obligor who prepays the premium finance loan prior to maturity,
(v) regulate the amount of late fees, if any, and finance charges that may be
charged upon a premium finance loan becoming overdue, (vi) regulate the manner
and method of canceling an insurance policy upon non-payment of the premium
finance loan, including a requirement that the premium finance lender provide
the obligor with appropriate notice prior to such cancellation, and (vii) allow
imposition of penalties, which may be significant, upon premium finance lenders
for violations of the state's premium finance laws. See "Risk Factors--State
Regulation of Premium Finance Lending."
In order to increase the likelihood of the payment of claims and unearned
premiums in the event that an insurance carrier becomes insolvent, the insurance
industry created self-funded state guaranty associations. All States have state
insurance guaranty funds that cover the return of some or all unearned insurance
premiums in the event an insurance carrier becomes insolvent or is placed in
receivership. However, there is no guaranty of payment in the event the state
insurance guaranty fund is underfunded or legislation changes the terms and
conditions of its refund program. See "Risk Factors--Limitations on State
Insurance Guaranty Funds."
State insurance guaranty funds differ by the types of insurance policies
covered and by deductible amounts required or maximum refunds allowed.
Generally, state insurance guaranty funds have successfully responded to claims
for refunds in a timely manner if access to the liquidation estate is readily
accessible and their premium assessments on fund members are accurate.
Generally, the timing of payment of a State Fund Refund by a state insurance
guaranty fund ranges from a few months to one year.
AS SERVICER
Each Originator will act as a Servicer for the Receivables in accordance
with the Agreement. In certain limited circumstances, a Servicer may resign or
be removed as Servicer, in which case a third party may be appointed as its
successor. See "Risk Factors--State Regulation of Premium Finance Lending,"
"Description of the Servicer Defaults."
THE RECEIVABLES
The assets of the Trust will include (i) loans made by either of the
Originators to commercial borrowers to finance the payment of insurance premiums
on insurance and related sums regarding insurance policies under which the
borrowers are the insureds governed by the law of a State in the United States
of America or the District of Columbia, which loans are transferred from time to
time by either of the Originators to the Transferor and by the Transferor to the
Trustee for the benefit of the Trust (the "Receivables"); (ii) all monies due or
to become due with respect to the Receivables, including all monies received
from insurance companies and state insurance guaranty funds representing returns
of unearned portions of insurance premiums, the proceeds of any guarantees
issued by insurance agents with respect to the Receivables and other charges due
on the related Receivables; (iii) such amounts as may be from time to time held
in one or more trust accounts, which will be established and maintained by the
Trustee pursuant to the Agreement; (iv) any Enhancement issued with respect to
any Series; (v) all of the Transferor's rights under a receivables purchase
agreement (the "Receivables Purchase Agreement"), dated as of December 1, 1996,
among the Transferor and the Originators and (vi) the proceeds of all of the
foregoing. "
Each Receivable will have been originated by the Originators to finance
commercial insurance premiums. The Receivables are not guaranteed by AFCO
Credit, AFCO Acceptance, the Transferor, PFSI or any affiliate thereof, and the
Trust, as holder of the Receivables, has no recourse against AFCO Credit, AFCO
Acceptance, the Transferor, PFSI or any affiliate thereof for the
non-collectibility of the Receivables, except that, under certain limited
circumstances, AFCO Credit or AFCO Acceptance, as the case may be, and the
Transferor will be required to repurchase certain Receivables from the Trust and
to provide indemnification to the Trust in certain events. AFCO Credit and AFCO
Acceptance will each act as Servicer with respect to the Receivables it
originated and transferred to the Transferor, who in turn will transfer such
Receivables to the Trust. PFSI will act as Back-up Servicer. As set forth in the
Agreement, each Receivable to be transferred to the Trust must satisfy certain
eligibility criteria. See "Description of the Certificates-Representations and
Warranties" and "--Eligible Receivables." The Originators assign an account
number (each, an "Account") for the borrower under a Premium Finance Agreement
for the related insurance policy period. A Premium Finance Agreement may finance
premiums relating to more than one insurance policy or from one or more
insurance carriers. However, there is only one monthly payment under a Premium
Finance Agreement and such payment is not allocated to the repayment of the
financing of the premiums of any particular insurance policy.
Receivables provide for allocation of payments according to the "sum of
periodic balances" or "sum of monthly payments" method, similar to the "Rule of
78's" ("Rule of 78's Receivables"). 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 in an amount calculated on the basis of the
stated annual percentage rate for the term of the Receivable. The fraction used
in the calculation of add-on interest earned each month has as its denominator a
number equal to the sum of the series of numbers (the sum of the numbers of
payments) and the numerator of the fraction for a given month is the number of
payments before giving effect to the payment to be made in that month. For
example, in the case of a Rule 78's Receivable providing for twelve payments,
the denominator of each month's fraction will be 78, the sum of the series of
numbers from one to twelve. The fraction for the first payment would be 12/78,
the fraction for the second payment would be 11/78 and the faction for the last
payment would be 1/78. The applicable fraction is then multiplied by the total
add-on interest payable over the entire term of the Receivable, and the
resulting amount is the amount of add-on interest "earned" that month. The
difference between the amount of the monthly payment and the amount of add-on
interest earned for the month is applied to reduce the outstanding principal
balance of the Receivable. Interest accrues more rapidly and principal is
amortized more slowly on Rule of 78's Receivables than if interest on the
Receivables were calculated using the actuarial method. The rate at which such
amount of add-on interest is earned and, correspondingly, the amount of each
fixed monthly payment allocated to reduction of the outstanding principal are
calculated in accordance with the "Rule of 78's".
Generally, in the event of the prepayment in full (voluntarily or by
acceleration) of a Rule of 78's Receivable, 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 under the contract allocable to "unearned" add-on interest,
calculated in accordance with a method equivalent to the rule of 78's.
Certain information regarding the performance and composition of the
Originators' pool of commercial premium finance loans with borrowers whose
stated addresses in the related insurance premium finance loan agreements are in
one of the Permitted States (the "Identified Portfolio") is set forth below. As
of the Statistical Calculation Date (as defined below), the Premium Finance
Agreements in the Identified Portfolio constitute approximately __% (by
principal balance) of all the commercial premium finance loans in the
Originators' portfolio. It is expected that substantially all of the commercial
premium finance loans in the Identified Portfolio will satisfy the eligibility
criteria in the Agreement and will be transferred to the Trust on the Closing
Date. "Permitted State" means (i) any State listed in the chart entitled
"Geographic Concentration" appearing below or (ii) any other state with respect
to which each of the Originators, the Transferor and the Trust has either
complied with such state's applicable licensing laws or is not required to be
licensed under such state's applicable licensing laws, in each case, as
evidenced by an opinion of counsel or within evidence from the applicable state
regulatory authority trustees with an officer's certificate certifying that such
correspondence evidences compliance with clause (ii) of this definition
Statistical Calculation. The selection of the Permitted States listed in the
chart entitled "Geographic Concentration" was based on state regulatory
considerations.
Each Originator will be required pursuant to the Receivables Purchase
Agreement to transfer and assign all Additional Receivables from the Identified
Portfolio to the Transferor, who in turn will be required pursuant to the
Agreement to transfer and assign all such Additional Receivables to the Trustee
for the benefit of the Trust. Such Additional Receivables may include
Receivables originated using criteria different from those which were applied to
the Receivables assigned to the Trustee for the benefit of the Trust on the
Closing Date or to previously Additional Receivables, because such Receivables
were originated at a different date. Consequently there can be no assurance that
Additional Receivables transferred to the Trust in the future will be of the
same credit quality as previously transferred Receivables. Additionally, because
the latest scheduled maturity date of any Receivable included in the Trust as of
the Closing Date is _____, 199_, it is expected that following such date
substantially all of the Receivables in the Trust will consist of Additional
Receivables. See "Risk Factors--Additional Receivables Considerations". In
addition, there are many legal, economic and competitive factors that could
adversely affect the amount and collectibility of the Receivables, including
insurers' decisions to use new sources of credit, which would affect the
Originators' ability to generate Additional Receivables, and changes in usage of
credit, payment patterns and general economic conditions. Because the impact of
these and other factors (including the composition of the Receivables and the
interest rates, fees and charges assessed thereon) may change in the future, the
text and tables set forth below are not necessarily indicative of the future
performance of the Receivables that are transferred to the Trust.
During each of the calendar years 1993, 1994 and 1995 and during the six months
ended June 30, 1996, collections by the Originators on commercial premium
finance loans in each month of such periods exceeded __% of the principal
balance of the loans outstanding as of the beginning of the month. Assuming (i)
a __% payment rate each month, (ii) twelve equal 30-day monthly periods, and
(iii) the Transferor Interest equaling at least the Minimum Transferor Interest,
the amount available under the Agreement during the Revolving Period for yield
enhancement would be ___ basis points on the outstanding principal of the
Certificates on an annualized basis and may be greater during an amortization
period (unless the amount of interest due on the outstanding principal of the
Certificates during such Monthly Period is less than ____ basis points on an
annualized basis, in which case the amount available for yield enhancement would
be such lesser amount). There can be no assurance, however, that the monthly
payment rate on the Receivables will not be less than __% since the payment rate
will vary depending on a variety of factors, including loan maturities, interest
rates and delinquency and default rates.
The statistical information presented in this Prospectus is based on the
Receivables as of November 15, 1996 (the "Statistical Calculation Date").
Receivables transferred to the Trust on the Closing Date will include certain
other Premium Finance Agreements originated by either of the Originators after
the Statistical Calculation Date and on or prior to the Calculation Date. In
addition, the characteristics of the Receivables included as of the Statistical
Calculation Date will vary as of the Cut-off Date as a result of payments
received by or on behalf of borrowers after the Statistical Calculation Date and
prior to the Cut-off Date. There will be no material permissible deviations from
the eligibility criteria used for identifying the Premium Finance Agreements in
the Identified Portfolio as of the Statistical Calculation Date from those
applied on the Closing Date. However, certain of the Premium Finance Agreements
in the Identified Portfolio that satisfied the eligibility criteria as of the
Statistical Calculation Date may not satisfy such criteria on the Closing Date
because of a change in circumstances and therefore will not be permitted to be
transferred to the Trust. While the statistical distribution of the
characteristics of all Receivables transferred to the Trust on the Closing Date
will vary from the statistical information presented in this Prospectus, the
Transferor does not believe that the characteristics of the Receivables as of
the Cut-off Date will vary materially from the information presented herein with
respect to the Receivables as of the Statistical Calculation Date. In addition,
the historical information set forth in certain tables below relates to the
Originators' entire portfolio of Premium Finance Agreements (including Premium
Finance Agreements that would not satisfy the eligibility criteria as of the
Closing Date). There can be no assurance that such historical experience will be
indicative of the performance of the Receivables.
AGGREGATE OUTSTANDING RECEIVABLES BALANCE BY SIZE
AS OF THE STATISTICAL CALCULATION DATE
% of
Aggregate Aggregate
% of Outstanding Outstanding
Outstanding Receivable No. of No. of Receivables Receivables
s Balance (1) ACCOUNTS ACCOUNTS BALANCE BALANCE
-------- -------- ------- -------
$5,000 or less......
$5,001 to $10,000...
$10,001 to $25,000..
$25,001 to $50,000..
$50,001 to $75,000..
$75,001 to $100,000.
$100,001 to $250,000.
$250,001 to $500,000.
$500,001 to $1,000,000.
$1,000,001 to
$5,000,000............
Over $5,000,000...............
TOTAL.........................
- -------------
(1)...Includes outstanding principal balances and unearned finance charges.
COMPOSITION OF RECEIVABLES BY REMAINING INSTALLMENT TERM
AS OF THE STATISTICAL CALCULATION DATE
% of
Aggregate Aggregate
Outstanding Outstanding
Remaining No. of % of Receivables Receivables
Installment Term (1) ACCOUNTS ACCOUNTS BALANCE(2) BALANCE
3 months or less.....
4 to 6 months........
7 to 9 months........
10 to 12 months......
13 to 18 months......
More than 18 months..
- -------------
- -------------
(1) Terms of the loans commonly provide for level payments of principal and
finance charges on a monthly basis.
(2) Receivables Balance includes principal and unearned finance charges.
GEOGRAPHIC CONCENTRATION
The Identified Portfolio as of the Statistical Calculation Date includes
commercial premium finance loans originated in __ states. The following table
sets forth information regarding the concentration of Receivables in the
"Identified Portfolio" by outstanding principal balance as of the Statistical
Calculation Date.
GEOGRAPHIC CONCENTRATION
AS OF THE STATISTICAL CALCULATION DATE
AGGREGATE % OF AGGREGATE
OUTSTANDING OUTSTANDING
RECEIVABLES RECEIVABLES
STATES(1) BALANCE(2) BALANCE
Total.................
=============== =============
- ----------------------
(1) Indicates the states where the insured's stated address in the related
premium finance loans agreement is located.
(2) Outstanding Receivables Balance includes principal and unearned finance
charges.
LOSS AND DELINQUENCY EXPERIENCE
The following tables set forth the loss and delinquency experience with
respect to commercial premium finance loans in the Originator's entire portfolio
of Premium Finance Agreements for each of the periods or at each of the dates
shown, as applicable. The Originators collectively originated commercial premium
finance loans in [all 50] states during such periods. All of the Receivables
transferred to the Trust on the Closing Date will be from the Originators'
Identified Portfolio as of the day prior to the Closing Date. Thereafter if a
state becomes a Permitted State on or after the Closing Date, premium finance
loans from such Permitted State that otherwise satisfy the eligibility criteria
set forth under "Description of the Certificates--Eligible Receivables and
- -Transfer and Assignment of Receivables" shall be transferred to the Trust.
Consequently, it is likely that commercial premium finance loans in the
Identified Portfolio at any time will represent only a portion of the
Originators' entire premium finance loan portfolio. The Originators do not
believe that the historical performance of commercial premium finance loans in
the Identified Portfolio differs materially from the historical performance of
their entire premium finance loan portfolio. There can be no assurance that the
loss or delinquency experience for the Trust with respect to the Receivables
will be similar to the historical experience set forth below. For purposes of
the following tables the Identified Portfolio only includes insurance premium
finance loans to borrowers whose stated addresses in the related insurance
premium finance loan agreements are in one of the States listed in the chart
entitled "Geographic Concentration" above.
LOAN LOSS EXPERIENCE
The following table sets forth loss experience with respect to payments by
borrowers on commercial premium finance loans in the Originator's entire
portfolio of Premium Finance Agreements for each of the periods shown. Neither
the Originators nor the Transferor believe that changes of amounts from period
to period reflect any material trends.
<PAGE>
LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
Ten Months
Ended Year Ended December 31.
OCTOBER 30,
1996 1995 1994 1993
---- ---- ---- ----
Average Aggregate Outstanding
Balance (1)..........
Gross Charge-Offs (2).
Recoveries (3)........
Net Charge-Offs.......
Net Charge-Offs as
Percentage of Average
Aggregate Outstanding
Principal Balance
- -------------------------
(1) Calculated as the average of the Principal Balance at the beginning
of each month.
Principal Balance excludes unearned interest.
(2) Beginning December 1993, loans are generally charged off if uncollected 270
days after cancellation. Prior to December 1993, loans were charged off when
deemed to be uncollectible. Charge-offs in 1993 exclude a one-time
cumulative charge-off to reflect the change in charge-off procedures in
December.
(3) A recovery occurs, if, after a loan is written off, AFCO receives additional
funds to pay in whole or in part the outstanding balance due.
(4) Calculated on an annualized basis.
LOAN DELINQUENCY EXPERIENCE FOLLOWING CANCELLATION
The following table sets forth the delinquency experience with respect to
payments on premium finance loans in the Originator's entire portfolio of
Premium Finance Agreements at each of the dates shown. In conformity with state
requirements regarding cancellation notification, insurance policies are
generally canceled within one month following a borrower's failure to make a
related scheduled loan installment payment. The loan delinquency data presented
in the following table are measured from the date of issuance of a Notice of
Cancellation. The percentages presented for each aging category reflect the sum
of the balance of principal and unearned finance charges (including the overdue
installment(s) as well as all of the remaining installment payments not yet due)
on all canceled accounts within each category divided by the aggregate principal
loan balance (excluding unearned finance charges). Since the table reflects
percentages calculated by including unearned finance charges in the canceled
accounts, but not including such amounts in the aggregate loan balances, the
resulting percentages may reflect higher percentages of delinquencies than
actually experienced. Variations from one measurement date to another
measurement date within aging categories are primarily a reflection of the
variability of time required to collect the unearned insurance premium from the
insurance carrier or, alternatively, the remaining loan balance from the
borrower, on a revolving pool of loans. Neither the Originators nor the
Transferor believe the changes in amounts from period to period in the
categories in the table reflect any material trend. There can be no assurance
that the delinquency experience with respect to the Receivables will be similar
to the historical experience set forth below. The Originators and Transferor
have no knowledge of any trends which are expected to materially change future
delinquency experience.
LOAN DELINQUENCY EXPERIENCE FOLLOWING CANCELLATION
At At
Number of days a loan October December 31,
remains overdue after 30
cancellation of the ---------- --------------
related insurance 1996 1995 1994
policy: ---- ---- ----
31-89 days...........
90-270 days..........
Over 270 days (1).. .
. . . . . . . . . . .
. . . . . . . ..
Total .................................
--------------------
(1) A loan is generally written off to the extent it is uncollected 270
days after the effective date of cancellation. See "Business of the
Originators - - Premium Finance Loan Origination; Collection Policy.
ORIGINATORS' PORTFOLIO YIELD
(DOLLARS IN THOUSANDS)
The following table sets forth the total revenues from finance charges and
fees billed with respect to the Originators' entire portfolio of Premium Finance
Agreements for each of the periods shown. The figures in the table represent
amounts billed to borrowers before deductions for charge-offs or other expenses.
FOR THE TEN
MONTHS
ENDING OCTOBER 30 FOR THE FISCAL YEAR ENDING
1996 DECEMBER 31,
1995 1994 1993
Average Receivables(1)
Interest and Fee
Income(2).............
Average Revenue Yield.
- -------------------------
(1) Calculated as the average of the principal balance (excluding unearned
interest of the Receivables) at the beginning of each month.
(2) Includes interest income, late fees, cancellation fees, returned check
charges, and other fees.
(3) Calculated on an annualized basis.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates, approximately
$_________ before deduction of expenses, will be applied to the purchase of the
Receivables from the Originators.
MATURITY ASSUMPTIONS
The Agreement provides that Class A Holders will not receive payments of
principal until the Class A Scheduled Payment Date, or earlier in the event of a
Pay Out Event which results in the commencement of the Rapid Amortization
Period. The Class B Holders will not begin to receive payments of principal
until the final principal payment on the Class A Certificates has been made.
CONTROLLED ACCUMULATION PERIOD. On each Transfer Date during the
Controlled Accumulation Period prior to the payment of the Class A Investor
Interest in full, an amount equal to, for each Monthly Period, the least of (a)
the Available Investor Principal Collections, (b) the "Controlled Deposit
Amount" for such Monthly Period (which equals the sum of the Controlled
Accumulation Amount for such Monthly Period and any portion of the Controlled
Accumulation Amount for any prior Monthly Period that was not deposited in the
Principal Funding Account) and (c) the Class A Adjusted Investor Interest prior
to any deposits on such day, will be deposited in the Principal Funding Account
(the "Principal Funding Account") established by the Trustee until the principal
amount on deposit in the Principal Funding Account (the "Principal Funding
Account BalancePrincipal Funding Account Balance") equals the Class A Investor
Interest. After the Class A Investor Interest has been paid in full, Available
Investor Principal Collections, to the extent required, will be distributed to
the Class B Holders on each Distribution Date until the earlier of the date the
Class B Investor Interest has been paid in full and the Series 1996-1
Termination Date. After the Class A Investor Interest and the Class B Investor
Interest have each been paid in full, Available Investor Principal Collections,
to the extent required, will be distributed to the Collateral Interest Holder on
each Transfer Date until the earlier of the date the Collateral Interest has
been paid in full and the Series 1996-1 Termination Date. Amounts in the
Principal Funding Account are expected to be available to pay the Class A
Investor Interest on the Class A Scheduled Payment Date. After the payment of
the Class A Investor Interest in full, Available Investor Principal Collections
are expected to be available to pay the Class B Investor Interest on the Class B
Scheduled Payment Date. Although it is anticipated that collections of Principal
Receivables will be available on each Transfer Date during the Controlled
Accumulation Period to make a deposit of the applicable Controlled Deposit
Amount and that the Class A Investor Interest will be paid to the Class A
Holders on the Class A Scheduled Payment Date and the Class B Investor Interest
will be paid to the Class B Holders on the Class B Scheduled Payment Date,
respectively, no assurance can be given in this regard. If the amount required
to pay the Class A Investor Interest or the Class B Investor Interest in full is
not available on the Class A Scheduled Payment Date or the Class B Scheduled
Payment Date, respectively, a Pay Out Event will occur and the Rapid
Amortization Period will commence. The ability of Certificateholders to receive
payments of principal on the Class A Scheduled Payment Date or the Class B
Scheduled Payment Date, as applicable, depends on the amount and schedule of
installments of outstanding Receivables, delinquencies, charge-offs and the
timing of the origination and transfer of Additional Receivables, which may vary
from month to month due to seasonal variations, regulatory factors, general
economic conditions and conditions in the insurance premium finance market.
RAPID AMORTIZATION PERIOD. If a Pay Out Event occurs, the Rapid
Amortization Period will commence and any amount on deposit in the Principal
Funding Account will be paid to the Class A Holders on the Distribution Date in
the month following the commencement of the Rapid Amortization Period. In
addition, to the extent that the Class A Investor Interest has not been paid in
full, the Class A Holders will be entitled to monthly payments of principal on
each Distribution Date after a Pay Out Event occurs (each such Distribution Date
a "Special Payment Date") equal to the Available Investor Principal Collections
until the earlier of the date on which the Class A Certificates have been paid
in full and the Series 1996-1 Termination Date. After the Class A Certificates
have been paid in full and if the Series 1996-1 Termination Date has not
occurred, Available Investor Principal Collections will be paid to the Class B
Certificates on each Distribution Date until the earlier of the date on which
the Class B Certificates have been paid in full and the Series 1996-1
Termination Date.
PAY OUT EVENTS. A Pay Out Event occurs, either automatically or after
specified notice, upon (a) certain insolvency events involving the Transferor or
either Originator, (b) the Trust becoming an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, (c) (i) the Back-up
Servicer becomes legally unable to act as Successor Servicer or has been
released or has resigned as a Back-up Servicer and, within 90 days of such
event, a successor Back-up Servicer has not assumed the obligations of Back-up
Servicer and the Rating Agency Condition has not been satisfied with respect to
the appointment of such Back-up Servicer or (ii) [the failure to appoint a
Successor Servicer 90 days after a notice of termination has been delivered to a
Successor Servicer pursuant to the Agreement]; (d) the failure of the Servicer,
any Successor Servicer, the Transferor or the Trustee to be in compliance with
the licensing laws of any Receivable State relating to the acquisition,
transfer, ownership or servicing of insurance premium finance loans and such
entity fails to become so licensed or exempt from such licensing laws within the
period specified in the Agreement; (e) the failure of the Transferor to make
certain payments or transfers of funds for the benefit of the Holders within the
time periods stated in the Agreement, (f) material breaches of certain
representations, warranties or covenants of the Transferor, (g) a reduction in
the average of the Portfolio Yields for any three consecutive Monthly Periods to
a rate that is less than the average of the Base Rates for such period, (h) (i)
the average Transferor Interest during any 5 consecutive days being below the
Minimum Transferor Interest for the same period and (ii) the sum of (x) the
Principal Receivables and (y) the principal amount on deposit in the Excess
Funding Account being less than the Minimum Aggregate Principal Receivables, (i)
the failure of either Originator to transfer Additional Receivables to the
Transferor when required by the Receivables Purchase Agreement or the failure of
the Transferor to convey Additional Receivables when required by the Agreement,
[(j) the occurrence of a Servicer Default which would have a material adverse
effect on the Holders], (k) the Class A Investor Interest or the Class B
Investor Interest not being paid in full on the Class A Scheduled Payment Date
or the Class B Scheduled Payment Date, respectively, (l) the Monthly Payment
Rate is less than 12% for three consecutive Monthly Periods; (m) the [sixth]
consecutive Determination Date on which there exists an Excess Obligor
Concentration Amount exists, (n) the [sixth] consecutive Determination Date on
which there exists an Excess Insurer Concentration; (o) the [sixth] consecutive
Determination Date on which the Investment Grade Insurer Percentage is less than
the required Investment Grade Insurer Percentage; (p) the [sixth] consecutive
Determination Date on which there are less than 300 insurance carriers whose
insurance premiums have been financed by the Receivables in the Identified
Portfolio; and (q) the [sixth] consecutive Determination Date on which the Top
10 Insurers Percentage is greater than the Maximum Top 10 Insurer Percentage.
See "Description of the Certificates--Pay Out Events." If a Pay Out Event
occurs, the average life and maturity of the Certificates could be significantly
reduced. No prepayment premium will be payable on account of any prepayment of
the Certificates as the result of the occurrence of the Rapid Amortization
Period.
Because there may be a slowdown in the payment rate below the payment
rates used to determine the Controlled Accumulation Amounts, or a Pay Out Event
may occur which would initiate the Rapid Amortization Period, there can be no
assurance that the actual number of months elapsed from the date of issuance of
the Class A Certificates and the Class B Certificates to their respective final
Distribution Dates will equal the expected number of months. As described under
"Description of the Certificates--Postponement of Controlled Accumulation
Period," the Servicer may shorten the Controlled Accumulation Period and, in
such event, there can be no assurance that there will be sufficient time to
accumulate all amounts necessary to pay the Class A Investor Interest and the
Class B Investor Interest on the Class A Scheduled Payment Date and the Class B
Scheduled Payment Date, respectively.
As of the Statistical Calculation Date (i) the amount of the Aggregate
Receivables related to any single borrower was not greater than __% of the
amount of Aggregate Receivables in the Identified Portfolio as of the
Statistical Calculation Date; (ii) the amount of the portion of the Aggregate
Receivables relating to the financing of insurance premiums of any Tier 1
Insurer was not greater than __% of the amount of Aggregate Receivables as of
the Statistical Calculation Date; (iii) the amount of the portion of the
Aggregate Receivables relating to the financing of insurance premiums or any
Tier 2 Insurer was not greater than __% of the amount of Aggregate Receivables
as of the Statistical Calculation Date; (iv) the amount of the portion of the
Aggregate Receivables relating to the financing of insurance premiums of any
Tier 3 Insurer was not greater than __% of the amount of Aggregate Receivables
as of the Statistical Calculation Date; (v) the Investment Grade Insurer
Percentage equaled ___%; (vi) the Top 10 Insurer Percentage equaled ___%; and
(vii) there were _____ insurance carriers whose insurance premiums have been
financed by the Finance Premium Agreements in the Identified Portfolio
"Base Rate" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is the
sum of the Class A Monthly Interest, the Class B Monthly Interest and the
Collateral Monthly Interest, each for the related Distribution Date, and the
Investor Servicing Fee for such Monthly Period, and the denominator of which is
the Investor Interest as of the close of business on the last day of such
Monthly Period.
"Portfolio Yield" means, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction, the numerator of
which is the sum of collections of Finance Charge Receivables, Principal Funding
Investment Proceeds and amounts withdrawn from the Reserve Account deposited
into the Finance Charge Account and allocable to the Certificates and the
Collateral Interest for such Monthly Period, after subtracting the Investor
Default Amount for such Monthly Period and the denominator of which is the
Investor Interest as of the close of business on the last day of such Monthly
Period.
"Excess Obligor Concentration Amount" means, as of any date of
determination, the Aggregate Receivables related to a single borrower (or an
affiliated group of borrowers), but only to the extent such amount is in excess
of 5% of the amount of the Aggregate Receivables as of such date of
determination.
"Excess Insurer Concentration Amount" means as of any date of
determination an amount equal to the sum of (i) with respect to each Tier 1
Insurer, the amount by which the portion of the Aggregate Receivables relating
to the financing of insurance premiums of such Tier 1 Insurer exceeds 25% of the
amount of the Aggregate Receivables as of such date of determination (ii) with
respect to each Tier 2 Insurer, the amount by which the portion of the Aggregate
Receivables relating to the financing of insurance premiums of such Tier 2
Insurer exceeds 10% of the Aggregate Receivables as of such date of
determination and (iii) with respect to each Tier 3 Insurer, the amount by which
the portion of the Aggregate Receivables relating to the financing of insurance
premiums of any single Tier 3 Insurer exceeds 5% of the Aggregate Receivables as
of such date of determination.
"Investment Grade Insurer Percentage" means as of any date of
determination a fraction (expressed as a percentage) the numerator of which is
the portion of the Aggregate Receivables relating to the financing of insurance
premiums of the Top Ten Investment Grade Insurers as of such date of
determination and the denominator of which is the portion of the Aggregate
Receivables relating to the financing of insurance premiums of the Top Ten
Insurers as of such date of determination.
"Maximum Top 10 Insurer Percentage" means 60%.
"Minimum Aggregate Principal Receivables" means, as of any date of
determination, an amount equal to the sum of the numerators used to calculate
the Investor Percentage with respect to the allocation of collections of
Principal Receivables for each Series outstanding on such date. "Minimum
Transferor Interest" means ___% of the sum of the aggregate amount of Principal
Receivables and the principal amount on deposit in the Excess Funding Account at
the end of the day immediately prior to the date of determination; provided that
Transferor may increase or reduce the percentage used to determine the Minimum
Transferor Interest (but not below ___%) upon (a) 30 day's prior notice to
Trustee, each Rating Agency and Credit Enhancement Provider, (b) satisfaction of
the Rating Agency Condition, and (c) delivery to Trustee and each such Credit
Enhancement Provider of an Officer's Certificate stating that Transferor
reasonably believes that such reduction will not, based on the facts known to
such officer at the time of such certification, then or thereafter cause a Pay
Out Event to occur with respect to any Series.
"Monthly Payment Rate" means, in respect of any Monthly Period, a fraction
(expressed as a percentage), the numerator of which shall equal the aggregate
collections received by the Servicer during such Monthly Period and the
denominator of which shall equal the aggregate amount of Principal Receivables
in the Trust [at the end of the preceding] Monthly Period.
"Receivable State" means any State where the stated address of a borrower
under any Receivable conveyed to the Trust is located (excluding Receivables
with zero balances, Receivables in Defaulted Accounts or Receivables that have
been removed from the Trust).
"Tier 1 Insurer" means as of any date of determination, an insurance
carrier which has a then current (i) claims-paying ability rating from Standard
& Poor's of at least A-, but below AAA and (ii) insurance financial strength
rating from Moody's of at least A3, but below Aaa.
"Tier 2 Insurer" means as of any date of determination , an insurance
carrier which has a then current (i) claims-paying ability rating from Standard
& Poor's of at least BBB-, but below A- and (ii) insurance financial strength
rating from Moody's of at least Baa3, but below A3.
"Tier 3 Insurer" means as of any date of determination, an insurance
carrier that did not have (i) a claims-paying ability rating of at least
investment grade (i.e., in one of the top four generic rating categories,
irrespective of any plus or minus) from Standard & Poor's and (ii) an insurance
financial strength rating of at least investment grade (i.e., in one of the top
four generic rating categories, irrespective of any plus or minus) by Moody's.
"Top 10 Insurer" means as of any date of determination any insurance
carrier with insurance premiums financed by the Receivables and the aggregate
amount of all such premiums are at least the 10th largest relative to any other
insurance carrier's aggregate amount of insurance premiums financed by the
Receivables.
"Top 10 Investment Grade Insurer" means as of any date of determination
any Top 10 Insurer which is an Investment Grade Insurer.
"Top 10 Insurer Percentage" means with respect to any Top 10 insurer and
as of any date of determination a fraction (expressed as a percentage), the
numerator of which is the portion of the aggregate amount of Receivables
relating to the financing of insurance premiums of such Top Ten Insurer and the
denominator of which is the aggregate amount of Receivables.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. Pursuant to the
Agreement, the Transferor and the Trustee may execute further series supplements
in order to issue additional Series. The following summary of the Certificates
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all of the provisions of the Agreement.
GENERAL
The Certificates will represent the right to receive certain payments from
the assets of the Trust, including the right to the applicable allocation
percentage of all borrower payments on the Receivables in the Trust. Each Class
A Certificate represents the right to receive payments of interest at the Class
A Rate for the related Interest Period and payments of principal on the Class A
Scheduled Payment Date or, to the extent of the Class A Investor Interest, on
each Distribution Date during the Rapid Amortization Period, funded from
collections of Finance Charge Receivables and Principal Receivables,
respectively, allocated to the Class A Investor Interest and certain other
available amounts. Each Class B Certificate represents the right to receive
payments of interest at the applicable Class B Rate for the related Interest
Period, and payments of principal on the Class B Scheduled Payment Date or, to
the extent of the Class B Investor Interest, on each Distribution Date during
the Rapid Amortization Period after the Class A Certificates have been paid in
full, funded from collections of Finance Charge Receivables and Principal
Receivables, respectively, allocated to the Class B Investor Interest and
certain other available amounts. In addition to representing the right to
payment from collections of Finance Charge Receivables and Principal
Receivables, each Class A Certificate also represents the right to receive
payments from Excess Spread, funds on deposit in the Principal Funding Account
and the Reserve Account and certain investment earnings thereon, Reallocated
Principal Collections and Shared Principal Collections and certain other
available amounts (including, under certain circumstances, amounts on deposit in
the Excess Funding Account). In addition to representing the right to payment
from collections of Finance Charge Receivables and Principal Receivables, each
Class B Certificate also represents the right to receive payments from Excess
Spread, Reallocated Collateral Principal Collections and Shared Principal
Collections and certain other available amounts (including, under certain
circumstances, amounts on deposit in the Excess Funding Account). Payments of
interest and principal will be made, to the extent of funds available therefor,
on each Distribution Date on which such amounts are due to Holders in whose
names the Certificates were registered on the last business day of the calendar
month preceding such Distribution Date (each, a "Record DateRecord Date").
The Transferor initially will own the Transferor Interest. The Transferor
Interest will represent the right to receive certain payments from the assets of
the Trust, including the right to a percentage (the "Transferor
PercentageTransferor Percentage") of all payments on the Receivables in the
Trust equal to 100% minus the sum of the applicable Investor Percentages for all
Series of certificates then outstanding. The Transferor Interest may be
transferred in whole or in part subject to certain limitations and conditions
set forth in the Agreement. See "--Certain Matters Regarding the Transferor and
the Servicer."
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of Cede, as nominee of DTC.
Unless and until Definitive Certificates are issued, all references herein to
actions by Class A Holders and/or Class B Holders shall refer to actions taken
by DTC upon instructions from DTC Participants and all references herein to
distributions, notices, reports and statements to Class A Holders and/or Class B
Holders shall refer to distributions, notices, reports and statements to DTC or
Cede, as the registered holder of the Class A Certificates and the Class B
Certificates, as the case may be, for distribution to Certificate Owners in
accordance with DTC procedures. Holders may hold their Certificates through DTC
(in the United States) or Cedel or Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations that are
participants in such systems. Cede, as nominee for DTC, will hold the global
Certificates. Cede and Euroclear will hold omnibus positions on behalf of the
Cedel Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the books of
their respective Depositaries which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
See "--Book-Entry Registration."
BOOK-ENTRY REGISTRATION
Certificateholders may hold their certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositories
(collectively, the "DepositoriesDepositories") which in turn will hold such
positions in customers' securities accounts in the Depositories' names on the
books of DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, 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 meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds securities for its Participants ("DTC ParticipantsDTC
Participants") and facilitates the clearance and settlement among DTC
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic book-entry changes in DTC Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Indirect
access to the DTC system is also available to others such as securities brokers
and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly
("Indirect ParticipantsIndirect Participants"). The rules applicable to DTC and
its DTC Participants are on file with the Securities and Exchange Commission.
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
Purchases of Certificates under the DTC system must be made by or through
DTC Participants, which will receive a credit for the Certificates on DTC's
records. The ownership interest of each actual Certificate Owner is in turn to
be recorded on the DTC Participants' and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchase, but Certificate Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect Participant through which the
Certificate Owner entered into the transaction. Transfers of ownership interests
in the Certificates are to be accomplished by entries made on the books of DTC
Participants acting on behalf of Certificate Owners. Certificate Owners will not
receive certificates representing their ownership interest in Certificates,
except in the event that use of the book-entry system for the Certificates is
discontinued.
To facilitate subsequent transfers, all Certificates deposited by DTC
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Certificates with DTC and their registration in the name of Cede
& Co. effects no change in beneficial ownership. DTC has no knowledge of the
actual Certificate Owners of the Certificates; DTC's records reflect only the
identity of the DTC Participants to whose accounts such Certificates are
credited, which may or may not be the Certificate Owners. The DTC Participants
will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect Participants, and by DTC Participants and
Indirect Participants to Certificate Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to
Certificates. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date, which assigns Cede & Co.'s
consenting or voting rights to those DTC Participants to whose accounts the
Certificates are credited on the record date (identified in a listing attached
thereto).
Principal and interest payments on the Certificates will be made to DTC.
DTC's practice is to credit DTC Participants' accounts on the applicable
Distribution Date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
such Distribution Date. Payments by DTC Participants to Certificate Owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name" and will be the responsibility of such DTC Participant and not
of DTC, the Trustee or the Transferor, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of the Trustee, disbursement of such
payments to DTC Participants shall be the responsibility of DTC, and
disbursement of such payments to Certificate Owners shall be the responsibility
of DTC Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Certificates at any time by giving reasonable notice to the
Transferor or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Definitive Certificates are
required to be printed and delivered. The Transferor may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor securities
depository). In that event, Definitive Certificates will be delivered to
Certificateholders. See "%Definitive Certificates."
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Transferor believes to be reliable, but
the Transferor takes no responsibility for the accuracy thereof.
Cedel Bank, SocietJ Anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel ParticipantsCedel Participants") and
facilitates the clearance and settlement of securities transactions between
Cedel Participants through electronic book-entry changes in accounts of Cedel
Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedel in any of 32 currencies,
including United States dollars. Cedel provides to its Cedel Participants, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulation by the Luxembourg Monetary Institute.
Cedel Participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include the
underwriters of any Series of Certificates. Indirect access to Cedel is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedel Participant,
either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear ParticipantsEuroclear
Participants") and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 32 currencies, including United States
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in 25
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office (the "Euroclear OperatorEuroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance System,
SociJtJ CoopJrative, a Belgian cooperative corporation (the
"CooperativeCooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative Board establishes policy for the Euroclear System. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters of any Series of Certificates. Indirect access to the Euroclear
System is also available to other firms that maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System (collectively, the
"Terms and ConditionsTerms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "U.S. Federal Income Tax Consequences." Cedel or the Euroclear Operator, as
the case may be, will take any other action permitted to be taken by a
Certificateholder under the Agreement on behalf of a Cedel Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Certificates will be issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee for
such Series in writing that DTC is no longer willing or able to discharge
properly its responsibilities as Depositary with respect to such Series of
Certificates, and the Trustee or the Transferor is unable to locate a qualified
successor, (ii) the Transferor, at its option, advises the Trustee in writing
that it elects to terminate the book-entry system through DTC or (iii) after the
occurrence of a Servicer Default, Certificate Owners representing not less than
50% of the Investor Interest advise the Trustee and DTC through DTC Participants
in writing that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all DTC Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
registration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments and any
principal payments on each Distribution Date will be made to Holders in whose
names the Definitive Certificates were registered at the close of business on
the related Record Date. The final payment on any Certificate (whether
Definitive Certificates or the Certificates registered in the name of Cede
representing the Certificates), will be made only upon presentation and
surrender of such Certificate at the office or agency specified in the notice of
final distribution to Certificateholders. The Trustee will provide such notice
to registered Certificateholders not later than the fifth day of the month of
such final distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be the
Trustee. No service charges will be imposed for any registration of transfer or
exchange, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. The Transfer Agent and Registrar shall not be required to register
the transfer or exchange of Definitive Certificates for a period of fifteen days
preceding the due date for any payment with respect to such Definitive
Certificates.
INTEREST PAYMENTS
Interest on the Class A Certificates and the Class B Certificates will
accrue from the Closing Date on the outstanding principal balance of the Class A
Certificates and the Class B Certificates at the Class A Certificate Rate and
Class B Certificate Rate, respectively. Interest will be distributed quarterly
on the 15th day of March, June, September and December (or if any such day is
not a business day, the next succeeding business day) and on [the Scheduled
Class A Payment Date and the Scheduled Class B Payment Date], commencing on
March 17, 1997 Distribution Date and, following the occurrence of a Pay Out
Event, on each Special Payment Date to the Certificateholders in whose names the
Certificates were registered at the close of business on the last day of the
calendar month preceding the date of such payment Date (each, a "Record Date").
Interest for any Interest Payment Date or Special Payment Date will accrue from
and including the preceding Interest Payment Date or Special Payment Date (or in
the case of the first Interest Payment Date, from and including the Closing
Date) to but excluding the next Interest Payment Date or Special Payment Date.
Interest on the Class A Certificates and the Class B Certificates will accrue
from the Closing Date on the outstanding principal balance of the Class A
Certificates and the Class B Certificates at the Class A LIBOR Rate and Class B
LIBOR Rate, respectively, subject to the limitations described below. Interest
will be distributed quarterly on the 15th day of March, June, September, and
December (or if any such day is not a business day, the next succeeding business
day) and on the Scheduled Class B Payment Date, commencing on the March 17, 1997
Distribution Date and, following the occurrence of a Pay Out Event, on each
Special Payment Date. Interest for any Interest Payment Date or Special Payment
Date will accrue from and including the preceding Interest Payment Date or
Special Payment Date (or in the case of the first Interest Payment Date, from
and include the Closing Date) to but exclude the next Interest Payment Date or
Special Payment Date (an "Interest PeriodInterest Period").
Interest payments or deposits with respect to the Class A Certificates for
each Distribution Date will be calculated on the outstanding principal balance
of the Class A Certificates as of the preceding Record Date (or in the case of
the initial Distribution Date, as of the Closing Date) based upon, subject to
certain limitations described below, the Class A LIBOR Rate. The initial
Distribution Date will be __________, __, 1996. Interest payments or deposits
with respect to each Distribution Date will be calculated on the basis of the
actual number of days in the period (each, a "Monthly Interest Period") from and
including the preceding Distribution Date (or in the case of the initial
Distribution Date, the Closing Date) to but excluding such Distribution Date and
a 360-day year. On each Distribution Date, Class A Monthly InterestClass A
Monthly Interest (as defined below) and Class A Monthly Interest previously due
but not deposited in the Class A Interest Funding Account (as defined below) or
paid to the Class A Certificateholders and any Class A Additional InterestClass
A Additional Interest will be (i) paid to the Class A Certificateholders, if
such Distribution Date is an Interest Payment Date or a Special Payment Date, or
(ii) deposited in an eligible trust account in the name of Trustee and for the
benefit of the Class A Certificateholders (the "Class A Interest Funding
Account"), if such Distribution Date is not an Interest Payment Date or a
Special Payment Date. Payments to the Class A Certificateholders or deposits
into the Class A Interest Funding Account in respect of interest on the Class A
Certificates on any Distribution Date will be funded from Class A Available
FundsClass A Available Funds for the related Monthly Period.
Interest payments or deposits with respect to the Class B Certificates for
each Distribution Date will be calculated on the Class B Invested Amount as of
the preceding Record Date (or in the case of the initial Distribution Date, on
the Class B Initial Invested Amount) based upon the Class B LIBOR Rate and the
actual number of days in the period from and including the previous Distribution
Date (or in the case of the initial Distribution Date, the Closing Date) to but
excluding such Distribution Date and a 360-day year. On each Distribution Date,
Class B Monthly Interest and Class B Monthly Interest previously due but not
deposited in the Interest Funding Account or paid to the Class B
Certificateholders and any Class B Additional InterestClass B Additional
Interest will be (i) paid to the Class B Certificateholders, if such
Distribution Date is an Interest Payment Date or a Special Payment Date, or (ii)
deposited in the Class B Interest Funding Account, if such Distribution Date is
not an Interest Payment Date or a Special Payment Date. Payments to the Class B
Certificateholders or deposits into the Interest Funding Account in respect of
interest on the Class B Certificates on any Distribution Date will be funded
from Class B Available Funds for the related Monthly Period. Class A Monthly
Interest and Class B Monthly Interest for any Distribution Date due but not paid
on such Distribution Date will be payable on the next succeeding Distribution
Date, together with additional interest on such amount at the applicable Class A
LIBOR Rate or Class B LIBOR Rate plus 2% per annum (such amount, as applicable,
"Additional Interest"). Any such amounts will not be distributed until the
related Interest Payment Date.
"Class A Monthly Interest" means for any Distribution Dates an amount
equal to the lesser of (x) the product of (i) the actual number of days in the
period from the prior Distribution Date (or with respect to the initial
Distribution Date, the Closing Date) to and excluding such Distribution Date
divided by 360, (ii) the Class A LIBOR Rate and (iii) the outstanding principal
balance of the Class A Certificates as of the preceding Record Date (or in the
case of the first Distribution Date, as of the Closing Date) and (y) the Class A
Available Funds Cap for the related Monthly Period.
"Class B Monthly InterestClass B Monthly Interest" means for any
Distribution Date, an amount equal to the lesser of (x) the product of (i) the
actual number of days in the related Interest Period divided by 360, (ii) the
Class B Rate and (iii) the outstanding principal balance of the Class B
Certificates as of the preceding Record Date (or in the case of the first
Distribution Date, as of the Closing Date) and (y) the Class B Available Funds
Cap for the related Monthly Period.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation of collections of
Finance Charge Receivables accrued and allocated to the Investor Interest with
respect to such Monthly Period, (b) Principal Funding Investment Proceeds, if
any, with respect to the related Transfer Date and (c) amounts, if any, to be
withdrawn from the Reserve Account which are required to be included in Class A
Available Funds pursuant to the Series 1996-1 Supplement with respect to such
Transfer Date.
"Class A Available Funds Cap" means, with respect to any Monthly Period,
Class A Available Funds for such Monthly Period less, if the Originators are not
the Servicer, the Class A Servicing Fee for such Monthly Period.
"Class B Available Funds" means, with respect to any Monthly Period, an
amount equal to the Class B Floating Allocation of collections of Finance Charge
Receivables accrued and allocated to the Investor Interest with respect to such
Monthly Period.
"Class B Available Funds Cap" means, with respect to any Monthly Period,
Class B Available Funds for such Monthly Period less, if the Originators are not
the Servicer, the Class B Servicing Fee for such Monthly Period.
Interest payments or deposits on each Distribution Date (other than any
payments or deposits relating to any Shortfall Amounts or Carry Over Amounts)
will be funded from the portion of Finance Charge Receivables collected during
the preceding Monthly Period [(or with respect to the first Distribution Date,
from and including the Closing Date through __________ __, 1996)] and certain
other available amounts (a) with respect to the Class A Certificates, allocated
to the Class A Investor Interest, and, if necessary, from Excess Spread and
Reallocated Principal Collections (to the extent available), (b) with respect to
the Class B Certificates, allocated to the Class B Investor Interest and, if
necessary, from Excess Spread and Reallocated Principal Collections (to the
extent available) and (c) with respect to the Collateral Interest, from Excess
Spread. See "Description of the Certificates--Reallocation of Cash Flows" and
"--Application of Collections--Payment of Interest, Fees and Other Items" and
"Risk Factors--Risk of Limitations on Subordination."
If and to the extent on any Distribution Date, the amount of interest
payable on the Class A Certificates based on the Class A LIBOR for the related
Monthly Interest Period Class A exceeds the Class A Available Funds Cap for the
related Monthly Period, then such excess (the "Class A Shortfall Amount") will
be carried forward to the next Distribution Date together with interest thereon
at the applicable Class A LIBOR Rate plus 2% per annum (the "Class A Carry Over
Amount") and will be funded on a subordinated basis solely from Excess Spread,
if any, available therefor as described under "Description of the Certificates
- -- Application of Collections -- Excess Spread."
If and to the extent on any Distribution Date, amount of interest payable
on the Class B Certificates based on the Class B LIBOR Rate for the related
Monthly Interest Period exceeds the Class B Available Funds Cap for the related
Monthly Interest Period, then such excess (the "Class B Shortfall Amount") will
be carried forward to the next Distribution Date together with interest thereon
at the applicable Class B LIBOR Rate plus 2% per annum (the "Class B Carry Over
Amount") and will be funded on a subordinated basis solely from Excess Spread,
if any, available therefor as described under "Description of the Certificates
- -- Application of Collections -- Excess Spread." The Class B Carry Over Amount
is subordinated to the Class A Carry Over Amount. The Class A Carry Over Amount
and Class B Carry Over Amount are subordinated to payments in respect of the
Collateral Interest. See "Risk Factors -- Basis Risk."
The Trustee will determine LIBOR on ________ __, 199[7] for the period
from the Closing Date through ________ __, 1996 and for each Interest Period
thereafter, on the second business day prior to the Distribution Date on which
such Interest Period commences (each, a "LIBOR Determination DateLIBOR
Determination Date"). For purposes of calculating LIBOR, a business day is any
business day on which dealings in deposits in United States dollars are
transacted in the London interbank market.
"Class A LIBOR Rate" means, with respect to each Interest Period, a per
annum rate equal to ___% per annum in excess of LIBOR, as determined on the
related LIBOR Determination Date.
"Class B LIBOR Rate" means, with respect to each Interest Period, a per
annum rate equal to ___% per annum in excess of LIBOR, as determined on the
related LIBOR Determination Date.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits
in United States dollars for a period equal to the relevant Interest Period
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such date.
If such rate does not appear on Telerate Page 3750, the rate for that LIBOR
Determination Date will be determined on the basis of the rates at which
deposits in United States dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a period equal to the relevant Interest Period. The Trustee
will request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided,
the rate for that LIBOR Determination Date will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the rate for
that LIBOR Determination Date will be the arithmetic mean of the rates quoted by
major banks in New York City, selected by the Servicer, at approximately 11:00
a.m., New York City time, on that day for loans in United States dollars to
leading European banks for a period equal to the relevant Interest Period.
"Telerate Page 3750" means the display page currently so
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service for the purpose of displaying comparable rates or
prices).
"Reference Banks" means four major banks in the London
interbank market selected by the Servicer.
The Class A Rate and the Class B Rate applicable to the current and
immediately preceding Interest Period may be obtained by telephoning the Trustee
at its Corporate Trust Office at ______________.
Interest on the Certificates will be calculated on the basis of the actual
number of days in the Interest Period and a 360-day year.
PRINCIPAL PAYMENTS
On each Transfer Date relating to the Revolving Period (which begins on
the Closing Date and ends at the commencement of the Controlled Accumulation
Period or, if earlier, the Rapid Amortization Period), unless a reduction in the
Required Collateral Interest has occurred, collections of Principal Receivables
allocable to the Investor Interest will, subject to certain limitations,
including the allocation of any Reallocated Principal Collections with respect
to the related Monthly Period to pay the Class A Required Amount and the Class B
Required Amount, be treated as Shared Principal Collections or, under certain
circumstances, deposited into the Excess Funding Account.
On each Transfer Date relating to the Controlled Accumulation Period, the
Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Investor Principal Collections with respect to such
Transfer Date, (b) the applicable Controlled Deposit Amount and (c) the Class A
Adjusted Investor Interest prior to any deposits on such date. Amounts in the
Principal Funding Account will be paid to the Class A Holders on the Class A
Scheduled Payment Date. After the Class A Investor Interest has been paid in
full, on each Transfer Date during the Controlled Accumulation Period, amounts
equal to the lesser of (a) Available Investor Principal Collections with respect
to such Transfer Date and (b) the Class B Investor Interest will be deposited in
the Distribution Account for distribution to the Class B Holders until the Class
B Investor Interest has been paid in full. Such amounts in the Distribution
Account will be paid to the Class B Holders on the Class B Scheduled Payment
Date. During the Controlled Accumulation Period until the final principal
payment to the Class B Holders, the portion of Available Investor Principal
Collections not applied to Class A Monthly PrincipalClass A Monthly Principal,
Class B Monthly Principal or Collateral Monthly Principal on a Transfer Date
will generally be treated as Shared Principal Collections or, under certain
circumstances, deposited into the Excess Funding Account.
"Available Investor Principal Collections" means, with respect to any
Monthly Period in the Controlled Accumulation Period or the Rapid Amortization
Period, an amount equal to the sum of (a) (i) the Fixed Investor Percentage of
collections of Principal Receivables received during such Monthly Period and
certain other amounts allocable to the Investor Interest, minus (ii) the amount
of Reallocated Principal Collections with respect to such Monthly Period used to
fund interest on the Certificates or Servicing Fee, plus (b) any Shared
Principal Collections with respect to other Series that are allocated to Series
1996-1.
On each Distribution Date during the Rapid Amortization Period, the Class
A Holders will be entitled to receive Available Investor Principal Collections
for the related Monthly Period in an amount up to the Class A Investor Interest
until the earlier of the date the Class A Certificates are paid in full and the
Series 1996-1 Termination Date. After payment in full of the Class A Investor
Interest, the Class B Holders will be entitled to receive on each Distribution
Date during the Rapid Amortization Period Available Investor Principal
Collections until the earlier of the date the Class B Certificates are paid in
full and the Series 1996-1 Termination Date. After payment in full of the Class
B Investor Interest, the Collateral Interest Holder will be entitled to receive
on each Transfer Date (other than the Transfer Date prior to the Series 1996-1
Termination Date) and on the Series 1996-1 Termination Date, Available Investor
Principal Collections until the earlier of the date the Collateral Interest is
paid in full and the Series 1996-1 Termination Date. See "--Pay Out Events"
below for a discussion of events which might lead to the commencement of the
Rapid Amortization Period.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Controlled Accumulation Period, and extend the length of the
Revolving Period, subject to certain conditions including those set forth below.
The Servicer may make such election only if the Accumulation Period
LengthAccumulation Period Length (determined as described below) is less than 12
months. On each Determination Date on and after the Determination Date preceding
the ________ ____ Monthly Period, until the Controlled Accumulation Period
begins, the Servicer will determine the "Accumulation Period Length," which is a
number of months such that the amount available for distribution of principal on
the Class A Certificates on the Class A Scheduled Payment Date is expected to
equal or exceed the Class A Investor Interest, assuming (a) the expected monthly
collections of Principal Receivables expected to be distributable to the Holders
of all Series have a principal payment rate no greater than the lowest monthly
principal payment rate on the Receivables for the preceding twelve months, (b)
the amount of principal expected to be distributable to Holders of all Series
remains constant at the level on such date of determination, (c) no Pay Out
Event with respect to any Series will subsequently occur and (d) no additional
Series will be subsequently issued. If the Accumulation Period Length is less
than twelve months, the Servicer may, at its option, postpone the commencement
of the Controlled Accumulation Period such that the number of months included in
the Controlled Accumulation Period will be equal to or exceed the Accumulation
Period Length. The effect of the foregoing calculation is to permit the
reduction of the length of the Controlled Accumulation Period based on the
investor interest of certain other Series which are scheduled to be in their
revolving periods during the Controlled Accumulation Period and on increases in
the principal payment rate occurring after the Closing Date. The length of the
Controlled Accumulation Period will not be determined to be less than one month.
SUBORDINATION
The Class B Certificates and the Collateral Interest will be subordinated
to the extent necessary to fund certain payments with respect to the Class A
Certificates. In addition, the Collateral Interest will be subordinated to the
extent necessary to fund certain payments with respect to the Class B
Certificates. Certain principal payments otherwise allocable to the Class B
Holders may be reallocated to cover amounts in respect of the Class A
Certificates and the Class B Investor Interest may be reduced if the Collateral
Interest is equal to zero. Similarly, certain principal payments allocable to
the Collateral Interest may be reallocated to cover amounts in respect of the
Class A Certificates and the Class B Certificates and the Collateral Interest
may be reduced. To the extent the Class B Investor Interest is reduced, the
percentage of collections of Finance Charge Receivables allocated to the Class B
Certificates in subsequent Monthly Periods will be reduced. Moreover, to the
extent the amount of such reduction in the Class B Investor Interest is not
reimbursed, the amount of principal and interest distributable to the Class B
Holders will be reduced. See "--Allocation Percentages," "--Reallocation of Cash
Flows" and "--Application of Collections--Excess Spread."
TRANSFER AND ASSIGNMENT OF RECEIVABLES
Pursuant to the Receivables Purchase Agreement, on the date of issuance of
the Certificates (the "Closing Date"), the Originators will transfer and assign
to the Transferor Premium Finance Agreements from their portfolio of Premium
Finance Agreements on the day immediately preceding the Closing Date (the
"Calculation Date") to borrowers whose stated addresses in the related insurance
premium finance loan agreements are in one of the Permitted States (as defined
under "The Receivables") (the "Identified PortfolioIdentified Portfolio") and
that satisfy as of the Cut-off Date (as defined below) the eligibility criteria
specified in the Receivables Purchase Agreement and the Agreement. The "Cut-off
Date" is (x) with respect to Premium Finance Agreements originated prior to
December 1, 1996, December 1, 1996 and (y) with respect to Premium Financing
Agreements originated after December 1, 1996 but through and including the
Calculation Date, the Calculation Date. See "The Receivables" and "Description
of the Certificates--Eligible Accounts and Eligible ReceivablesEligible
Receivables." The selection of the Permitted States was based on state
regulatory considerations. Each of the Originators will represent and warrant in
the Receivables Purchase Agreement, and the Transferor will represent and
warrant in the Agreement, that the Identified Portfolio was not selected in a
manner adverse to Certificateholders. Pursuant to the Agreement, the Transferor
will transfer and assign such Premium Finance Agreements to the Trustee for the
benefit of the Trust.
In connection with the transfer of the Receivables to the Trust, the
Originators will indicate in their respective computer files that the
Receivables have been conveyed to the Transferor who will in turn convey such
Receivables to the Trust. In addition, the Transferor has provided to the
Trustee or its bailee computer files or microfiche lists containing a true and
complete list showing each Receivable, identified by account number and by total
outstanding balance on the Cut-Off Date. The Transferor will provide the Trustee
an updated list of each Receivable since the Trust Cut-Off Date, identified by
account number and indicating the aggregate receivable balance as of the end of
the first day of any Monthly Period. Neither the Originators nor the Transferor
will deliver to the Trustee any other records or agreements relating to the
Receivables and documents and agreements maintained by an Originator will not be
segregated by such Originator from other documents and agreements relating to
other premium finance loans and will not be stamped or marked to reflect the
transfer and assignment of the related Receivables to the Trustee on behalf of
the Trust, but the Originators are required to indicate on their computer
records that the Receivables have been transferred and assigned to the
Transferor, who in turn will transfer and assign such Receivables to the Trustee
on behalf of the Trust. The Originators have not taken and will not be obligated
to take any actions in order to perfect for the benefit of the Transferor a
security interest in the Receivables, other than filing in the appropriate
filing offices in the states of New York and California a financing statement on
Form UCCUCC-1. The Transferor has not taken and will not be obligated to take
any actions in order to perfect for the benefit of the Trust a security interest
in the Receivables, other than filing in the appropriate filing offices in the
State of Pennsylvania a financing statement on Form UCC-1. See "Risk
Factors--Transferor Bankruptcy Risk."
The Transferor shall covenant in the Agreement that it shall not transfer
on any day any Premium Finance Agreement to the Trust which would cause as of
such day after giving effect to such transfer (i) an Excess Obligor
Concentration Amount to exist or be increased; (ii) an Excess Insurer
Concentration Amount to exist or be increased; (iii) the Investment Grade
Insurer Percentage to be less than the Required Investment Grade Insurer
Percentage; (iv) the Investment Grade Insurer Percentage to be decreased, if on
such day the Investment Grade Insurer Percentage is equal to or less than the
Required Investment Grade Insurer Percentage; (v) the Top 10 Insurer Percentage
to exceed the Maximum Top Insurer Percentage and (vi) the Top 10 Insurer
Percentage to be increased, if on such day the Top 10 Insurer Percentage is
equal to or greater than the Maximum Top 10 Insurer Percentage.
In the event of a breach of any of the covenants described in clauses (i)
through (iv) and such breach continues for a period of 15 days after discovery
of such breach by the Transferor or by the Servicer or receipt by the Transferor
of written notice by the Trustee of such event, then each Receivable arising
under the Account (an "Ineligible Account") under which such Receivable arises
shall be removed from the Trust on the terms and conditions so that Receivables
in Ineligible Accounts are removed in "--Representations and Warranties."
NEW ISSUANCES
The Agreement will authorize the Trustee to issue one or more Series of
Certificates which are transferable and have the characteristics described
below. The Transferor Interest will initially be held by the Transferor and will
be transferable only as provided in the Agreement. The Transferor may require
the Trustee to issue one or more new Series in exchange for a reduction in the
Transferor Interest. Pursuant to the Agreement, the Transferor may define, with
respect to any newly issued Series, all Principal Terms of such new Series. Upon
the issuance of an additional Series of Certificates, none of the Transferor,
the Servicer, the Trustee or the related Trust will be required or will intend
to obtain the consent of any Certificateholder of any other Series previously
issued by such Trust. However, as a condition of a New Issuance, the Transferor
will deliver to the Trustee written confirmation that the New Issuance will not
result in the reduction or withdrawal by any Rating Agency of its rating of any
outstanding Series, including Series 1996-1. The Transferor may offer any Series
to the public or other investors in transactions either registered or under the
Securities Act or exempt from registration thereunder, directly, through the
Underwriters or one or more other underwriters or placement agents, in
fixed-price offerings, in negotiated transactions, or otherwise. Any such Series
may be issued in fully registered or book-entry form in minimum denominations
determined by the Transferor.
The Transferor may require New Issuances and define Principal Terms such
that a Series issued under the Trust has a period during which amortization or
accumulation of the principal amount thereof is intended to occur which may have
a different length and begin on a different date than such period for the
Certificates. Further, one or more Series may be in their amortization or
accumulation periods while the Certificates are not. Moreover, each Series may
have the benefit of a Credit Enhancement which is available only to such Series.
Under the Agreement, the Trustee shall hold any such form of Credit Enhancement
only on behalf of the Series to which it relates. The Transferor may deliver a
different form of Credit Enhancement agreement with respect to any Series. The
Transferor may specify different certificate rates and monthly servicing fees
with respect to each Series (or a particular Class within such Series). The
Transferor will also have the option under the Agreement to vary between Series
the terms upon which a Series (or a particular Class within such Series) may be
repurchased by the Transferor or remarketed to other investors. There will be no
limit to the number of New Issuances that may be performed under the Agreement.
Under the Agreement, the Transferor may commence a New Issuance by
notifying the Trustee at least five days in advance of the date upon which the
New Issuance is to occur stating the Series to be issued on the date of the New
Issuance and, with respect to each such Series (and, if applicable, each Class
thereof): (1) its initial principal amount (or method for calculating such
amount), (2) its certificate rate (or method of calculating such rate) and (3)
the provider of Credit Enhancement, if any, which is expected to provide support
with respect to it. The Agreement will provide that on the date of the New
Issuance the Trustee will authenticate any such Series only upon delivery to it
of at least the following: (i) a Series Supplement specifying the Principal
Terms of such Series; (ii) (a) an opinion of counsel to the effect that, unless
otherwise stated in the related Series Supplement, the certificates of such
Series will be characterized as indebtedness for Federal income tax purposes and
(b) a Tax Opinion; (iii) if required by the related Series Supplement, the form
of Credit Enhancement; (iv) if Credit Enhancement is required by the Series
Supplement, an appropriate Credit Enhancement agreement executed by the
Transferor and the Credit Enhancement Provider; (v) written confirmation from
each Rating Agency that the New Issuance will not result in such Rating Agency's
reducing or withdrawing its rating on any then outstanding Series rated by it;
(vi) an officer's certificate of the Transferor to the effect that after giving
effect to the New Issuance the Transferor would not be required to add
Additional Receivables pursuant to the Agreement and the Transferor Interest
would be at least equal to the Minimum Transferor Interest; and (vii) the
certificates representing the Series to be exchanged, if applicable. Upon
satisfaction of such conditions, the Trustee will reduce the Transferor Interest
and/or cancel the certificates of the exchanged Series, as applicable, and
authenticate the new Series.
The Transferor also may from time to time cause the Trustee to sell
purchased interests in the Receivables and other assets of a Trust to one or
more purchasers. Any purchased interest will represent an interest in the
applicable Trust's assets similar to the interest of a Series of Certificates.
No Series will be subordinated to any purchased interest, and no purchased
interest will have any interest in the Enhancement or series accounts specified
for any Series, except as specified in the prospectus relating to that Series.
Any such sale will take place pursuant to one or more agreements which will
specify terms similar to Principal Terms for the applicable purchased interests
and may grant the purchasers of such interests notice and consultation rights
with respect to rights or actions of the Trustee. Any sale of purchased
interests in the assets of a Trust will be subject to the satisfaction of the
same conditions (including Rating Agency confirmations) as for a New Issuance,
as appropriately modified to refer to a purchased interest rather than a New
Issuance. The modifications of conditions would not result in any substantive
change in such conditions, but would simply change the conditions to refer to
the contemplated sale of a purchased interest rather than a New Issuance.
REPRESENTATIONS AND WARRANTIES
The Transferor will represent and warrant in the Agreement that as of the
Closing Date, with respect to Receivables conveyed to the Trust on such date and
the related Addition Date with respect to Additional Receivables that (a) the
Agreement and the Receivables Purchase Agreement will constitute a legal, valid
and binding obligation of the Transferor, (b) the transfer of Receivables by it
to the Trust under the Agreement will constitute either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor in
and to the Receivables, whether then existing or thereafter created and the
proceeds thereof (including amounts in any of the accounts established for the
benefit of Certificateholders) or the grant of a first priority perfected
security interest in such Receivables (except for certain tax and other
governmental liens) and the proceeds thereof (including amounts in any of the
accounts established for the benefit of Certificateholders), which is effective
as to each such Receivable upon the creation thereof, (c) the Agreement and the
Receivables Purchase Agreement constitute legal, valid and binding obligations
of Transferor, enforceable against Transferor in accordance with their terms,
except (A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and the rights
of creditors of national banking associations, and (B) as such enforceability
may be limited by general principles of equity (whether considered in a suit at
law or in equity), (d) the execution and delivery of the Agreement, the
Certificates and the Receivables Purchase Agreement, the performance of the
transactions contemplated by the Agreement, the Certificates and the Receivables
Purchase Agreement and the fulfillment of the terms hereof and thereof will not
conflict with or result in any breach of any of the material terms and
provisions of any material agreement to which Transferor is a party or by which
it or any of its properties are bound, (e) the execution and delivery of the
Agreement, the Certificates and the Receivables Purchase Agreement, the
performance of the transactions contemplated by the Agreement and the
fulfillment of the terms thereof will not conflict with or violate any
requirements of law applicable to Transferor, (f) each Receivable then existing
has been conveyed to the Trust free and clear of any Lien of any Person claiming
through or under Transferor or any of its Affiliates (other than any Liens for
municipal and other local taxes if such taxes shall not at the time be due and
payable or if Transferor shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto) and in compliance, in all material
respects, with all Requirements of Law applicable to Transferor, and (g) each
such Receivable is an Eligible Receivable. In the event of a material breach of
the representation and warranty described in clause (f) above, and if any of the
following two conditions is met: (A) as a result of such breach such Receivable
is charged off as uncollectible or the Trust's rights in, to or under such
Receivable or its proceeds are impaired or the proceeds of such Receivable are
not available for any reason to the Trust free and clear of any Lien or (B) the
Lien upon the subject Receivable (1) arises in favor of the United States of
America or any State or any agency or instrumentality thereof and involves taxes
or liens arising under Title IV of ERISA or (2) has been consented to by
Transferor; then, upon the earlier to occur of the discovery of such breach or
event by Transferor or Servicer or receipt by Transferor of written notice of
such breach given by Trustee, each Receivable arising under the Account under
which such Receivable arises shall be automatically removed from the Trust on
the terms are conditions set forth below. In the event of a material breach of
the representation and warranty described in clause (g) above, as a result of
such breach, the related Account becomes a Defaulted Account or the Trust's
rights in, to or under the Receivable or its proceeds are impaired or the
proceeds of such Receivable are not available for any reason to the Trust free
and clear of any Lien, then, upon the expiration of 60 days (or such longer
period as may be agreed to by Trustee in its sole discretion, but in no event
later than 120 days) from the earlier to occur of the discovery of any such
event by either Transferor or Servicer, or receipt by Transferor of written
notice of any such event given by Trustee, then each Receivable arising under
the Account under which such Receivable arises shall be removed from the Trust
on the terms and conditions set forth below; provided that no such removal shall
be required to be made if, on any day within such applicable period, such
representations and warranties with respect to such Receivable shall then be
true and correct in all material respects as if such Receivable had been created
on such day. The Transferor will accept reassignment of each Receivable conveyed
to the Trust in breach of clauses (f) and (g) above (a "Transferor Ineligible
Receivable") on the terms and conditions set forth below. The Transferor will
accept reassignment of Transferor Receivables in Ineligible Accounts by
directing the Servicers to deduct the amount of the principal amount of each
Transferor Ineligible Receivable from the aggregate amount of Principal
Receivables used to calculate the Transferor Interest. If the exclusion of an
Ineligible Receivable from the calculation of the Transferor Interest would
cause the Transferor Interest to be less than zero, on the date of reassignment
of such Ineligible Receivable, the Transferor will make a deposit in the Excess
Funding Account in immediately available funds in an amount equal to the amount
by which the Transferor Interest would be reduced below zero. Any such deduction
or deposit shall be considered a repayment in full of the Transferor Ineligible
Receivable. The obligation of the Transferor to accept reassignment of any
Transferor Ineligible Receivable is the sole remedy respecting any breach of the
representations and warranties or covenants set forth in this paragraph with
respect to such Receivable available to the Certificateholders or the Trustee on
behalf of Certificateholders. In the event of a material breach of any of the
representations and warranties described in clauses (a) through (e) above,
either the Trustee or the Holders of Certificates evidencing undivided interests
in the Trust aggregating more than 50% of the aggregate Investor Interest of all
Series outstanding under such Trust may direct the Transferor to accept
reassignment of the entire Identified Portfolio within 60 days of such notice,
or within such longer period specified in such notice. The Transferor will be
obligated to accept reassignment of such Receivables on a Distribution Date
occurring within such applicable period. Such reassignment will not be required
to be made, however, if at any time during such applicable period, or such
longer period, the representations and warranties are true and correct in all
material respects. The deposit amount for such reassignment will equal the
Investor Interest and Enhancement Invested Amount, if any, plus accrued and
unpaid interest for each Series outstanding under the Trust on the last day of
the Monthly Period preceding the Distribution Date on which the reassignment is
scheduled to be made less the amount, if any, previously allocated for payment
of principal and interest to such Certificateholders or such holders of the
Enhancement Invested Amount or the Collateral Interest, if any, on such
Distribution Date. The payment of the reassignment deposit amount and the
transfer of all other amounts deposited for the preceding month in the
Distribution Account will be considered a payment in full of the Investor
Interest and the Enhancement Invested Amount, if any, for each such Series
required to be repurchased and will be distributed upon presentation and
surrender of the Certificates for each such Series. The obligation of the
Transferor to make any such deposit will constitute the sole remedy respecting a
breach of the representations and warranties available to the Trustee or
Certificateholders
CERTAIN COVENANTS
Pursuant to the Agreement, the Transferor covenants that, among other
things, subject to specified exceptions and limitations, (i) it will take no
action to cause any Receivable to be evidenced by any instruments or to be
anything other than a general intangible, (ii) except for the conveyances under
the Agreement, it will not sell any Receivable or grant a lien on any
Receivable, (iii) it will comply with and perform its obligations under, and
will cause each Originator to comply with and perform its obligations under, any
Receivable to which it is a party and its credit and collection policies and it
will not change the terms of such agreements or policies except as provided in
the Agreement, (iv) in the event it is unable for any reason to transfer
Receivable to the Trust, it will nevertheless continue to allocate and pay all
collections from all Receivables to the Trust, (v) it will notify the Trust
promptly after becoming aware of any lien on any Receivable and (vi) it will
take all actions necessary to enforce its rights and claims under the Receivable
Purchase Agreement.
Pursuant to the Agreement, the Servicer covenants (a) to maintain, with
respect to each Receivable originated on or before February 1, 1997, each
Originator's first priority perfected security interest in the Unearned Premiums
securing such Receivables and with respect to each Receivable originated after
February 1, 1997, the Trust's first priority perfected security interest in the
Unearned Premiums securing such Receivables, (b) not to impair the rights of the
Certificateholders in any Receivable, (c) to make reasonable efforts to collect
all payments called for under the terms and provisions of the Receivables as and
when the same shall become due and follow such collection procedures as it
follows with respect to all comparable insurance premium finance loans that it
services and (d) not to voluntarily increase or decrease the number or amount of
any scheduled payment, or the principal balance of a Receivable or the annual
percentage rate of a Receivable, or extend, rewrite or otherwise modify the
payment terms; provided, however, Servicer may (i) extend the term of any
Receivable, but not past the maturity date of the related insurance policies and
(ii) change the installment due date in the related Premium Finance Agreement
one time during the term of a Receivable, provided that such a change does not
result in extending the maturity of such Receivable for more than 30 days or
past the maturity date of the related insurance policies.
In the event of a breach of any of the covenants set forth in (i) clauses
(b), (c) and (d) above and as a result of such breach the related Account
becomes a Defaulted Account or the Trust's rights in, to or under such
Receivable in such Account or its proceeds are impaired or the proceeds of such
Receivable in such Account are not available for any reason to the Trust free
and clear of any Lien, then, upon the expiration of ____ days (or such longer
period as may be agreed to by the Trustee in its sole discretion, but in no
event later than 120 days) from the earlier to occur of the discovery of any
such event by either Transferor or Servicer, or receipt by Servicer of written
notice of any such event given by Trustee or (ii) clause (a) above then, upon
the expiration of 15 days from the earlier to occur of the discovery of any such
event by either Transferor or Servicer, or receipt by Servicer of written notice
of any such event given by Trustee, then each Receivable arising under the
Account under which such Receivable arises shall be removed from the Trust on
the terms and conditions set forth below. When the above provisions require
removal of a Receivable, Servicer shall accept assignment of Receivables arising
under an Account (a "Servicer Ineligible Account" and together with any
Transferor Ineligible Accounts, "Ineligible Account") by depositing into the
Collection Account on the applicable Determination Date an amount equal to the
principal portion of each Receivable arising under such Servicer Ineligible
Account and deducting such amount from the Principal Receivables in the Trust
(to the extent previously included therein). Deposits of any amounts into the
Collection Account shall be treated for all purposes of the Agreement as
Principal Collections. Upon the removal of Receivables arising under such
Servicer Ineligible Account (and the mailing of any deposit required above), the
Trust shall automatically and without further action be deemed to transfer,
assign, and otherwise convey to Servicer, without recourse, representation or
warranty, all the right, title and interest of the Trust in and to each
Receivable arising under such Servicer Ineligible Account, all monies due or to
become due with respect to each Receivable arising under such Servicer
Ineligible Account and all proceeds of such Servicer Ineligible Receivable and
Recoveries relating to such Servicer Ineligible Receivable. Such reassigned
Receivables shall be treated by the Trust as collected in full as of the date on
which it was transferred. Trustee shall execute such documents and instruments
of transfer or assignment and take other actions as shall reasonably be
requested by Servicer to evidence the conveyance of each Receivable arising
under such Servicer Ineligible Account. The obligation of Servicer set forth
above shall constitute the sole remedy respecting any breach set forth above
with respect to such Receivable available to the Holders or Trustee on behalf of
the Holders.
ELIGIBLE ACCOUNTS AND ELIGIBLE RECEIVABLES
"Eligible Account" means with respect to Accounts under which the
Receivables transferred to the Trust on the Closing Date arise, and as of the
earliest Addition Date of the Additional Receivables arising under an Additional
Account, with respect to each Additional Account, each Account the Receivables
under which: (a) are payable in United States dollars; (b) have been funded by
the related Originator in whole or in part; (c) do not relate to an insurance
policy related to Lloyds of London; (d) do not relate to a Premium Finance
Agreement under which the Obligor is a Governmental Authority; and (e) are
underwritten in accordance with guidelines that are not materially different
from the underwriting guidelines that were used by the Originators with respect
to the Initial Receivables.
"Eligible Receivable" means each Receivable, as of the Cut-Off Date and
with respect to each Additional Receivable, as of the date of origination of
such Receivable: (a) which the related Obligor used all the proceeds of such
Receivable to pay premiums and related items with respect to commercial property
or casualty insurance policies, governed by the law of any State or territory of
the United States or the District of Colombia, under which such Obligor is the
insured; (b) with respect to which all materials consents, licenses, approvals
or authorizations of, or registrations or declarations with, any Governmental
Authority required to be obtained, effected or given in connection with the
creation of such Receivable or the execution, delivery and performance by the
related Originator of the related Premium Finance Agreement, have been duly
obtained, effected or given and are in full force and effect as of the date of
transfer of such Receivable to the Trust; (c) which, at the time of transfer of
such Receivables to the Trust, the terms of the related Premium Finance
Agreement have not been waived or modified except for waivers or modifications
that were made by the Originators in accordance with the Guidelines; (d) with
respect to which the related Premium Finance Agreement is not subject to any
right of rescission, setoff, counterclaim, defense arising out of the violations
of usury laws or any other defenses of any Obligor at the time of the transfer
of such Receivable to the Trust, other than defenses that may arise after the
time of transfer out of applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights in
general and general equity principles; (e) with respect to which, at the time of
transfer of such Receivable to the Trust, the related Originator has not taken
any action which would impair, or failed to take any action necessary to avoid
impairing, the rights of the Trust or the Certificateholders therein; (f) which
is not delinquent for more than 30 days; (g) which is among the Initial
Receivables, provides the related Originator with a limited power of attorney
allowing it to cancel the related insurance policy, if cancelable, in accordance
with state law upon non-payment of a loan installment by the related Obligor;
(h) which is an Additional Receivable, provides the related Originator with a
limited power of attorney allowing it to cancel the related insurance policy, in
accordance with state law upon non-payment of a loan installment by the related
Obligor; (i) which grants the related Originator a first priority preferred
security interest in the related Unearned Premium and allows such Originator to
direct the related insurance company to pay such Originator any such Unearned
Premium calculated as of the time of cancellation of the related insurance
policy, if cancelable; (j) with respect to which the related insurance policy
has not been canceled; (k) with respect to which the stated address of the
Obligor in the related Premium Finance Agreement is in a Permitted State; (l)
which was underwritten in accordance with the related Guidelines; (m) which was
originated in compliance, in all material respects, with all Requirements of Law
applicable to the applicable Originator and pursuant to loan documents which
comply, in all material respects, with all Requirements of Law applicable to the
applicable Originator; (n) which is the legal, valid and binding payment
obligation of the related Obligor, legally enforceable against such Obligor in
accordance with its terms; (o) with respect to which the related Obligor is not
the subject of a bankruptcy or insolvency proceeding; (p) with respect to which
the related Premium Finance Agreement provides for monthly payments by the
related Obligor; (q) which, with respect to Additional Receivables conveyed to
the Trust on or after February 1, 1997 only, the Trust has a first priority
perfected security interest in the Unearned Premium related to such Additional
Receivable and a Notice of Financed Premium has been delivered to the applicable
insurance company or companies; and (r) which is a "general intangible" under
the Uniform Commercial Code in the States of New York and Pennsylvania and is
not evidenced by a promissory note.
REMOVAL OF RECEIVABLES
The Transferor may, but shall not be obligated to, designate from time to
time certain Receivables be Removed ReceivablesRemoved Receivables, which shall
be subject to deletion and removal from the Trust. The Transferor will, however,
be permitted to designate and require reassignment to it of the Removed
Receivables only if: (i) the removal of any Receivables will not, in the
reasonable belief of the Transferor, cause a Pay Out Event to occur; (ii) the
Transferor shall have delivered to the Trustee for execution a written
assignment and a computer file or microfiche list containing a true and complete
list of all Removed Receivables; (iii) the Transferor represents and warrants
that no selection procedures believed by the Transferor to be materially adverse
to the interests of the holders of any Series of Certificates outstanding under
such Trust were used in selecting the Removed Accounts to be removed from such
Trust; (iv) the Transferor shall have notified each such Rating Agency of such
proposed removal and shall have received notice from each such Rating Agency
that such proposed removal will not result in a downgrade of its then-current
rating for any such Series; (v) the principal balance of the Removed Receivables
in the trust at such time; and (vi) the Transferor shall have delivered to the
trustee an officers certificate confirming the items set forth in clauses (i)
through (v) above. Notwithstanding the above, the Transferor will be permitted
to designate as a Removed Receivable without the consent of the Trustee,
Certificateholders or Rating Agencies any Receivable that has a zero balance and
which the Transferor will remove from its computer file.
COLLECTION AND OTHER SERVICING PROCEDURES
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the Servicer's
policies and procedures for servicing insurance premium finance loans comparable
to the Receivables. The Servicer will be required to maintain fidelity bond
coverage insuring against losses through wrongdoing of its officers and
employees who are involved in the servicing of insurance premium Finance loans
covering such actions and in such amounts as the Servicer believes to be
reasonable from time to time.
TRUST ACCOUNTS
The Trustee will establish and maintain in the name of the Trust a
"Finance Charge AccountFinance Charge Account," an "Excess Funding AccountExcess
Funding Account," and a "Principal Funding Account" as segregated trust accounts
or with a Qualified institution, for the benefit of the Certificateholders of
all related Series, including any Series offered pursuant to this Prospectus.
The Trustee will also establish a non-interest bearing segregated demand deposit
account to serve as the "Distribution Account" for the Trust. The Servicers will
establish and maintain, in the name of the Trust, for the benefit of
Certificateholders of all Series issued thereby, a non-interest bearing
segregated account to serve as the Collection Account for the Trust. The
Distribution Account and Collection Account will each be established as a
segregate trust account or with a "Qualified InstitutionQualified Institution,"
defined as a depository institution or trust company, which may include the
Trustee, organized under the laws of the United States or any one of the states
thereof, which at all times has a certificate of deposit, short-term deposit or
commercial paper rating of P-1 by Moody's Investors Service, Inc.
("Moody'sMoody's") and of at least A-1 by Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc. ("Standard & Poor'sStandard &
Poor's") or long-term unsecured debt obligation (other than such obligation the
rating of which is based on collateral or on the credit of a person other than
such institution (or trust company) rating of at lease Aa3 by Moody's and AA--
by Standard & Poor's and deposit insurance provided by either the Bank Insurance
Fund ("BIFBIF") or the Savings Association Insurance Fund ("SAIFSAIF"), each
administered by the FDIC, or a depository institution, which may include the
Trustee, which is acceptable to each Rating Agency. The Servicer will also
establish and maintain, with respect to each Trust, the Excess funding Account,
as more fully described herein. Funds in the Excess Funding Account and the
Finance Charge Account for each Trust will be invested, at the direction of the
Servicer, in (i) obligations fully guaranteed by the United States of America,
(ii) demand deposits, time deposits or certificates of deposit of depository
institutions or trust companies, the certificates of deposit of which have the
highest rating from Moody's and Standard & Poor's, (iii) commercial paper
having, at the time of the Trust's investment, a rating in the highest rating
category from Moody's and Standard & Poor's, (iv) bankers' acceptances issued by
any depository institution or trust company described in clause (ii) above, (v)
money market funds which have the highest rating from, or have otherwise been
approved in writing by, Moody's and Standard & Poor's (so long as such
investment will not require the Trust to register as an "investment company"
under the Investment Company Act of 1940, as amended), (vi) repurchase
obligations with respect to any security described in clause (i) above or with
respect to 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 described in clause (ii) above
and (vii) any other investment if each Rating Agency confirms in writing that
such investment will not adversely affect its then current rating or ratings of
the Certificates and making such investment will not require the related Trust
to register as an investment company under the Investment Company Act of 1940,
as amended (such investments, "Permitted Investments"). Any earnings (net of
losses and investment expenses) on funds in the Finance Charge Account or the
Excess funding Account will be paid to the Transferor. The Servicer will have
the revocable power to withdraw funds from the Collection Account and to
instruct the Trustee to make withdrawals and payments from the Finance Charge
Account and the Excess Funding Account for the purpose of carrying out the
Servicer's duties under the Agreement. The Trustee will be the paying agent and
will have the revocable power to withdraw funds from the Distribution Account
for the purpose of making distributions to the Certificateholders.
EXCESS FUNDING ACCOUNT
If on any date the Transferor Interest is less than zero (after giving
effect to any addition of Principal Receivables to the applicable Trust), the
Servicer will not distribute to the holder of the Transferor Interest any
collections of Principal Receivables that otherwise would be distributed to the
holder of the Transferor Interest, but shall instead deposit such funds in a
segregated account established and maintained by the Servicer, in the name of
the Trust, for the benefit of Certificateholders of all Series issued by such
Trust, as a trust account or with the Servicer or with a Qualified Institution
(the "Excess Funding Account") until the Transferor Interest equals zero. Funds
on deposit in the Excess Funding Account will be withdrawn and paid to the
Transferor on any date to the extent that the Transferor Interest is greater
than zero on such date.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Permitted Investments. Any
earnings (net of losses and investment expenses) earned on amounts on deposit in
the Excess funding Account during any Monthly Period will be withdrawn from the
Excess Funding Account and turned over to or at the direction of the Servicer.
ALLOCATION OF COLLECTIONS
The Aggregate Receivables as of the Statistical Calculation Date was $ ,
consisting of $ of Finance Charge Receivables and $ of Principal Receivables.
"Aggregate Receivables" means as of any date of determination an amount equal to
the aggregate amount of payments owed on the Receivables from such date through
the respective scheduled final payment dates of such Receivables (exclusive of
late fees and administrative charges) less certain net payables as of such date
of determination.
"Finance Charge Receivables" means, with respect to the Receivables as of
the beginning of any Monthly Period (as defined below), an amount equal to the
aggregate amount of unearned interest with respect to such Receivables
calculated in accordance with the Rule of 78's Method. "Monthly Period" means
each calendar month, commencing December, 1996.
"Principal Receivables" means as of any date of determination, an amount
equal to the product of (x) Aggregate Receivables as of such date of
determination and (y) a fraction, the number of which is Beginning of Month
Principal Receivables and the denominator of which is the Aggregate Receivables
as of the first day of the current Monthly Period.
"Beginning of Month Principal Receivables" means, with respect to the
Receivables and any Monthly Period, an amount equal to the Aggregate Receivables
as of the first day of such Monthly Period (or, in the case of the Monthly
Period commencing December, 1996, as of the Cut-off Date) minus Finance Charge
Receivables as of such date.
ALLOCATION PERCENTAGES
Pursuant to the Agreement, with respect to each Monthly Period the
Servicer will allocate among the Investor Interest, the investor interest for
all other Series issued and outstanding and the Transferor Interest, all amounts
collected and allocated to Finance Charge Receivables, all amounts collected and
allocated to Principal Receivables and all Default Amounts with respect to such
Monthly Period.
Default Amounts and collections of Finance Charge Receivables at any time
and collections of Principal Receivables during the Revolving Period will be
allocated to the Investor Interest based on the Floating Investor Percentage.
The "Floating Investor PercentageFloating Investor Percentage" means, with
respect to any Monthly Period, the percentage equivalent of a fraction, the
numerator of which is the Adjusted Investor Interest as of the close of business
on the last day of the preceding Monthly Period (or with respect to the first
Monthly Period, the initial Investor Interest) and the denominator of which is
the greater of (a) the aggregate amount of Principal Receivables as of the close
of business on the last day of the preceding Monthly Period (or with respect to
the first Monthly Period, the aggregate amount of Principal Receivables as of
the close of business on the day immediately preceding the Closing Date) and (b)
the sum of the numerators used to calculate the Investor Percentages for
allocations with respect to Finance Charge Receivables, Default Amounts or
Principal Receivables, as applicable, for all outstanding Series on such date of
determination; provided, however, that with respect to any Monthly Period in
which a Reset Date occurs, the amount in clause (a) above shall be (i) the
aggregate amount of Principal Receivables in the Trust as of the close of
business on the last day of the prior Monthly Period for the period from and
including the first day of such Monthly Period to but excluding the Reset Date
and (ii) the aggregate amount of Principal Receivables in the Trust as of the
beginning of the day on the Reset Date after adjusting for the aggregate amount
of Principal Receivables added to or, in certain circumstances, removed from the
Trust on the Reset Date, if any, for the period from and including the Reset
Date to and including the last day of such Monthly Period. The amounts so
allocated will be further allocated between the Class A Holders, Class B Holders
and the Collateral Interest Holder based on the Class A Floating Allocation, the
Class B Floating Allocation and the Collateral Floating Allocation,
respectively. The "Class A Floating Allocation" means, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is equal to the Class A Adjusted
Investor Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, as of the Closing
Date) and the denominator of which is equal to the Adjusted Investor Interest as
of the close of business on such day. The "Class B Floating AllocationClass B
Floating Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class B Investor Interest as of the close of
business on the last day of the preceding Monthly Period (or with respect to the
first Monthly Period, as of the Closing Date) and the denominator of which is
equal to the Adjusted Investor Interest as of the close of business on such day.
The "Collateral Floating AllocationCollateral Floating Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is equal to the
Collateral Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, as of the Closing
Date) and the denominator of which is equal to the Adjusted Investor Interest as
of the close of business on such day.
Collections of Principal Receivables during the Controlled Accumulation
Period and Rapid Amortization Period will be allocated to the Investor Interest
based on the Fixed Investor Percentage. The "Fixed Investor PercentageFixed
Investor Percentage" means, with respect to any Monthly Period, the percentage
equivalent of a fraction, the numerator of which is the Investor Interest as of
the close of business on the last day of the Revolving Period and the
denominator of which is the greater of (a) the aggregate amount of Principal
Receivables as of the close of business on the last day of the prior Monthly
Period and (b) the sum of the numerators used to calculate the Investor
Percentages for allocations with respect to Principal Receivables for all
outstanding Series for such Monthly Period; provided, however, that with respect
to any Monthly Period in which a Reset Date occurs, the amount in clause (a)
above shall be (i) the aggregate amount of Principal Receivables in the Trust as
of the close of business on the last day of the prior Monthly Period for the
period from and including the first day of such Monthly Period to but excluding
the Reset Date and (ii) the aggregate amount of Principal Receivables in the
Trust at the beginning of the day on the Reset Date after adjusting for the
aggregate amount of Principal Receivables added to or, in certain circumstances,
removed from the Trust on the Reset Date, if any, for the period from and
including the Reset Date to and including the last day of such Monthly Period.
The amounts so allocated will be further allocated between the Class A Holders,
the Class B Holders and the Collateral Interest Holder based on the Class A
Fixed Allocation, the Class B Fixed Allocation and the Collateral Fixed
Allocation, respectively. The "Class A Fixed Allocation" means, with respect to
any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Class A
Investor Interest as of the close of business on the last day of the Revolving
Period, and the denominator of which is equal to the Investor Interest as of the
close of business on the last day of the Revolving Period. The "Class B Fixed
AllocationClass B Fixed Allocation" means, with respect to any Monthly Period,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class B Investor Interest as of
the close of business on the last day of the Revolving Period, and the
denominator of which is equal to the Investor Interest as of the close of
business on the last day of the Revolving Period. The "Collateral Fixed
AllocationCollateral Fixed Allocation" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Collateral Interest as of the
close of business on the last day of the Revolving Period, and the denominator
of which is equal to the Investor Interest as of the close of business on the
last day of the Revolving Period.
"Class A Adjusted Investor Interest," for any date of determination, means
an amount equal to the then current Class A Investor Interest, minus the
Principal Funding Account Balance on such date.
"Class A Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class A Certificates, minus (b) the
aggregate amount of principal payments made to Class A Holders prior to such
date, minus (c) the excess, if any, of the aggregate amount of Class A Investor
Charge-Offs for all Transfer Dates preceding such date over the aggregate amount
of any reimbursements of Class A Investor Charge-Offs for all Transfer Dates
preceding such date; provided, however, that the Class A Investor Interest may
not be reduced below zero.
"Class B Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class B Certificates, minus (b) the
aggregate amount of principal payments made to Class B Holders prior to such
date, minus (c) the aggregate amount of Class B Investor Charge-Offs for all
prior Transfer Dates, minus (d) the aggregate amount of Reallocated Class B
Principal Collections for all prior Transfer Dates for which the Collateral
Interest has not been reduced, minus (e) an amount equal to the aggregate amount
by which the Class B Investor Interest has been reduced to fund the Class A
Investor Default Amount on all prior Transfer Dates as described under
"--Receivables in Defaulted Accounts; Investor Charge Offs," and plus (f) the
aggregate amount of Excess Spread allocated and available on all prior Transfer
Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c), (d) and (e); provided, however, that the Class B Investor Interest
may not be reduced below zero.
"Collateral Interest" for any date means an amount
equal to (a) the Initial Collateral Interest, minus (b) the aggregate amount of
principal payments made to the Collateral Interest Holder prior to such date,
minus (c) the aggregate amount of Collateral Charge-Offs for all prior Transfer
Dates, minus (d) the aggregate amount of Reallocated Principal Collections for
all prior Transfer Dates, minus (e) an amount equal to the aggregate amount by
which the Collateral Interest has been reduced to fund the Class A Investor
Default Amount and the Class B Investor Default Amount on all prior Transfer
Dates as described under "--Receivables in Defaulted Accounts; Investor
Charge-Offs," plus (f) the aggregate amount of Excess Spread allocated and
available on all prior Transfer Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c), (d) and (e); provided, however,
that the Collateral Interest may not be reduced below zero.
"Reset Date" means each of (a) any date on which Receivables are
removed from the Trust and on which, if any Series has been paid in full,
Principal Receivables in an aggregate amount approximately equal to the initial
investor interest of such Series are removed from the Trust and (b) a date on
which there is an increase in the Investor Interest under any Variable Interest
issued by the Trust.
"Variable Interest" means either of (a) any certificate
that is designated as a variable funding certificate in the related Series
Supplement and (b) any purchased interest sold as permitted by an Agreement.
REALLOCATION OF CASH FLOWS
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class A Required Amount"), if any, by which the sum of (a) Class A Monthly
Interest due on the related Distribution Date and overdue Class A Monthly
Interest and Class A Additional Interest thereon, if any, (b) the Class A
Servicing Fee for the related Monthly Period and overdue Class A Servicing Fee,
if any, and (c) the Class A Investor Default Amount, if any, for the related
Monthly Period exceeds the Class A Available Funds for the related Monthly
Period. If the Class A Required Amount is greater than zero, Excess Spread
allocated to Series 1996-1 and available for such purpose will be used to fund
the Class A Required Amount with respect to such Transfer Date. If such Excess
Spread is insufficient to fund the Class A Required Amount, first, Reallocated
Collateral Principal Collections and, then, Reallocated Class B Principal
Collections will be used to fund the remaining Class A Required Amount. If
Reallocated Principal Collections with respect to the related Monthly Period,
together with Excess Spread, are insufficient to fund the remaining Class A
Required Amount for such related Monthly Period, then the Collateral Interest
(after giving effect to reductions for any Collateral Charge-Offs and
Reallocated Principal Collections on such Transfer Date) will be reduced by the
amount of such excess (but not by more than the Class A Investor Default Amount
for such Monthly Period). In the event that such reduction would cause the
Collateral Interest to be a negative number, the Collateral Interest will be
reduced to zero, and the Class B Investor Interest (after giving effect to
reductions for any Class B Investor Charge-Offs and any Reallocated Class B
Principal Collections for which the Collateral Interest was not reduced on such
Transfer Date) will be reduced by the amount by which the Collateral Interest
would have been reduced below zero (but not by more than the excess of the Class
A Investor Default Amount, if any, for such Monthly Period over the amount of
such reduction, if any, of the Collateral Interest with respect to such Monthly
Period). In the event that such reduction would cause the Class B Investor
Interest to be a negative number, the Class B Investor Interest will be reduced
to zero and the Class A Investor Interest will be reduced by the amount by which
the Class B Investor Interest would have been reduced below zero (but not by
more than the excess, if any, of the Class A Investor Default Amount for such
Monthly Period over the amount of the reductions, if any, of the Collateral
Interest and the Class B Investor Interest with respect to such Monthly Period).
Any such reduction in the Class A Investor Interest will have the effect of
slowing or reducing the return of principal and interest to the Class A Holders.
In such case, the Class A Holders will bear directly the credit and other risks
associated with their interests in the Trust. See "--Receivables in Defaulted
Accounts; Investor Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"), which will be equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B Monthly Interest due on the
related Distribution Date and overdue Class B Monthly Interest and Class B
Additional Interest thereon, if any, and (ii) the Class B Servicing Fee for the
related Monthly Period and overdue Class B Servicing Fee, if any, exceeds the
Class B Available Funds for the related Monthly Period and (b) the Class B
Investor Default Amount, if any, for the related Monthly Period. If the Class B
Required Amount is greater than zero, Excess Spread allocated to Series 1996-1
not required to pay the Class A Required Amount or reimburse Class A Investor
Charge-Offs will be used to fund the Class B Required Amount with respect to
such Transfer Date. If such Excess Spread is insufficient to fund the Class B
Required Amount, Reallocated Collateral Principal Collections not required to
fund the Class A Required Amount for the related Monthly Period will be used to
fund the remaining Class B Required Amount. If such Reallocated Collateral
Principal Collections with respect to the related Monthly Period are
insufficient to fund the remaining Class B Required Amount, then the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
Reallocated Principal Collections on such Transfer Date and after any
adjustments made thereto for the benefit of the Class A Holders) will be reduced
by the amount of such deficiency (but not by more than the Class B Investor
Default Amount for such Monthly Period). In the event that such a reduction
would cause the Collateral Interest to be a negative number, the Collateral
Interest will be reduced to zero, and the Class B Investor Interest will be
reduced by the amount by which the Collateral Interest would have been reduced
below zero (but not by more than the excess of the Class B Investor Default
Amount for such Monthly Period over the amount of such reduction of the
Collateral Interest), and the Class B Holders will bear directly the credit and
other risks associated with their interests in the Trust. See "-- Receivables in
Defaulted Accounts; Investor Charge-Offs."
Reductions of the Class A Investor Interest or Class B Investor Interest
described above will be reimbursed by, and the Class A Investor Interest or
Class B Investor Interest increased to the extent of, Excess Spread available
for such purposes on each Transfer Date. See "--Application of
Collections--Excess Spread." When such reductions of the Class A Investor
Interest and Class B Investor Interest have been fully reimbursed, reductions of
the Collateral Interest shall be reimbursed until reimbursed in full in a
similar manner.
"Reallocated Class B Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor Interest
for the related Monthly Period in an amount not to exceed the amount applied to
fund the Class A Required Amount, if any; provided, however, that such amount
will not exceed the Class B Investor Interest after giving effect to any Class B
Investor Charge-Offs for the related Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Collateral Interest for
the related Monthly Period in an amount not to exceed the amount applied to fund
the Class A Required Amount and the Class B Required Amount, if any; provided,
however, that such amount will not exceed the Collateral Interest after giving
effect to any Collateral Charge-Offs for the related Transfer Date.
"Reallocated Principal Collections" for any Monthly Period means the sum of
(a) the Reallocated Class B Principal Collections for such Monthly Period, if
any, and (b) the Reallocated Collateral Principal Collections such Monthly
Period, if any.
APPLICATION OF COLLECTIONS
ALLOCATIONS. Except as otherwise provided below, the Servicer will deposit
into the Collection Account, no later than the second business day following the
date of processing, any payment collected by the Servicer on the Receivables. On
the same day as any such deposit is made, the Servicers will make the deposits
and payments to the accounts and parties as indicated below; provided, however,
that for as long as an Originator remains the Servicer under the Agreement and
(a) (i) such Servicer provides to the Trustee a letter of credit or other credit
enhancement covering the risk of collection of such Servicer acceptable to the
Rating Agency and (ii) the Transferor shall not have received a notice from the
Rating Agency that reliance on such letter of credit or other credit enhancement
would result in the lowering of such Rating Agency's then-existing rating of any
Series then outstanding, (b) the certificate of deposit or unsecured short-term
debt obligations of the Transferor (or, if neither such certificates of deposit
nor obligations of the Transferor are rated by Moody's or Standard & Poor's,
then the certificate of deposit or unsecured short-term debt obligations of
Mellon Bank, N.A.) are rated P-1 by Moody's and at least A-1 by Standard &
Poor's and insured by either BIF or SAIF or such Servicer makes other
arrangements satisfactory to each Rating Agency rating any Series then
outstanding, or (c) the Rapid Amortization Period does not exist, then such
Servicer may make such deposits and payments on the Transfer Date in an amount
equal to the net amount of such deposits and payments which would have been made
during the related Monthly Periods had the conditions of this proviso not
applied. Because Mellon Bank, N.A.'s unsecured short-term debt obligations are
currently rated P-1 by Moody's and A-1 by Standard & Poor's, the Servicer will
initially make such deposits and payments monthly on a net basis and expects to
continue to do so (subject to the requirements described above) for as long as
the Certificates are outstanding.
With respect to the Certificates and any Monthly Period, and
notwithstanding anything in the Agreement to the contrary, whether the Servicer
is required to make monthly or daily deposits from the Collection Account into
the Finance Charge Account or the "Principal AccountPrincipal Account", (i) the
Servicer will only be required to deposit Collections from the Collection
Account into the Finance Charge Account or the Principal Account up to the
required amount to be deposited into any such deposit account or, without
duplication, distributed on or prior to the related Distribution Date to Holders
or to the Collateral Interest Holder and (ii) if at any time prior to such
Distribution Date the amount of Collections deposited in the Collection Account
exceeds the amount required to be deposited pursuant to clause (i) above, the
Servicer will be permitted to withdraw the excess from the Collection Account.
PAYMENT OF INTEREST, FEES AND OTHER ITEMS. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds in the
Finance Charge Account in the following manner:
(a) On each Transfer Date, an amount equal to the Class A Available
Funds will be distributed or deposited in the following priority:
(i) an amount equal to Class A Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class A Monthly
Interest and Class A Additional Interest thereon, if any, will be (x)
deposited into the Distribution Account for distribution to Class A
Holders on such Distribution Date if such Distribution Date is an
Interest Payment Date or a Special Payment Date or (y) deposited into
the Class A Interest Funding Account, if such Distribution date is
not an Interest Payment Date or a special Payment Date, for
distribution to the Class A Holders or the next Interest Payment Date
or Special Distribution Date;
(ii) an amount equal to the Class A Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class A Servicing Fee,
will be paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount, if
any, for the related Monthly Period will be treated as a portion of
Available Investor Principal Collections and deposited into the
Principal Account for such Transfer Date; and
(iv) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"--Excess Spread."
If the Back-up Servicer is the Servicer, the amounts described in clause
(ii) above shall be paid prior to the amounts described in clause (i) above.
(b) On each Transfer Date, an amount equal to the Class B Available
Funds will be distributed or deposited in the following priority:
(i) an amount equal to Class B Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class B Monthly
Interest and Class B Additional Interest thereon, if any, will be (x)
deposited into the Distribution Account for distribution to Class B
Holders on such Distribution Date if such Distribution Date is an
Interest Payment Date or a Special Payment Date or (y) deposited into
the Class B Interest Funding Account, if such Distribution Date is
not an Interest Payment Date, or a Special Payment Date, for
distribution to the Class B Holders on the next Interest Payment Date
or Special Payment Date therefor;
(ii) an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing Fee,
will be paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"--Excess Spread."
If the Back-up Servicer is the Servicer, the amounts described in clause
(ii) above shall be paid prior to the amounts described in clause (i) above.
(c) On each Transfer Date, an amount equal to the Collateral
Available Funds will be distributed or deposited in the following
priority:
(i) if AFCO Credit and AFCO Acceptance are no longer the Servicers,
an amount equal to the Collateral Interest Servicing Fee for the
related Monthly Period, plus the amount of any overdue Collateral
Interest Servicing Fee, will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed or deposited as
described under "--Excess Spread."
"Class A Monthly Interest" with respect to any Distribution Date will
equal the product of (i) the Class A Rate for the related Interest Period, (ii)
the actual number of days in the period from and including the prior
Distribution Date (or with respect to the Initial Distribution Date, the Closing
Date) to and excluding such Distribution Date divided by 360 and (iii) the
outstanding principal balance of the Class A Certificates as of the related
Record Date.
"Class B Monthly Interest" with respect to any Distribution Date will
equal the product of (i) the Class B Rate for the related Interest Period, (ii)
the actual number of days in the period from and including the prior
Distribution Date (or with respect to the Initial Distribution Date, the Closing
Date) to and excluding such Distribution Date divided by 360 and (iii) the
outstanding principal balance of the Class B Certificates as of the related
Record Date.
Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Allocation of collections of Finance
Charge Receivables allocated to the Investor Interest with respect to such
Monthly Period.
"Excess Spread" means, with respect to any Transfer Date, an amount equal
to the sum of the amounts described in clause (a)(v), clause (b)(iv) and clause
(c)(iii) above. To the extent such amounts are insufficient to make the
distributions required by subparagraphs (a) through (j) below under "--Excess
Spread," Excess Spread shall also be deemed to include any Excess Finance Charge
Collections allocable to other Series available to Series 1996-1 in accordance
with the Agreement.
EXCESS SPREAD. On each Transfer Date, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread with respect to the related
Monthly Period, to make the following distributions or deposits in the following
priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class A Required
Amount; provided, that in the event the Class A Required Amount for such
Transfer Date exceeds the amount of Excess Spread, such Excess Spread
shall be applied first to pay amounts due with respect to such Transfer
Date pursuant to clause (a)(i) above under "--Payment of Interest, Fees
and Other Items", second to pay amounts due with respect to such Transfer
Date pursuant to clause (a)(ii) above under "--Payment of Interest, Fees
and Other Items," and third to pay amounts due with respect to such
Transfer Date pursuant to clause (a)(iii) above under "--Payment of
Interest, Fees and Other Items";
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed (after giving effect
to the allocation on such Transfer Date of certain other amounts applied
for that purpose) will be deposited into the Principal Account and treated
as a portion of Available Investor Principal Collections for such Transfer
Date as described under "--Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class B Required
Amount and will be applied first to pay amounts due with respect to such
Transfer Date pursuant to clause (b) (i) above under "--Payment of
Interest, Fees and Other Items," second to pay amounts due with respect to
such Transfer Date pursuant to clause (b) (ii) above under "--Payment of
Interest, Fees and Other Items," and third, the amount remaining, up to
the Class B Investor Default Amount, will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "--Payments of
Principal" below;
(d) an amount equal to the aggregate amount by which the Class B
Investor Interest has been reduced below the initial Class B Investor
Interest for reasons other than the payment of principal to the Class B
Holders (but not in excess of the aggregate amount of such reductions
which have not been previously reimbursed) will be deposited into the
Principal Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "--Payments of
Principal" below;
(e) an amount equal to the Collateral Monthly Interest for such
Transfer Date, plus the amount of any Collateral Monthly Interest
previously due but not distributed to the Collateral Interest Holder on a
prior Transfer Date, will be distributed to the Collateral Interest Holder
for distribution in accordance with the Loan Agreement;
(f) if AFCO Credit and AFCO Acceptance are the Servicers, an amount
equal to the Collateral Interest Servicing Fee for the related Monthly
Period, plus the amount of any overdue Collateral Interest Servicing Fee,
will be paid to the Servicer;
(g) an amount equal to the aggregate Collateral Default Amount, if
any, for such Transfer Date will be deposited into the Principal Account
and treated as a portion of Available Investor Principal Collections for
such Transfer Date as described under "--Payments of Principal" below;
(h) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced below the Required Collateral Interest for
reasons other than the payment of principal to the Collateral Interest
Holder (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "--Payments of
Principal" below;
(i) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "--Reserve Account," an amount up to the excess, if any,
of the Required Reserve Account Amount over the Available Reserve Account
Amount will be deposited into the Reserve Account;
(j) an amount equal to the sum of (x) any Class A Shortfall Amount
for the current Distribution Date and (y) any accrued and unpaid Class A
Carry-Over Amount from a prior Distribution Date shall be deposited by
Servicer or Trustee in the Class A Interest Funding Account for payment to
the Class A Holders on the applicable Interest Payment Date;
(k) an amount equal to the sum of (x) any Class B Shortfall Amount
for the current Distribution Date and (y) any accrued and unpaid Class B
Carry-Over Amount from a prior Distribution Date shall be deposited by
Servicer or Trustee into the Class B Interest Funding Account for payment
to the Class B Holders on the applicable Interest Payment Date.
(l) an amount equal to all other amounts due under the Loan Agreement
(to the extent payable out of Excess Spread or Excess Finance Charge
Collections) shall be distributed in accordance with the Loan Agreement;
and
(m) the balance, if any, after giving effect to the payments made
pursuant to Excess Finance Charge Collections" to be applied with respect to
other Series in accordance s
with the Agreement.
Collateral Monthly Interest" with respect to any Transfer Date will equal
the product of (a) an amount equal to LIBOR plus ___% per annum, or such lesser
amount as may be Collateral Rate"), (b) the actual number of days in the related
Interest Period divided by 360 and (c) the Collateral Interest as of the related
Record Date, or with respect to the first Transfer Date, the Initial Collateral
Interest.
PAYMENTS OF PRINCIPAL. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will distribute Available Investor Principal
Collections (see "--Principal Payments" above) on deposit in the Principal
Account in the following manner:
(a) on each Transfer Date with respect to the Revolving Period, all
such Available Investor Principal Collections will be distributed or
deposited in the following priority:
(i) an amount equal to the Collateral Monthly Principal will be paid
to the Collateral Interest Holder in accordance with the Loan Agreement;
and
(ii) the balance will be treated as Shared Principal Collections and
applied as described under "Description of the Certificates--Shared
Principal Collections";
(b) on each Transfer Date with respect to the Controlled Accumulation
Period or the Rapid Amortization Period, all such Available Investor
Principal Collections will be distributed or deposited in the following
priority:
(i) an amount equal to Class A Monthly Principal will be deposited
in the Principal Funding Account (during the Controlled Accumulation
Period) or distributed to the Class A Holders (during the Rapid
Amortization Period); and
(ii) for each Transfer Date after the Class A Investor Interest has
been paid in full (after taking into account payments to be made on
the related Distribution Date), an amount equal to the Class B
Monthly Principal for such Transfer Date will be distributed to the
Class B Holders;
(c) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period in which a reduction in the
Required Collateral Interest has occurred, Available Investor Principal
Collections not applied to Class A Monthly Principal or Class B Monthly
Principal will be applied to reduce the Collateral Interest to the
Required Collateral Interest; and
(d) on each Transfer Date with respect to the Controlled Accumulation
Period and Rapid Amortization Period, the balance of Available Investor
Principal Collections not applied pursuant to (b) and (c) above, if any,
will be treated as Shared Principal Collections and applied as described
under "Description of the Certificates--Shared Principal Collections".
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period or the Rapid Amortization Period, prior to
the payment in full of the Class A Investor Interest, will equal the least of
(i) the Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date, (ii) for each Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, and on or prior to the Class A Scheduled Payment
Date, the applicable Controlled Deposit Amount for such Transfer Date and (iii)
the Class A Adjusted Investor Interest prior to any deposits on such Transfer
Date.
Class B Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period or the Rapid Amortization Period, after the
Class A Certificates have been paid in full (after taking into account payments
to be made on the related Distribution Date), will equal the lesser of (i) the
Available Investor Principal Collections on deposit in the Principal Account
with respect to such Transfer Date (minus the portion of such Available Investor
Principal Collections applied to Class A Monthly Principal on such Transfer
Date) and (ii) the Class B Investor Interest for such Transfer Date.
Collateral Monthly Principal" means (a) with respect to any Transfer Date
relating to the Revolving Period following any reduction of the Required
Collateral Interest pursuant to clause (3) of the proviso in the definition
thereof an amount equal to the lesser of (i) the excess, if any, of the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after giving effect to any adjustments thereto for the benefit of the Class A
Holders and the Class B Holders on such Transfer Date) over the Required
Collateral Interest on such Transfer Date, and (ii) the Available Investor
Principal Collections on such Transfer Date or (b) with respect to any Transfer
Date relating to the Controlled Accumulation Period or Rapid Amortization Period
an amount equal to the lesser of (i) the excess, if any, of the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
Reallocated Principal Collections on such Transfer Date and after giving effect
to any adjustments thereto for the benefit of the Class A Holders and the Class
B Holders on such Transfer Date) over the Required Collateral Interest on such
Transfer Date, and (ii) the excess, if any, of (A) the Available Investor
Principal Collections on such Transfer Date over (B) the sum of the Class A
Monthly Principal and the Class B Monthly Principal for such Transfer Date.
Controlled Accumulation Amount" means (a) for any Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, $__________; provided, however, that if the
commencement of the Controlled Accumulation Period is modified as described
above under "--Postponement of Controlled Accumulation Period," (i) the
Controlled Accumulation Amount for each Transfer Date with respect to the
Controlled Accumulation Period shall mean the amount determined in accordance
with the Agreement on the date on which the Controlled Accumulation Period has
most recently been modified and (ii) the sum of the Controlled Accumulation
Amounts for all Transfer Dates with respect to the modified Controlled
Accumulation Period shall not be less than the Class A Investor Interest.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
To the extent that collections of Finance Charge Receivables allocated to
the Investor Interest (and any other amounts that are to be treated as
collections of Finance Charge Receivables allocated to the Investor Interest)
are not needed to make payment in respect of the Investor Interest as described
above under "--Application of Collections--Payment of Interest, Fees and Other
Items" and "--Excess Spread," such Excess Finance Charge Collections will be
applied to make payments in respect of other Series entitled to share therein in
accordance with the Agreement. In addition, Excess Finance Charge Collections
with respect to certain other Series, to the extent not required to make
payments in respect of such Series, may be applied to cover shortfalls in
amounts payable from Excess Spread as described above under "--Application of
Collections--Excess Spread" (as well as shortfalls experienced by other Series).
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to
the Investor Interest will first be used to cover, with respect to any Monthly
Period during the Controlled Accumulation Period, deposits of the applicable
Controlled Deposit Amount to the Principal Funding Account or the Distribution
Account, and during the Rapid Amortization Period, payments to the Holders and
then under certain circumstances payments to the Collateral Interest Holder. The
Servicer will determine the amount of collections of Principal Receivables for
any Monthly Period allocated to the Investor Interest remaining after covering
required payments to the Holders and any similar amount remaining for any other
Series ("Shared Principal Collections"). The Servicer will allocate the Shared
Principal Collections to cover any scheduled or permitted principal
distributions to certificateholders and deposits to principal funding accounts,
if any, for any Series entitled thereto which have not been covered out of the
Collections of Principal Receivables allocable to such Series and certain other
amounts for such Series ("Principal Principal Shortfalls"). Shared Principal
Collections will not be used to cover investor charge-offs for any Series. If
Principal Shortfalls exceed Shared Principal Collections for any Monthly Period,
Shared Principal Collections will be allocated pro rata among the applicable
Series based on the relative amounts of Principal Shortfalls. To the extent that
Shared Principal Collections exceed Principal Shortfalls, the balance will be
paid to the Transferor or, under certain circumstances, deposited into the
Excess Funding Account.
REQUIRED COLLATERAL INTEREST
The "Required Collateral Interest" with respect to any Transfer Date means
(i) initially $___________ and (ii) thereafter on each Transfer Date an amount
equal to ___% of the sum of the Class A Adjusted Investor Interest and the Class
B Investor Interest on such Transfer Date, after taking into account deposits
into the Principal Funding Account on such Transfer Date and payments to be made
on the related Distribution Date, and the Collateral Interest on the prior
Transfer Date after any adjustments made on such Transfer Date, but not less
than $__________; provided, however, (1) that if certain reductions in the
Collateral Interest are made or if a Pay Out Event occurs, the Required
Collateral Interest for such Transfer Date shall equal the Required Collateral
Interest for the Transfer Date immediately preceding the occurrence of such
reduction or Pay Out Event, (2) in no event shall the Required Collateral
Interest exceed the unpaid principal amount of the Certificates as of the last
day of the Monthly Period preceding such Transfer Date after taking into account
payments to be made on the related Distribution Date and (3) the Required
Collateral Interest may be reduced to a lesser amount at any time if the Rating
Agency Condition is satisfied.
Rating Agency Condition" means the notification in writing by each Rating
Agency that a proposed action will not result in such Rating Agency reducing or
withdrawing its then existing rating of the investor certificates of any
outstanding Series or class with respect to which it is a Rating Agency.
With respect to any Transfer Date, if the Collateral Interest is less than
the Required Collateral Interest, certain Excess Spread, if available, will be
allocated to increase the Collateral Interest to the extent of such shortfall.
Any of such Excess Spread not required to be so allocated or deposited into the
Reserve Account with respect to any Transfer Date will be applied in accordance
with the Loan Agreement. See "--Application of Collections--Excess Spread."
RECEIVABLES IN DEFAULTED ACCOUNTS; INVESTOR CHARGE-OFFS
On or before each Transfer Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Investor
Default Amount" means, for any Monthly Period, the product of (a) the Floating
Investor Percentage with respect to such Monthly Period and (b) the aggregate
amount of Receivables in Defaulted Accounts (the "Default Amount") for such
Monthly Period. A portion of the Investor Default Amount will be allocated to
the Class A Holders (the "Class A Investor Default Amount") on each Transfer
Date in an amount equal to the product of the Class A Floating Allocation
applicable during the related Monthly Period and the Investor Default Amount for
such Monthly Period. A portion of the Investor Default Amount Class B Investor
Default Amount") on each Transfer Date in an amount equal to the product of the
Class B Floating Allocation applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Collateral Interest Collateral Default
Amount") on each Transfer Date in an amount equal to the product of the
Collateral Floating Allocation applicable during the related Monthly Period and
the Investor Default Amount for such Monthly Period.
On each Transfer Date, if the Class A Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Principal
Collections available to fund such amount with respect to the Monthly Period
immediately preceding such Transfer Date, the Collateral Interest (after giving
effect to reductions for any Collateral Charge-Offs and any Reallocated
Principal Collections on such Transfer Date) will be reduced by the amount of
such excess, but not more than the lesser of the Class A Investor Default Amount
and the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and any Reallocated Principal Collections on such
Transfer Date) for such Transfer Date. In the event that such reduction would
cause the Collateral Interest to be a negative number, the Collateral Interest
will be reduced to zero, and the Class B Investor Interest (after giving effect
to reductions for any Class B Investor Charge-Offs and any Reallocated Class B
Principal Collections on such Transfer Date) will be reduced by the amount by
which the Collateral Interest would have been reduced below zero. In the event
that such reduction would cause the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced to zero, and the Class A
Investor Interest will be reduced by the amount by which the Class B Investor
Interest would have been reduced below zero, but not more than the Class A
Investor Default Amount for such Transfer Date (a "Class A Investor
Charge-Off"), which will have the effect of slowing or reducing the return of
principal and interest to the Class A Holders. If the Class A Investor Interest
has been reduced by the amount of any Class A Investor Charge-Offs, it will be
reimbursed on any Transfer Date (but not by an amount in excess of the aggregate
Class A Investor Charge-Offs) by the amount of Excess Spread allocated and
available for such purpose as described under "--Application of
Collections--Excess Spread."
On each Transfer Date, if the Class B Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Collateral
Principal Collections which are allocated and available to fund such amount with
respect to the Monthly Period preceding such Transfer Date, the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
any Reallocated Principal Collections on such Transfer Date and after giving
effect to any adjustments with respect thereto as described in the preceding
paragraph) will be reduced by the amount of such excess but not more than the
lesser of the Class B Investor Default Amount and the Collateral Interest (after
giving effect to reductions for any Collateral Charge-Offs and any Reallocated
Principal Collections on such Transfer Date and after giving effect to any
adjustments with respect thereto as described in the preceding paragraph) for
such Transfer Date. In the event that such reduction would cause the Collateral
Interest to be a negative number, the Collateral Interest will be reduced to
zero and the Class B Investor Interest will be reduced by the amount by which
the Collateral Interest would have been reduced below zero, but not more than
the Class B Investor Default Amount for such Transfer Date (a "Class B Investor
Charge-Off"). The Class B Investor Interest will also be reduced by the amount
of Reallocated Class B Principal Collections in excess of the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
any Reallocated Collateral Principal Collections on such Transfer Date) and the
amount of any portion of the Class B Investor Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest. The Class B
Investor Interest will thereafter be reimbursed (but not in excess of the unpaid
principal balance of the Class B Certificates) on any Transfer Date by the
amount of Excess Spread allocated and available for that purpose as described
under "--Application of Collections--Excess Spread."
On each Transfer Date, if the Collateral Default Amount for such Transfer
Date exceeds the amount of Excess Spread which is allocated and available to
fund such amount as described under "--Application of Collections--Excess
Spread," the Collateral Interest will be reduced by the amount of such excess
Collateral Charge-Off"). The Collateral Interest will also be reduced by the
amount of Reallocated Principal Collections and the amount of any portion of the
Collateral Interest allocated to the Class A Certificates to avoid a reduction
in the Class A Investor Interest or to the Class B Certificates to avoid a
reduction in the Class B Investor Interest. The Collateral Interest will
thereafter be reimbursed on any Transfer Date by the amount of Excess Spread
allocated and available for that purpose as described under "--Application of
Collections--Excess Spread."
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 1996-1 Supplement, the Trustee will establish and
maintain a segregated account held for the benefit of the Holders (the
"Principal Funding Account"). The Principal Funding Account will be established
as a segregated trust account or with a Qualified Institution. During the
Controlled Accumulation Period, the Trustee at the direction of the Servicer
will transfer collections in respect of Principal Receivables (other than
Reallocated Principal Collections) and Shared Principal Collections from other
Series, if any, allocated to Series 1996-1 from the Principal Account to the
Principal Funding Account as described under "--Application of Collections."
Funds on deposit in the Principal Funding Account will be invested to the
following Transfer Date by the Trustee at the direction of the Servicer in
Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") will be used to pay interest on the Class A
Certificates in an amount up to, for each Transfer Date, the product of (a) a
fraction, the numerator of which is the actual number of days in the related
Interest Period and the denominator of which is 360, (b) the Class A Rate in
effect with respect to the related Interest Period and (c) the Principal Funding
Account Balance as of the Record Date preceding such Transfer Date (the "Class A
Covered Amount"). If, for any Transfer Date, the Principal Funding Investment
Proceeds are less than the Class A Covered Amount, the amount of such deficiency
(the "Class A Principal Funding Investment Shortfall") shall be withdrawn, to
the extent available, from the Reserve Account and deposited in the Finance
Charge Account and included in collections of Finance Charge Receivables to be
applied to the payment of Class A Monthly Interest.
RESERVE ACCOUNT
Pursuant to the Series 1996-1 Supplement, the Trustee will establish and
maintain a segregated account held for the benefit of the Holders (the Reserve
Account") in order to assist with the subsequent distribution of interest on the
Certificates during the Controlled Accumulation Period. The Reserve Account will
be established as a segregated trust account or with a Qualified Institution. On
each Transfer Date from and after the Reserve Account Funding Date, but prior to
the termination of the Reserve Account, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread allocated to the Certificates
(to the extent described above under "--Application of Collections--Excess
Spread") to increase the amount on deposit in the Reserve Account Reserve
Account Funding Date" will be the Transfer Date with respect to the Monthly
Period which commences no later than three months prior to the Required Reserve
Account Amount" for any Transfer Date on or after the Reserve Account Funding
Date will be equal to (a) ___% of the outstanding principal balance of the Class
A Certificates or (b) any other amount designated by the Transferor; provided,
that if such designation is of a lesser amount, the Transferor shall have
provided the Servicer, the Collateral Interest Holder and the Trustee with
evidence that the Rating Agency Condition has been satisfied and the Transferor
shall have delivered to the Trustee a certificate of an authorized officer to
the effect that, based on the facts known to such officer at such time, in the
reasonable belief of the Transferor, such designation will not cause a Pay Out
Event or an event that, after the giving of notice or the lapse of time, would
cause a Pay Out Event to occur with respect to Series 1996-1. On each Transfer
Date, after giving effect to any deposit to be made to, and any withdrawal to be
made from, the Reserve Account on such Transfer Date, the Trustee will withdraw
from the Reserve Account an amount equal to the excess, if any, of the amount on
deposit in the Reserve Account over the Required Reserve Account Amount and
distribute such excess to the Collateral Interest Holder for application in
accordance with the terms of the Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Transfer Date (after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Transfer Date) will be invested to the following Transfer Date by the
Trustee at the direction of the Servicer in Permitted Investments. The interest
and other investment income (net of investment expenses and losses) earned on
such investments will be retained in the Reserve Account (to the extent the
amount on deposit is less than the Required Reserve Account Amount) or deposited
in the Finance Charge Account and treated as Class A Available Funds.
On or before each Transfer Date with respect to the Controlled Accumulation
Period and on the first Transfer Date with respect to the Rapid Amortization
Period, a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Finance Charge Account and included in
collections of Finance Charge Receivables to be applied to the payment of the
Class A Monthly Interest for such Transfer Date in an amount equal to the lesser
of (a) the Available Reserve Account Amount with respect to such Transfer Date
and (b) the Class A Principal Funding Investment Shortfall with respect to such
Transfer Date; provided, that the amount of such withdrawal shall be reduced to
the extent that funds otherwise would be available to be deposited in the
Reserve Account on such Transfer Date. On each Transfer Date, the amount
available to be withdrawn from the Reserve Account (the "Available Available
Reserve Account Amount") will be equal to the lesser of the amount on deposit in
the Reserve Account (before giving effect to any deposit to be made to the
Reserve Account on such Transfer Date) and the Required Reserve Account Amount
for such Transfer Date.
The Reserve Account will be terminated upon the earlier to occur of (a) the
termination of the Trust pursuant to the Agreement and (b) if the Controlled
Accumulation Period has not commenced, the first Transfer Date with respect to
the Rapid Amortization Period or, if the Controlled Accumulation Period has
commenced, the earlier to occur of (a) the first Transfer Date with respect to
the Rapid Amortization Period and (ii) the Transfer Date immediately preceding
the Class A Scheduled Payment Date. Upon the termination of the Reserve Account,
all amounts on deposit therein (after giving effect to any withdrawal from the
Reserve Account on such date as described above) will be distributed to the
Collateral Interest Holder for application in accordance with the terms of the
Loan Agreement. Any amounts withdrawn from the Reserve Account and distributed
to the Collateral Interest Holder as described above will not be available for
distribution to the Holders.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
The Certificates will be subject to optional repurchase by the Transferor
on any Distribution Date after the Investor Interest is reduced to an amount
less than or equal to 5% of the initial Investor Interest, if certain conditions
set forth in the Agreement are met. The repurchase price will be equal to the
Investor Interest (less the amount, if any, on deposit in any Principal Funding
Account), plus accrued and unpaid interest on the Certificates and interest or
other amounts payable on the Collateral Interest, through the day preceding the
Distribution Date on which the repurchase occurs.
The Certificates will be retired on the day following the Distribution Date
on which the final payment of principal is schedule to be made to the
Certificateholders, whether as a result of optional reassignment to the
Transferor or otherwise. Subject to prior termination as provided above, the
Agreement provides that the final distribution of principal and interest on the
Certificates will be made on the _________ 200_ Distribution Date (the Series
1996-1 Termination Date"). In the event that the Invested Amount is greater than
zero on the Series 1996-1 Termination Date, the Trustee will sell or cause to be
sold (and apply the proceeds first to the Class A Certificates until paid in
full, then to the Class B Certificates and finally to the Collateral Interest to
the extent necessary to pay such remaining amounts to all Certificateholders pro
rata within each class as final payment of the Certificates) interests in the
Receivables or certain Receivables, as specified in the Agreement in an amount
equal to up to 110% of the Investor Interest at the close of business on such
date (but not more than the total amount of Receivables allocable to the
Certificates). The net proceeds of such sale and any collections on the
Receivables allocable to the Certificates). The net proceeds of such sale and
any collections on the Receivables, up to an amount equal to the Investor
Interest plus accrued interest due on the Certificates, will be paid on the
Series 1996-1 Termination Date, first to the Class A Certificateholders until
the Class A Invested Amount is paid in full, then to the Class B
Certificateholders until the Class B Invested Amount is paid in full.
Unless the Servicer and the Transferor instruct the Trustee otherwise, the
Trust will terminate on the earlier of (a) the day after the Distribution Date
on which the aggregate Investor Interest and, Collateral Interest, with respect
to each Series issued by such Trust is zero, (b) ____________ or (c) if the
Receivables are sold, disposed of or liquidated following the occurrence of an
Insolvency Event, immediately following such sale, disposition or Trust
Termination Date"). Upon the termination of each Trust and the surrender of the
Transferor Interest, the Trustee shall convey to the holder of the Transferor
Interest all right, title and interest of the Trust in and to the Receivables
and other funds of the Trust.
PAY OUT EVENTS
As described above, the Revolving Period will continue through ___________
(unless such date is postponed as described under "--Postponement of Controlled
Accumulation Period"), unless a Pay Out Event occurs prior to such date. A "Pay
Out Event" refers to any of the following events:
(a) certain insolvency events involving the Transferor or either
Originator,
(b) the Trust becoming an "investment company" within the meaning of
the Investment Company Act of 1940, as amended,
(c) (i) the Back-up Services becomes legally unable to act as
Successor Servicer or has been released or has resigned as a Back-up
Servicer and, within 90 days of such event, a successor Back-up Servicer
has not assumed the obligations of Back-up Servicer and the Rating Agency
Condition has not been satisfied with respect to the appointment of such
Back-up Servicer or (ii) [the failure to appoint a Successor Servicer 90
days after a notice of termination has been delivered to a Successor
Servicer pursuant to the Agreement];
(d) the failure of the Servicer, any Successor Servicer, the
Transferor or the Trustee to be in compliance with the licensing laws of
any Receivable State relating to the acquisition, transfer, ownership or
servicing of insurance premium finance loans and such entity fails to
become so licensed or exempt from such licensing laws within the period
specified in the Agreement;
(e) the failure of the Transferor to make certain payments or
transfers of funds for the benefit of the Holders within the time periods
stated in the Agreement,
(f) material breaches of certain representations, warranties or
covenants of the Transferor,
(g) a reduction in the average of the Portfolio Yields for any three
consecutive Monthly Periods to a rate that is less than the average of the
Base Rates for such period,
(h) (i) the average Transferor Interest during any 5 consecutive days
being below the Minimum Transferor Interest for the same period and (ii)
the sum of (x) the Principal Receivables and (y) the principal amount on
deposit in the Excess Funding Account being less than the Minimum Aggregate
Principal Receivables,
(i) the failure of either Originator to transfer Additional
Receivables to the Transferor when required by the Receivables Purchase
Agreement or the failure of the Transferor to convey Additional Receivables
when required by the Agreement,
[(j) the occurrence of a Servicer Default which would have a material
adverse effect on the Holders],
(k) the Class A Investor Interest or the Class B Investor Interest not
being paid in full on the Class A Scheduled Payment Date or the Class B
Scheduled Payment Date, respectively,
(l) the Monthly Payment Rate is less than 12% for three consecutive
Monthly Periods;
(m) the [sixth] six consecutive Determination Date on which there
exists an Excess Obligor Concentration Amount exists,
(n) the [sixth] consecutive Determination Date on which there exists
an Excess Insurer Concentration;
(o) the [sixth] consecutive Determination Date on which the Investment
Grade Insurer Percentage is less than the required Investment Grade Insurer
Percentage;
(p) the [sixth] consecutive Determination Date on which there are less
than 300 insurance carriers whose insurance premiums have been financed by
the Receivables in the Identified Portfolio; and (q) the [sixth]
consecutive Determination Date on which the Top 10 Insurers Percentage is
greater than the Maximum Top 10 Insurer Percentage.
In the case of any event described in clause (e), (f), or (j) above, a Pay
Out Event will be deemed to have occurred with respect to the Certificates only
if, after any applicable grace period, either the Trustee or Holders and the
Collateral Interest Holder evidencing undivided interests aggregating more than
50% of the Investor Interest, by written notice to the Transferor and the
Servicer (and to the Trustee if given by the Holders) declare that a Pay Out
Event has occurred with respect to the Certificates as of the date of such
notice. In the case of any event described in clause (a), (b), (c), (d), (i) or
(m) a Pay Out Event with respect to all Series then outstanding, and in the case
of any event described in clause (g), (h), (k), (l), (m), (n), (o) or (p), a Pay
Out Event with respect to only the Certificates, will be deemed to have occurred
without any notice or other action on the part of the Trustee or the Holders,
the Collateral Interest Holder or all certificateholders, as appropriate,
immediately upon the occurrence of such event. On the date on which a Pay Out
Event is deemed to have occurred, the Rapid Amortization Period will commence.
In such event, distributions of principal to the Holders will begin on the first
Distribution Date following the month in which such Pay Out Event occurred.
In addition to the consequences of a Pay Out Event discussed above, if
pursuant to certain provisions of Federal law, the Transferor voluntarily enters
liquidation or a receiver is appointed for the Transferor, on the day of such
event the Transferor will immediately cease to transfer Principal Receivables to
the Trust and promptly give notice to the Trustee of such event. Within 15 days,
the Trustee will publish a notice of the liquidation or the appointment stating
that the Trustee intends to sell, dispose of, or otherwise liquidate the
Receivables in a commercially reasonable manner. Unless otherwise instructed
within a specified period by Certificateholders representing undivided interests
aggregating more than 50% of the Investor Interest of each Series (or if any
Series has more than one Class, of each Class, and any other Person specified in
the Agreement or a Series Supplement) issued and outstanding, the Trustee will
sell, dispose of, or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms. The Proceeds from the
sale, disposition or liquidation of the Receivables will be treated as
collections of the Receivables and applied as specified above in "--Application
of Collections".
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the Transferor,
the conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of a Rapid
Amortization Period. In addition, a conservator or receiver may have the power
to cause the early sale of the Receivables and the early retirement of the
Certificates. See "Risk Factors--Certain Matters Relating to Receivership" and
"Certain Legal Aspects of the Receivables--Certain Matters Relating to
Receivership."
As of the Statistical Calculation Date (i) the amount of the Aggregate
Receivables related to any single borrower was not greater than __% of the
amount of Aggregate Receivables in the Identified Portfolio as of the
Statistical Calculation Date; (ii) the amount of the portion of the Aggregate
Receivables relating to the financing of insurance premiums of any Tier 1
Insurer was not greater than __% of the amount of Aggregate Receivables as of
the Statistical Calculation Date; (iii) the amount of the portion of the
Aggregate Receivables relating to the financing of insurance premiums or any
Tier 2 Insurer was not greater than __% of the amount of Aggregate Receivables
as of the Statistical Calculation Date; (iv) the amount of the portion of the
Aggregate Receivables relating to the financing of insurance premiums of any
Tier 3 Insurer was not greater than __% of the amount of Aggregate Receivables
as of the Statistical Calculation Date; (v) the Investment Grade Insurer
Percentage equaled ___%; (vi) the Top 10 Insurer Percentage equaled ___%; and
(vii) there were _____ insurance carriers whose insurance premiums have been
financed by the Finance Premium Agreements in the Identified Portfolio
SERVICING COMPENSATION, BACK-UP SERVICING COMPENSATION AND PAYMENT OF EXPENSES.
The share of the Servicing Fee allocable to the Investor Interest with
respect to any Transfer Date (the "Investor Servicing Fee") shall be equal to
one-twelfth of the product of (a) __% and (b) the Adjusted Investor Interest as
of the last day of the Monthly Period preceding such Transfer Date.
The share of the Investor Servicing Fee allocable to the Class A Holders
with respect to any Transfer Date (the "Class A Servicing Fee") shall be equal
to one-twelfth of the product of (a) the Class A Floating Allocation, (b) __% or
if AFCO Credit and/or AFCO Acceptance are not the Servicers __% (the Net
Servicing Fee Rate") and (c) the Adjusted Investor Interest as of the last day
of the Monthly Period preceding such Transfer Date. The share of the Class B
Servicing Fee") shall be equal to one-twelfth of the product of (a) the Class B
Floating Allocation, (b) the Net Servicing Fee Rate and (c) the Adjusted
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date. The share of the Investor Servicing Fee allocable to the
Collateral Interest Servicing Fee") shall be equal to one-twelfth of the product
of (a) the Collateral Floating Allocation, (b) the Net Servicing Fee Rate and
(c) the Adjusted Investor Interest as of the last day of the Monthly Period
preceding such Transfer Date. The remainder of the Servicing Fee shall be paid
by the Transferor or other Series (as provided in the related Series
Supplements). The Class A Servicing Fee and the Class B Servicing Fee shall be
payable to the Servicer solely to the extent amounts are available for
distribution in respect thereof as described under "--Application of
Collections."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and independent
certified public accountants and other fees which are not expressly stated in
the Agreement to be payable by the Trust or the Holders other than federal,
state and local income and franchise taxes, if any, of the Trust.
The share of the Back-up Servicing Fee allocable to the Investor Interest
with respect to any Transfer Date (the "Investor Back-up Servicing Fee") shall
be equal to one-twelfth of the product of (a) __% and (b) the Adjusted Investor
Interest as of the last day of the Monthly Period preceding such Transfer Date.
The share of the Investor Back-up Servicing Fee allocable to the Class A
Holders with respect to any Transfer Date (the "Class A Back-up Servicing Fee")
shall be equal to one-twelfth of the product of (a) the Class A Floating
Allocation, (b) __% and (c) the Adjusted Investor Interest as of the last day of
the Monthly Period preceding such Transfer Date. The share of the Investor
Servicing Fee allocable to the Class B Holders with respect to any Transfer
Class B Back-up Servicing Fee") shall be equal to one-twelfth of the product of
(a) the Class B Floating Allocation, (b) ___% and (c) the Adjusted Investor
Interest as of the last day of the Monthly Period preceding such Transfer Date.
The share of the Investor Servicing Fee allocable to the Collateral Interest
Holder with respect to any Transfer Date (the "Collateral Interest Back-up
Servicing Fee") shall be equal to one-twelfth of the product of (a) the
Collateral Floating Allocation, (b) ___% and (c) the Adjusted Investor Interest
as of the last day of the Monthly Period preceding such Transfer Date. The
remainder of the Back-up Servicing Fee shall be paid by the Transferor or other
Series (as provided in the related Series Supplements). The Class A Back-up
Servicing Fee and the Class B Servicing Fee shall be payable to the Servicer
solely to the extent amounts are available for distribution in respect thereof
as described under "--Application of Collections."
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
The Servicer may not resign from their obligations and duties under the
Agreement, except upon determination that performance of their duties are no
longer permissible under applicable law. No such resignation will become
effective until the Trustee or a successor or successors to the Servicer has
assumed the Servicer's responsibilities and obligations under the Agreement.
The Agreement provides that, subject to the limitations on the Servicers's
liability described below, the Servicer will indemnify the Transferor and the
Trust from and against any loss, liability, reasonable expense, damage, or
injury suffered or sustained by reason of any acts or omissions or alleged acts
or omissions of the Servicer with respect to the activities of the Trust or the
Trustee for which the Servicer is responsible pursuant to the Agreement;
provided, however, that the Servicer will not indemnify (a) the Transferor or
the Trust if such acts, omissions, or alleged acts or omissions constitute or
are caused by fraud, negligence, or willful misconduct by the Transferor, the
Trustee (or any of its officers, directors, employees, or agents), or the
Certificateholders, (b) the Trust, the Certificateholders, or the Certificate
Owners for losses, liabilities, expenses, damages, or injuries arising from
actions taken by the Trustee at the request of Certificateholders, (c) the
Trust, the Certificateholders, or the Certificate Owners for any losses,
liabilities, expenses, damages, or injuries incurred by any of them in their
capacities as investors, including without limitation losses incurred as a
result of Receivables in Defaulted Accounts or Receivables which are written off
as uncollectible, or (d) the Transferor, the Trust, the Certificateholders, or
the Certificate Owners for any losses, liabilities, expenses, damages, or
injuries suffered or sustained by the Trust, the Certificateholders, or the
Certificate Owners arising under any tax law, including without limitation any
federal, state, local, or foreign income or franchise tax or any other tax
imposed on or measured by income (or any interest or penalties with respect
thereto or arising from a failure to comply therewith) required to be paid by
the Trust, the Certificateholders, or the Certificate Owners in connection with
the Agreement to any taxing authority. The Agreement also provides that the
Servicer will indemnify the Trustee and its officers, directors, employees, or
agents from and against any loss, liability, reasonable expense, damage, or
injury suffered or sustained by reason of the acceptance of the Trust by the
Trustee, the issuance by the Trust of certificates , or any of the other matters
contemplated in the Agreement; provided, however, that the Servicer will not
indemnify the Trustee or its officers, directors, employees, or agents for any
loss, liability, expense, damage, or injury caused by the fraud, negligence, or
willful misconduct of any of them.
In addition, the Agreement provides that, subject to certain exceptions,
the Transferor will indemnify and the Trust and the Trustee from and against any
reasonable loss, liability, expense, damage, or injury (other than to the extent
that any of the foregoing relate to any tax law or any failure to comply
therewith) suffered or sustained by reason of any acts or omissions or alleged
acts or omissions arising out of or based upon the arrangement created by the
Agreement as though the Agreement created a partnership under the Delaware
Uniform Partnership Law in which the Transferor is a general partner.
The Agreement provides that, except for obligations specifically undertaken
by the Transferor and the Servicer pursuant to the Agreement, neither the
Transferor nor the Servicer nor any of their respective directors, officers,
employees, or agents will be under any liability to the Trust, the Trustee, its
officers, directors, employees, or agents, the Certificateholders, or any other
person for any action taken, or for refraining from taking any action pursuant
to the Agreement provided that neither the Transferor nor the Servicer nor any
of their respective directors, officers, employees, or agents will be protected
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith, or gross negligence of the Transferor, the Servicer, or
any such person in the performance of its duties thereunder or by reason of
reckless disregard of obligations and duties thereunder. In addition, the
Agreement provides that the Servicer is not under any obligation to appear in,
prosecute, or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability.
Any person into which, in accordance with the Agreement, the Transferor or
any of the Servicers may be merged or consolidated or any person resulting from
any merger or consolidation to which the Transferor or the Servicer is a party,
or any person succeeding to the business of the Transferor or any of the
Servicers, upon execution of a Series Supplement and delivery of an opinion of
counsel with respect to the compliance of the transaction with the applicable
provisions of the Agreement, will be the successor to the Transferor or the
applicable Servicer, as the case may be, under the Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the Trustee
or Certificateholders representing undivided interests aggregating more than 50%
of the Investor Interests for all Series of certificates of the Trust, by
written notice to the applicable Servicer (and to the Trustee if given by the
certificateholders), may terminate all of the rights and obligations of the
applicable Servicer as servicer under the Agreement and in and to the Service
Transfer"). The rights and interest of the Transferor under the Agreement and in
the Transferor Interest will not be affected by such termination. The Trustee
will as promptly as possible appoint a successor Servicer. If no such Servicer
has been appointed and has accepted such appointment by the time a Servicer
ceases to act as Servicer, all authority, power and obligations of such Servicer
under the Agreement will pass to and be vested in the Trustee. If the Trustee is
unable to obtain any bids from eligible servicers and the Servicer delivers an
officer's certificate to the effect that it cannot in good faith cure the
Servicer Default which gave rise to a transfer of servicing, and if the Trustee
is legally unable to act as successor Servicer, then the Trustee will give the
Transferor the right of first refusal to purchase the Receivables on terms
equivalent to the best purchase offer as determined by the Trustee.
"Servicer Default" under the Agreement refers to any of the following
events:
(a) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Trustee to make certain payments, transfers
or deposits, on the date such Servicer is required to do so under the
Agreement (or within the applicable grace period, which shall not exceed 10
business days);
(b) failure on the part of the Servicer to duly observe or perform in
any respect any other covenants or agreements of the Servicer which has a
material adverse effect on the certificateholders of any Series issued and
outstanding under the Trust and which continues unremedied for a period of
60 days after written notice and continues to have a material adverse
effect on such certificateholders; or the delegation by a Servicer of its
duties under the Agreement, except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer
in the Agreement, or in any certificate delivered pursuant to the
Agreement, proves to have been incorrect when made which has a material
adverse effect on the certificateholders of any Series issued and
outstanding under the Trust, and which continues to be incorrect in any
material respect for a period of 60 days after written notice and continues
to have a material adverse effect on such certificateholders; or
(d) the occurrence of certain insolvency events with respect to the
Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in clause (a) above for a period of 10 business days, or referred to
under clause (b) or (c) for a period of 60 business days, will not constitute a
Servicer Default if such delay or failure could not be prevented by the exercise
of reasonable diligence by the Servicer or if such delay or failure caused by an
act of God or other similar occurrence. Upon the occurrence of any such event,
the Servicer will not be relieved from using their best efforts to perform their
obligations in a timely manner in accordance with the terms of Agreement, and
the Servicer will provide the Trustee, any provider of Enhancement, the
Transferor and the holders of certificates of each Series issued and outstanding
under the Trust prompt notice of such failure or delay by it, together with a
description of the cause of such failure or delay and its efforts to perform its
obligations.
If a conservator or receiver is appointed for the Servicer, and no Servicer
Default other than such conservatorship or receivership or the insolvency of
such Servicer exists, the conservator or receiver may have the power to prevent
either the Trustee or the majority of the certificateholders from effecting a
Service Transfer.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will forward to each
Certificateholder of record a statement prepared by the Servicers setting forth,
among other things: (a) the total amount distributed, (b) the amount of the
distribution on such Distribution Date allocable to principal on the Class A
Certificates, the Class B Certificates and the Collateral Interest, (c) the
amount of such distribution allocable to interest on the Class A Certificates,
the Class B Certificates and the Collateral Interest, (d) the amount of
collections of Principal Receivables processed during the preceding month or
months since the last Distribution Date and allocated in respect of the Class A
Certificates, the Class B Certificates, the Collateral Interest and the
Transferor's Interest, (e) the aggregate amount of Principal Receivables, in the
Trust as of the end of the last day of the preceding Monthly Period or Periods
since the last Distribution Date, (f) the aggregate outstanding balance of
Receivables which are 30-50, 60-89 and 90 or more days delinquent (or a similar
classification of delinquency) as of the end of the last day of the preceding
Monthly Period or Periods since the last Distribution Date, (g) the Class A
Investor Default Amount, Class B Investor Default Amount and the Collateral
Default Amount for the preceding Monthly Period or Periods since the last
Distribution Date, (h) the amount of Class A Investor Charge-Offs of Class B
Investor Charge-Offs and Collateral Charge-Offs for the preceding Monthly Period
or Periods since the last Distribution Date and the amount of reimbursements of
previous Investor Charge-Offs for the preceding Monthly Period or Periods since
the last Distribution Date, (i) the amount of the Class A Servicing Fee, the
Class B Servicing Fee and the Collateral Interest Servicing Fee for the
preceding Monthly Period or Periods since the last Distribution Date, (j) the
Class A Adjusted Investor's Interest, the Class B Investor's Interest, the
Collateral Interest and the Transferor's Interest, as of the close of business
on such Distribution Date, (k) the aggregate amount of collections of Finance
Charge Receivables processed during the preceding Monthly Period or Periods
since the last Distribution Date and the amount of such collections allocated in
respect of the Class A Certificates, the Class B Certificates, the Collateral
Interest and the Transferor's Interest, respectively, (l) the Portfolio Yield
for the preceding Monthly Period or Periods since the last Distribution Date,
(m) the amount deposited in the Principal Funding Account and the balance in
such Account, (n) the amount deposited in the Reserve Account and the balance in
such account, (o) the amount of investment income since the previous report, and
(p) the Accumulation Shortfall, if any.
On or before January 31 of each calendar year the Trustee will furnish to
each person who at any time during the preceding calendar year was a
Certificateholder of record, a statement prepared by the Servicer containing the
information required to be required to be contained in the regular monthly
report to Certificateholders, as set forth in clauses (a), (b) and (c) above
aggregated for such calendar year or the applicable portion thereof during which
such person was a Certificateholder, together with such other customary
information (consistent with the treatment of the Certificates as debt) as the
Trustee or the Servicer deems necessary or desirable to enable the
Certificateholders to prepare their United States tax returns.
EVIDENCE AS TO COMPLIANCE
The Agreement will provide that on or before March 31 of each calendar year
commencing after the calendar year during which such Agreement is in effect the
Servicer will cause a firm of independent certified public accountants (who may
also render other services to the Servicer or the Bank) to furnish a report to
the effect that such accounting firm has examined certain documents and records
relating to the servicing of the Receivables, compared the information contained
in the Servicer's certificates delivered during the period covered by the report
with such documents and records and that, on the basis of such examination, such
firm is of the opinion that such servicing was conducted in compliance with the
Agreement except for such exceptions or errors as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement.
The Agreement will provide for delivery to the Trustee on or before March
31 of each calendar year commencing in 1997, of an annual statement signed by an
officer of each Servicer to the effect that each Servicer has fully performed
its obligations under the Agreement throughout the preceding year, or, if there
has been a default in the performance of any such obligation, specifying the
nature and status of the default.
AMENDMENTS
The Agreement may be amended by the Transferor, the Servicer and the
Trustee, without the consent of Certificateholders of any Series then
outstanding, for any purpose, so long as (i) the Transferor delivers to the
Trustee an opinion of counsel to the effect that such amendment will not
adversely affect in any material respect the interest of such Certificateholders
and (ii) such amendment will not result in a withdrawal or reduction of the
rating of any outstanding Series under the Trust by any Rating Agency; provided
that if such amendment provides for additional or substitute Credit Enhancement
for a Series, changes the definition of Eligible Receivable or provides for the
addition of a Participation to the Trust, the matters to be covered by the
opinion of counsel described in clause (i) may instead be covered by a
certificate of an authorized officer of the Transferor. Such an amendment may be
entered into in order to comply with or obtain the benefits of certain future
tax legislation (such as legislation creating FASIT, as described below under
"U.S. Federal Income Tax Consequences--Future Legislation").
The Agreement may also be amended by the Transferor, the Servicer and the
Trustee with the consent of the holders of certificates evidencing undivided
interests aggregating not less than 66 2/3% of the Investor Interests for all
Series of the Trust, for the purpose of adding any provisions to, changing in
any manner or eliminating any of the provisions of, the Agreement or the related
Series Supplement or of modifying in any manner the rights of Certificateholders
of any outstanding Series of the Trust. No such amendment, however, may (a)
reduce in any manner the amount of, or delay the timing of, distributions
required to be made on any Series, (b) change the definition of or the manner of
calculating the interest of any certificateholder of any Series issued by the
Trust or (c) reduce the aforesaid percentage of undivided interests the holders
of which are required to consent to any such amendment, in each case without the
consent of all certificateholders of the related Series and of all Series
adversely affected. Promptly following the execution of any amendment to the
Agreement, the Trustee will furnish written notice of the substance of such
amendment to each certificateholder. Any Series Supplement and any amendments
regarding the addition or removal of Receivables or Participations from the
Trust will not be considered an amendment requiring Certificateholders consent
under the provisions of the Agreement.
LIST OF CERTIFICATEHOLDERS
Upon written request of Certificateholders of record representing undivided
interests in the Trust aggregating not less than 10% of the Investor Interest,
the Trustee will afford such Certificateholders access during business hours to
the current list of Certificateholders of the Trust for purposes of
communicating with other Certificateholders with respect to their rights under
the Agreement. The Trustee may, however, refuse to supply such list until it has
been adequately indemnified by such Certificateholders for its costs and
expenses, and will give the Servicers notice that such request has been made.
See "--Book-Entry Registration" and "--Definitive Certificates" above.
THE TRUSTEE
The First National Bank of Chicago is the Trustee under the Agreement. The
Transferor, the Servicer and their respective affiliates may from time to time
enter into normal banking and trustee relationships with the Trustee and its
affiliates. The Trustee, the Transferor, the Servicer and any of their
respective affiliates may hold Certificates in their own names (except that the
Trustee may not hold a Certificate issued by the related Trust for its own
account). In addition, for purposes of meeting the legal requirements of certain
local jurisdictions, the Trustee shall have the power to appoint a co-trustee or
separate trustees of all or part of the Trust. In the event of such appointment,
all rights, powers, duties and obligations conferred or imposed upon the Trustee
by the Agreement shall be conferred or imposed upon the Trustee and such
separate trustee or co-trustee jointly, or, in any jurisdiction in which the
Trustee shall be incompetent or unqualified to perform certain acts, singly upon
such separate trustee or co-trustee who shall exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will be
obligated to appoint a successor Trustee. The Transferor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Transferor will be obligated to appoint a successor Trustee. Any resignation or
removal of the Trustee and appointment of a successor Trustee does not become
effective until acceptance of the appointment by the successor Trustee.
DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
PURCHASES OF RECEIVABLES
The Receivables transferred to the Trust pursuant to the Agreement are
purchased by the Transferor pursuant to a Receivables Purchase Agreement.
Pursuant to the Receivables Purchase Agreement, the Transferor purchases
Receivables from the Originators from time to time. The purchase price of such
Receivables is equal to the outstanding principal balance of such Receivables,
and is payable by the Transferor in cash or by a note. See "Description of
Certificates." Pursuant to the Agreement, such Receivables are thereafter
transferred immediately by the Transferor to the Trust. Pursuant to the
Agreement, the Transferor assigned its rights in, to, and under the Receivables
Purchase Agreement with respect to such Receivables to the Trust.
REPRESENTATIONS AND WARRANTIES
Pursuant to the Receivables Purchase Agreement, each of the Originators
jointly and severally represent and warrant that as of the Closing Date, with
respect to Receivables conveyed to the Transferor on such date, and the related
Addition Date with respect to Additional Receivables that (a) each Receivable
then existing has been conveyed to the Transferor free and clear of any Lien of
any Person claiming through or under Originator or any of its Affiliates (other
than any Liens for municipal and other local taxes if such taxes shall not at
the time be due and payable or if Originator shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto) and in compliance, in
all material respects, with all Requirements of Law applicable to Originator,
and (b) each such Receivable is an Eligible Receivable. In the event of a
material breach of the representation and warranty described in clause (a)
above, and if any of the following two conditions is met: (A) as a result of
such breach such Receivable is charged off as uncollectible or the Transferor's
rights in, to or under such Receivable or its proceeds are impaired or the
proceeds of such Receivable are not available for any reason to the Transferor
free and clear of any Lien or (B) the Lien upon the subject Receivable (1)
arises in favor of the United States of America or any State or any agency or
instrumentality thereof and involves taxes or liens arising under Title IV of
ERISA or (2) has been consented to by Originator; and as a result thereof, the
Transferor is required to repurchase any Receivable from the Trust pursuant to
the Pooling and Servicing Agreement, then the Originator of the repurchased
Receivable shall be obligated to pay to the Transferor immediately upon the
Transferor's demand therefor an amount equal to the amount of all losses,
damages and liabilities of the Transferor that result from such breach,
including but not limited to the cost of the Transferor's repurchase obligations
pursuant to the Pooling and Servicing Agreement. In the event of a material
breach of the representation and warranty described in clause (b) above, and as
a result of such breach, the related Account becomes a Defaulted Account or the
Transferor's rights in, to or under the Receivable or its proceeds are impaired
or the proceeds of such Receivable are not available for any reason to the
Transferor free and clear of any Lien, then, upon the expiration of 60 days (or
such longer period as may be agreed to by Transferor in its sole discretion, but
in no event later than 120 days) from the earlier to occur of the discovery of
any such event by either Originator or Servicer, or receipt by Originator of
written notice of any such event given by Transferor, and as a further result
thereof, if the Transferor is required to repurchase any Receivable from the
Trust pursuant to the Pooling and Servicing Agreement, then the Originator of
the repurchased Receivable shall be obligated to pay to the Transferor
immediately upon the Transferor's demand therefor an amount equal to the amount
of all losses, damages and liabilities of the Transferor that result from such
breach, including but not limited to the cost of the Transferor's repurchase
obligations pursuant to the Pooling and Servicing Agreement; provided that no
such removal shall be required to be made if, on any day within such applicable
period, such representations and warranties with respect to such Receivable
shall then be true and correct in all material respects as if such Receivable
had been created on such day.
CERTAIN COVENANTS
Pursuant to the Receivables Purchase Agreement, each Originator jointly and
severally covenants that, among other things, subject to specified exceptions
and limitations, (i) it will take no action to cause any Receivable to be
evidenced by any instruments or to be anything other than a general intangible,
(ii) in the event any Originator is unable for any reason to transfer
Receivables to the Transferor, it will nevertheless continue to allocate and pay
all collections from all Receivables to the Transferor, (iii) it shall deliver
to the Transferor on or prior to the Determination Date following a Monthly
Period during which Additional Receivables are conveyed to the Trust, a written
assignment of the Additional Receivables to the Transferor and a computer file
or microfiche list containing a true and complete list of all Receivables,
including Additional Receivables, as of the end of such Monthly Period, (iv) it
shall deliver to the Transferor or the Trustee (x) a Notice of Financed Premium,
appropriately completed, and, (y) an assignment of power of attorney with
respect to each Additional Receivable, (v) shall represent and warrant that, as
of the day any Additional Receivable is conveyed to the Transferor, the written
assignment is either (x) a valid transfer and assignment of the Additional
Receivables to the Transferor, free and clear of any liens, except for certain
permitted liens or (y) a grant of a first priority perfected security interest
in the Additional Receivables subject to certain permitted liens, (vi) it shall
not transfer any Receivable to the Transferor that would cause the Aggregate
Receivables in the Trust as of the date of transfer to (a) have a weighted
average annual percentage rate that is less than ___% or (b) have a weighted
average original term to maturity of greater than ___, in each case, calculated
after giving effect to the transfer of such Receivable and (vii) it shall not
transfer any Receivable to the Transferor which it transferred to the Trust
would cause any single borrower (or group of affiliated borrowers) to be
obligated under 10% or more of the aggregate Receivables owned by the Trust
after giving effect to such transfer.
REPURCHASE OBLIGATIONS
If (i) any of the representations and warranties contained in clauses (v)
and (vi) in "C Representations and Warranties" was not true with respect to such
Originator or any Receivable, as applicable, at the time such representation or
warranty was made or (ii) if the Originators breach any of the covenants
contained in clauses (iii) through (vii) in "C Certain Covenants", and as a
result thereof, the Transferor is required to repurchase any Receivable from the
Trust pursuant to the Agreement, then the Originator of the repurchased
Receivable shall be obligated to pay to the Transferor immediately upon the
Transferor's demand therefor an amount equal to the amount of all losses,
damages and liabilities of the Transferor that result from such breach,
including but not limited to the cost of the Transferor's repurchase obligations
pursuant to the Agreement.
PURCHASE TERMINATION
If any of the Originators becomes insolvent, the Transferor's obligations
under the Receivables Purchase Agreement to purchase Receivables from such
Originator will automatically be terminated. In addition, if the Transferor
becomes insolvent, the Originator's obligations to transfer Receivables from the
Transferor will automatically be terminated.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Transferor will represent and warrant in the Agreement that the
transfer of Receivables by it to the related Trust is either a valid transfer
and assignment to such Trust of all right, title and interest of the Transferor
in and to the related Receivables, except for the Transferor Interest, or the
grant to the Trust of a security interest in such Receivables. The Transferor
also will represent and warrant in the Agreement that, if the transfer of
Receivables by the Transferor or the related Trust is deemed to create a
security interest under the Uniform Commercial Code, as in effect in the State
of [Pennsylvania] (the "UCC"), there will exist a valid, subsisting and
enforceable first priority perfected security interest in such Receivables
created thereafter in favor of such Trust on and after their creation, except
for certain tax and other governmental liens. For a discussion of the Trust's
rights arising from a breach of these warranties, see "Description of the
Certificates--Representations and Warranties."
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Transferor is chartered as a national banking association and is
subject to regulation and supervision by the Office of the Comptroller of the
Currency, which is authorized to appoint the FDIC as conservator or receiver of
the Transferor upon the occurrence of certain events relating to the
Transferor's financial condition.
The FDIA, as amended by FIRREA, sets forth certain powers that the FDIC in
its capacity as conservator or receiver for the Transferor could exercise.
Positions taken by the FDIC prior to the passage of FIRREA suggest that the
FDIC, if appointed as conservator or receiver of the Transferor, would not
interfere with the timely transfer to a Trust of payments collected on the
Receivables or interfere with the timely liquidation of related Receivables, as
described below. To the extent that the Transferor has granted a security
interest in related Receivables to a Trust, and that interest was validly
perfected before the Transferor's insolvency and was not taken in contemplation
of the insolvency of the Transferor, or with the intent to hinder, delay or
defraud the Transferor or the creditors of the Transferor, the FDIA provides
that such security interest should not be subject to avoidance. As a result,
payments to such Trust with respect to the Receivables should not be subject to
recovery by the FDIC as conservator or receiver of the Transferor. If, however,
the FDIC, as conservator or receiver for the Transferor, were to assert a
contrary position, or were to require the Trustee to establish its right to
those payments by submitting to and completing the administrative claims
procedure established under the FDIA, or the conservator or receiver were to
request a stay of proceedings with respect to the Transferor as provided under
the FDIA, delays in payments on the related Series of Certificates and possible
reductions in the amount of those payments could occur.
Upon the appointment of a conservator or receiver or upon a voluntary
liquidation with respect to the Transferor, the Transferor will promptly give
notice thereof to each Trustee and a Pay Out Event will occur with respect to
all Series then outstanding under the related Trust. Pursuant to the Agreement,
newly created Principal Receivables will not be transferred to the Trust on and
after any such appointment or voluntary liquidation, and the Trustee will
proceed to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms, unless
otherwise instructed within a specified period by holders of Certificates
representing undivided interests aggregating more than 50% of the Investor
Interest of each Series (or if any Series has more than one Class, of each
Class, and any other Person specified in the related Agreement of a Series
Supplement), or unless otherwise required by the FDIC as receiver or conservator
of the Transferor. Under the Agreement, the proceeds from the sale of the
Receivables would be treated as collections of the Receivables and the Investor
Percentage of such proceeds would be distributed to the Certificateholders. This
procedure could be delayed, as described above. If the only Pay Out Event to
occur is either the insolvency of the Transferor or the appointment of a
conservator or receiver for the Transferor, the conservator or receiver may have
the power to prevent the early sale, liquidation or disposition of the
Receivables and the commencement of a Rapid Amortization Period. In addition, a
conservator or receiver may have the power to cause the early sale of the
Receivables and the early retirement of the Certificates or to prohibit the
continued transfer of Principal Receivables to the Trust. See "Description of
the Certificates--Pay Out Events."
LACK OF PERFECTED SECURITY INTERESTS IN UNEARNED PREMIUMS
Each Receivable includes a grant by the borrower to the applicable
Originator of a security interest in the related Unearned Premium. The
perfection of a security interest in an unearned premium is not governed by the
UCC. State statutes, common law and industry practice govern the perfection of a
security interest in the unearned premiums and generally require for the
perfection of such security interest, a notice informing the applicable
insurance company of the identity of the person entitled to the payment of such
unearned premium. It is standard practice for the Originators to send such a
notice to the applicable insurance company at or about the time the insurance
policy premium is financed. Each Originator will represent and warrant in the
Receivables Purchase Agreement to the Transferor and the Transferor will
represent and warrant to the Trust, in each case, as of the date of transfers,
that the applicable Originator that has a first priority perfected security
interest in the Unearned Premiums relating to the Receivables so transferred.
Each Originator will assign its security interest in the Unearned Premiums
to the Transferor, who will in turn assign its security interest in the Unearned
Premiums to the Trust. Due to the administrative burden and expense of mailing a
notice for each Receivable to the applicable insurance company and the
administrative burden and expense of the related insurance companies, which
would have to process such notices, neither the Transferor nor the Trustee will
send notices to the related insurance companies, with respect to the Trust's
security interests in the Unearned Premiums relating to the Receivables
transferred to the Trust on or prior to February 1, 1997. In the absence of such
procedures neither the Transferor nor the Trust will have a perfected security
interest in the Unearned Premiums relating to such Receivables.
With respect to the Receivables transferred to the Trust on or after
February 1, 1997, the applicable Originator will represent and warrant in the
Receivables Purchase Agreement to the Transferor and the Transferor will
represent and warrant in the Agreement that a notice of finance premium has been
delivered to the related insurance carrier notifying it of the Trustee's
security interest in the Unearned Premium and that the Trust has a perfected
security interest in such Unearned Premiums.
In the event the representations and warranties relating to the perfection
of security interests in Unearned Premiums is breached and as a result of such
breach the related Account becomes a Defaulted Account or the Trust's rights in,
to or under the Receivables or its proceeds are impaired or the proceeds of such
Receivable are not free and clear of any lien, then upon the expiration of the
applicable grace period such Receivable shall be removed from the Trust as
described under "Description of the Certificates - Representations and
Warranties."
If an Originator becomes the subject of a bankruptcy or insolvency
proceeding and the Trust does not have a perfected security interest in the
Unearned Premium, the Trust's interest in such Unearned Premium would be
subordinate to the interest of a bankruptcy trustee of such Originator. As a
result, Certificateholders might not be able to obtain the proceeds of any
returned Unearned Premiums.
U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing the anticipated material generally
applicable Federal income tax consequences of the purchase, ownership and
disposition of the Certificates of a Series, is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), proposed, temporary and
final Treasury regulations thereunder, and published rulings and court decisions
in effect as of the date hereof, all of which are subject to change, possibly
retroactive. This discussion does not address every aspect of the Federal income
tax laws that may be relevant to Certificate Owners in light of their personal
investment circumstances or to certain types of Certificate Owners subject to
special treatment under the Federal income tax laws (for example, banks and life
insurance companies). Accordingly, investors should consult their own tax
advisors regarding Federal, state, local, foreign and any other tax consequences
to them of any investment in the Certificates. PROSPECTIVE INVESTORS ARE ADVISED
TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN CERTIFICATES, AS WELL AS
THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF Certificate Owner" refers to a
holder of a beneficial interest in a Certificate. ection "U.S. Federal Income
Tax Consequences" the term "Certificate Owner
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Stroock & Stroock & Lavan will act as special tax counsel to the Transferor
("Special Tax Counsel") and will advise the Transferor based on the assumptions
and qualifications set forth in the opinion that the Certificates will be IRS"),
and there can be no assurance that the IRS could not successfully challenge this
conclusion. ng on the Internal Revenue Service (the "IRS
The Transferor will express in the Agreement its intent that for Federal,
state and local income and franchise tax purposes, Certificates will be
indebtedness secured by the Receivables. The Transferor agrees and each
Certificateholder and Certificate Owner, by acquiring an interest in a
Certificate, agrees or will be deemed to agree to treat the Certificates as
indebtedness for Federal, state and local income or franchise tax purposes.
However, because different criteria are used to determine the non-tax accounting
characterization of the transactions contemplated by the Agreement, the
Transferor expects to treat such transaction, for regulatory and financial
accounting purposes, as a sale of an ownership interest in the Receivables and
not as a debt obligation.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the IRS and the courts have set forth several factors
to be taken into account in determining whether the substance of a transaction
is a sale of property or a secured indebtedness for Federal income tax purposes,
the primary factor in making this determination is whether the transferee has
assumed the risk of loss or other economic burdens relating to the property and
has obtained the benefits of ownership thereof. Special Tax Counsel will analyze
and rely on several factors in reaching its opinion that the weight of the
benefits and burdens of ownership of the Receivables has not been transferred to
the Certificate Owners.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. It is expected that Special Tax
Counsel will advise that the rationale of those cases will not apply to the
transaction evidenced by a Series of Certificates, because the form of the
transaction, as reflected in the operative provisions of the documents, either
is not inconsistent with the characterization of the Certificates as debt for
Federal income tax purposes or otherwise makes the rationale of those cases
inapplicable to this situation.
TAXATION OF INTEREST INCOME OF CERTIFICATEHOLDERS
As set forth above, it is expected that Special Tax Counsel will advise the
Transferor that the Certificates will constitute indebtedness for Federal income
tax purposes, and accordingly, Interest thereon will be includible in income by
Certificate Owners as ordinary income when received (in the case of a cash basis
taxpayer) or accrued (in the case of an accrual basis taxpayer) in accordance
with their respective methods of tax accounting. Interest received on the
Certificates may also constitute "investment income" for purposes of certain
limitations of the Code concerning the deductibility of investment interest
expense.
If the Certificates are issued with original issue discount ("OID"), the
provisions of sections 1271 through 1273 and 1275 of the Internal Revenue Code
of 1986 (the "Code") will apply to the Certificates. Under those provisions, a
U.S. Certificate Owner (including a cash basis holder) generally would be
required to accrue the OID on its interest in a Certificate in income for
federal income tax purposes on a constant yield basis, resulting in the
inclusion of OID in income in advance of the receipt of cash attributable to
that income. In general, a Certificate will be treated as having OID to the
extent that its "stated redemption price" exceeds its "issue price," if such
excess is more than 0.25 percent multiplied by the weighted average life of the
Certificate (determined by taking into account only the number of complete years
following issuance until payment is made for any partial principal payments).
Under section 1271(a)(6) of the Code, special provisions apply to debt
instruments on which payments may be accelerated due to prepayments of other
obligations securing those debt instruments. However, no regulations have been
issued interpreting those provisions, and the manner in which those provisions
would apply to the certificates is unclear. Additionally, the IRS could take the
position based on Treasury Regulations that none of the interest payable on a
Certificate is "unconditionally payable" and hence that all of such interest
should be included in the Certificate's stated redemption price at maturity.
Accordingly, Special Tax Counsel is unable to opine as to whether interest
payable on a Certificates constitutes "qualified stated interest" that is not
included in a Certificate's stated redemption price at maturity. Consequently,
prospective Certificate owners should consult their own tax advisors concerning
the impact to them in their particular circumstances. The Transferor intends to
take the position that interest on the Certificates constitutes "qualified
stated interest".
A holder who purchases a Certificate at a discount from its adjusted issue
price may be subject to the "market discount" rules of the Code. These rules
provide, in part, for the treatment of gain attributable to accrued market
discount as ordinary income upon the receipt of partial principal payments or on
the sale or other disposition of the Certificate, and for the deferral of
interest deductions with respect to debt incurred to acquire or carry the market
discount Certificate.
A holder who purchases a Certificate at a premium may elect to amortize and
deduct this premium over the remaining term of the Certificate in accordance
with rules set forth in Section 171 of the Code.
Sale of a Certificate
In general, a Certificate Owner will recognize gain or loss upon the sale,
exchange, redemption, or other taxable disposition of a Certificate measured by
the difference between (i) the amount of cash and the fair market value of any
property received (other than amounts attributable to, and taxable as, accrued
interest) and (ii) the Certificate Owner's tax basis in the Certificate (as
increased by any OID or market discount previously included in income by the
holder and decreased by any deductions previously allowed for amortizable bond
premium and by any payments reflecting principal or OID received with respect to
such Certificate). Subject to the market discount rules discussed above and to
the more than one-year holding period requirement for long-term capital gain
treatment, any such gain or loss generally will be long-term capital gain,
provided that the Certificate was held as a capital asset. The maximum ordinary
income rate for individuals, estates, and trusts exceeds the maximum long-term
capital gains rate for such taxpayers. In addition, capital losses generally may
be used only to offset capital gains.
TAX CHARACTERIZATION OF TRUST
The Agreement permits the issuance of Classes of Certificates that are
treated for Federal income tax purposes either as indebtedness or as an interest
in a partnership. Accordingly, the Trust could be characterized either as (i) a
security device to hold Receivables securing the repayment of the Certificates
or (ii) a partnership in which the Transferor and certain classes of
Certificateholders are partners, and which has issued debt represented by other
classes of Certificates of such Trust (including, the Certificates). In
connection with the issuance of Certificates of any Series, Special Tax Counsel
will render an opinion to the Transferor, based on the assumptions and
qualifications set forth therein, that under then current law, the issuance of
the Certificates of such Series will not cause the applicable Trust to be
characterized for Federal income tax purposes as an association (or publicly
traded partnership) taxable as a corporation.
FASIT LEGISLATION
Legislation enacted on August 20, 1996 provides for a new entity for
Federal income tax purposes, the "financial asset securitization investment
FASIT"), beginning on September 1, 1997. The Agreement may provide that the
Transferor may cause a FASIT election to be made for all or a portion of the
Trust if the Transferor delivers to the Trustee a Tax Opinion.
POSSIBLE CLASSIFICATION OF THE TRANSACTION AS A PARTNERSHIP OR AS AN
ASSOCIATION TAXABLE AS A CORPORATION
The opinion of Special Tax Counsel with respect to Certificates will not be
binding on the courts or the IRS. It is possible that the IRS could assert that,
for purposes of the Code, the transaction contemplated by this Prospectus
constitutes a sale of the Receivables (or an interest therein) to the
Certificate Owners and that the proper classification of the legal relationship
between the Transferor and some or all of the Certificate Owners or
Certificateholders resulting from the transaction is that of a partnership
(including a publicly traded partnership), a publicly traded partnership taxable
as a corporation, or an association taxable as a corporation. The Transferor
currently does not intend to comply with the Federal income tax reporting
requirements that would apply if any Classes of Certificates were treated as
interests in a partnership or corporation (unless, as is permitted by the
Agreement, an interest in the Trust is issued or sold that is intended to be
classified as an interest in a partnership).
If the Trust were treated in whole or in part as a partnership in which
some or all of the holders of interests in the publicly offered Certificates
were partners, that partnership would be classified as a publicly traded
partnership, and so could be taxable as a corporation. Further, if interests in
the Trust other than the publicly offered Certificates are considered to be
equity and are considered to be publicly traded, regulations published by the
Treasury Department on December 4, 1995 could cause the Trust to constitute a
publicly traded partnership even if all holders of interests in the publicly
offered Certificates were treated as debt for tax purposes. The regulations
generally apply to taxable years beginning after December 31, 1995. If the Trust
were classified as a publicly traded partnership, whether by reason of the
treatment of publicly offered Certificates as equity or by reason of the
regulations, it would avoid taxation as a corporation if its income was not
derived in the conduct of a "financial business"; however, whether the income of
the Trust would be so classified is unclear and Special Tax Counsel is unable to
opine as to whether the Trust would be so classified.
Under the Code and the regulations, a partnership will be classified as a
publicly traded partnership if equity interests are traded on an "established
securities market," or are "readily tradeable" on a "secondary market" or its
"substantial equivalent." The Transferor intends to take measures designed to
reduce the risk that the Trust could be classified as a publicly traded
partnership by reason of interests in the Trust other than the publicly offered
Certificates. Although the Transferor expects such measures will ultimately be
successful, certain of the actions that may be necessary for avoiding the
treatment of such interests as "readily tradeable" on a "secondary market" or
its "substantial equivalent" are not fully within the control of the Transferor.
As a result, there can be no assurance that the measures the Transferor intends
to take will in all circumstances be sufficient to prevent the Trust from being
classified as a publicly traded partnership under the regulations.
If a transaction were treated as creating a partnership between the
Transferor and the Certificate Owners or Certificateholders that is not
characterized as a publicly traded partnership taxable as a corporation, the
partnership itself would not be subject to Federal income tax; rather, the
partners of such partnership, including the Certificate Owners or
Certificateholders, would be taxed individually on their respective distributive
shares of the partnership's income, gain, loss, deductions and credits. The
amount and timing of items of income and deductions of a Certificate Owner could
differ if the Certificates were held to constitute partnership interests, rather
than indebtedness. Moreover, unless the partnership were treated as engaged in a
trade or business, an individual's share of expenses of the partnership would be
miscellaneous itemized deductions that, in the aggregate, are allowed as
deductions only to the extent they exceed two percent of the individual's
adjusted gross income, and would be subject to reduction under Section 68 of the
Code if the individual's adjusted gross income exceeded certain limits. As a
result, the individual might be taxed on a greater amount of income than the
stated rate on the Certificates. Finally, even if assuming partnership qualifies
for exemption from taxation as a corporation, all or a portion of any taxable
income allocated to a Certificate Owner that is a pension, profit-sharing or
employee benefit plan or other tax-exempt entity (including an individual
retirement account) may, under certain circumstances, constitute "unrelated
business taxable income" which generally would be taxable to the holder under
the Code.
If it were determined that a transaction created an entity classified as an
association or as a publicly traded partnership taxable as a corporation, the
Trust would be subject to Federal income tax at corporate income tax rates on
the income it derives from the Receivables, which would reduce the amounts
available for distribution to the Certificate Owners, possibly including
Certificate Owners of a Class that is treated as indebtedness. Such
classification may also have adverse state and local tax consequences that would
reduce amounts available for distribution to Certificate Owners. Cash
distributions to the Certificate Owners (except any Class not recharacterized as
an equity interest in an association) generally would be treated as dividends
for tax purposes to the extent of such deemed corporation's earnings and
profits.
FOREIGN INVESTORS
As set forth above, it is expected that Special Tax Counsel will render an
opinion, upon issuance, that the Certificates will be treated as debt for U.S.
Federal income tax purposes. The following information describes the U.S.
Federal income tax treatment of investors that are not U.S. persons ("Foreign
Foreign Investor" means any person other than (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision thereof, (iii)
an estate whose income is includable in gross income for United States federal
income taxation regardless of its source, or (iv) a trust for which one or more
United States fiduciaries have the authority to control all substantial
decisions and for which a court of the United States can exercise primary
supervision over the trust's administration. For years beginning before January
1, 1997, the term "Foreign Investor" shall include a trust whose income is not
includable in gross income for United States Federal income taxation regardless
of source, in lieu of trusts described in (iv) above, unless the trust elects to
have its Foreign Investor status determined under the criteria set forth in (iv)
above for tax years ending after August 20, 1996.
Interest, including principal to the extent of accrued OID, paid to a
Foreign Investor will be subject to U.S. withholding taxes at a rate of 30%
unless (i) the income is "effectively connected" with the conduct by such
Foreign Investor of a trade or business in the United States and the investor
provides on a timely basis Form 4224 or (ii) the Foreign Investor and each
securities clearing organization, bank, or other financial institution that
holds the Certificates on behalf of the customer in the ordinary course of its
trade or business, in the chain between the Certificate Owner and the U.S.
person otherwise required to withhold the U.S. tax, complies with applicable
identification requirements and the Certificate Owner does not actually or
constructively own 10% or more of the voting stock of the Transferor, or the
Collateral Interest (or, upon the issuance of an interest in the Trust that is
treated as a partnership interest, any holder of such interest) and is not a
controlled foreign corporation with respect to the Transferor. Applicable
identification requirements generally will be satisfied if there is delivered to
the securities clearing organization (i) IRS Form W-8 signed under penalties of
perjury by the Certificate Owner, stating that the Certificate Owner is not a
U.S person and providing such Certificate Owner's name and address, (ii) IRS
Form 1001, signed by the Certificate Owner or such Certificate Owner's agent,
claiming exemption from withholding under an applicable tax treaty, or (iii) IRS
Form 4224 signed by the Certificate Owner or such owner's agent, claiming
exemption from withholding of tax on income effectively connected with the
conduct of a trade or business in the United States; provided that in any such
case (x) the applicable form is delivered pursuant to applicable procedures and
is properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the Certificate Owner is a U.S. person or that the form is
otherwise inaccurate.
A Certificate Owner that is a nonresident alien or foreign corporation will
not be subject to U.S. Federal income tax on gain realized upon the sale,
exchange, or redemption of a Certificate, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States, (ii) in the case of a Certificate Owner that is an individual, such
Certificate Owner is not present in the United States for 183 days or more
during the taxable year in which such sale, exchange, or redemption occurs, and
(iii) in the case of gain representing accrued interest or OID the conditions
described in the immediately preceding paragraph are satisfied.
If the interests of the Certificate Owners were reclassified as interests
in a partnership (not taxable as a corporation), such recharacterization could
cause a Foreign Investor to be treated as engaged in a trade or business in the
United States. In such event the Certificate Owner would be required to file a
Federal income tax return and, in general, would be subject to Federal income
tax, including branch profits tax in the case of a Certificateholder that is a
corporation, on its net income from the partnership. Further, the partnership
would be required, on a quarterly basis, to pay withholding tax equal to the
sum, for each foreign partner, of such foreign partner's distributive share of
"effectively connected" income of the partnership multiplied by the highest rate
of tax applicable to that foreign partner. The tax withheld from each foreign
partner would be credited against such foreign partner's U.S. income tax
liability.
If a Trust were taxable as a corporation, distributions to foreign persons,
to the extent treated as dividends, would generally be subject to withholding at
the rate of 30%, unless such rate were reduced by an applicable tax treaty.
The Trust will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid on a Certificate (and
the amount of accrued OID, if any, and interest withheld for Federal income
taxes, if any) for each calendar year, except as to exempt holders (generally,
holders that are corporations, tax-exempt organizations, qualified pension and
profit-sharing trusts, or individual retirement accounts). Each holder (other
than exempt holders who are not subject to the reporting requirements) 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 Certificateholder fail to provide the required certification, the
Trust will be required to withhold 31% of the amount otherwise payable to the
holder, and remit the withheld amount to the IRS as a credit against the
holder's Federal income tax liability.
STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of a Trust, the
Certificates, or the Certificate Owners of any Series under state and local tax
laws. Prospective investors are urged to consult their own tax advisors
regarding state and local tax treatment of the Trust and the Certificates, and
the consequences of purchase, ownership or disposition of the Certificates under
any state or local tax law.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan or retirement arrangement 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 plan. ERISA also imposes certain duties on persons who are
fiduciaries of plans subject to ERISA and prohibits certain transactions between
such plans and parties in interest with respect to such plans. Under ERISA, any
person who exercises any authority or control respecting the management or
disposition of the assets of a plan is considered to be a fiduciary of such plan
(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.
Plan fiduciaries must determine whether the acquisition and holding of the
Certificates and the operations of the Trust would result in direct or indirect
prohibited transactions under ERISA and the Code. The operations of the Trust
could result in prohibited transactions if Benefit Plans (as defined below) that
purchase the Certificates of a Series are deemed to own an interest in the
underlying assets of the Trust. There may also be an improper delegation of the
responsibility to manage Benefit Plan assets if Benefit Plans that purchase the
Certificates are deemed to own an interest in the underlying assets of the
Trust.
Purusant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of an employee benefit plan subject to ERISA or the Code, or an
individual retirement Benefit Plans"), the assets and properties of certain
entities in which a Benefit Plan makes an equity investment could be deemed to
be assets of the Benefit Plan in certain circumstances. Accordingly, if Benefit
Plans purchase Certificates, the Trust could be deemed to hold plan assets
unless one of the exceptions under the Final Regulation is applicable to the
Trust.
The Final Regulation only applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that interests in Certificates are
equity interests, the Final Regulation contains an exception that provides that
if a Benefit Plan acquires a "publicly-offered security," the issuer of the
security is not deemed to hold plan assets. A publicly-offered security is a
security that is (i) freely transferable, (ii) part of a class of securities
that is owned by 100 or more investors independent of the issuer and of one
another and (iii) either is (A) part of a class of securities registered under
Section 12(b) or 12(g) of the Exchange Act or (B) sold to the plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Act and the class of securities of which such security is a
part is registered under the Exchange Act within 120 days (or such later time as
may be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred. In
addition, the Final Regulation provides that if at all times more than 75% of
the value of all classes of equity interests in Certificates are held by
investors other than benefit plan investors (which is defined as including plans
subject to ERISA, government plans and IRAs), the investing plan's assets will
not include any of the underlying assets of the applicable Trust.
There are no restrictions imposed on the transfer of the Certificates
offered hereby, and the Certificates offered hereby will be sold as part of an
offering pursuant to an effective registration statement under the Securities
Act. Based on information provided by any underwriter, agent or dealer involved
in the distribution of the Certificates offered hereby, the Transferor will
notify the Trustee as to whether or not the Certificates of any Series (or if
there is more than one Class in a Series each Class) will be expected to be held
by at least 100 separately named persons at the conclusion of the offering. The
Transferor will not, however, determine whether there will, in fact, be at least
100 separately named persons or whether the 100-investor requirement of the
exception for publicly offered securities is satisfied as to the Certificates of
such Series (or Class). Prospective purchasers may obtain a copy of the
notification described in the second preceding sentence from the Trustee at its
Corporate Trust Department. If the Certificates in any Class are expected to be
held by at least 100 separately named persons at the conclusion of the offering,
those Certificates will be timely registered under the Exchange Act. For so long
as the Certificates continue to be registered under the Exchange Act, the Trust
will file with the Securities and Exchange Commission the periodic reports
required by the Exchange Act. [In addition, as long as Mellon Financial Markets,
Inc. makes a market in the Certificates, the Trust will file required periodic
reports.]
If interests in the Certificates fail to meet the criteria of
publicly-offered securities and the applicable Trust's assets are deemed to
include assets of Benefit Plans that are Certificateholders, transactions
involving the Trust and "parties in interest" or "disqualified persons" with
respect to such plans might be prohibited under Section 406 of ERISA and Section
4975 of the Code unless an exemption is applicable. The Transferor, Servicer,
Trustee or any underwriter of such Series may be considered to be a party in
interest, disqualified person or fiduciary with respect to an investing Benefit
Plan. Accordingly, an investment by a Benefit Plan in Certificates may be a
prohibited transaction under ERISA and the Code unless such investment is
subject to a PTE") 84-14 (Class Exemption for Plan Asset Transactions Determined
by Independent Qualified Professional Asset Managers), PTE 91-38 (Class
Exemption for PTE Certain Transactions Involving Bank Collective Investment
Funds), PTE 90-1 (Class Exemption for Certain Transactions Involving Insurance
Company Pooled Separate Accounts), PTE 95-60 (Class Exemption for Certain
Transactions Involving Insurance Company General Accounts) and PTE 96-23 (Class
Exemption for Plan Asset Transactions Determined by In-house Asset Managers).
There is no assurance that these exemptions, even if all of the conditions
specified therein are satisfied, or any other exemption will apply to all
transactions involving the Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN CONSIDERING THE
PURCHASE OF INTERESTS IN CERTIFICATES OF ANY SERIES SHOULD CONSULT THEIR OWN
COUNSEL AS TO WHETHER THE ASSETS OF THE TRUST WHICH ARE REPRESENTED BY SUCH
INTERESTS WOULD BE CONSIDERED PLAN ASSETS, AND WHETHER, UNDER THE GENERAL
FIDUCIARY STANDARDS OF INVESTMENT PRUDENCE AND DIVERSIFICATION, AN INVESTMENT IN
CERTIFICATES OF ANY SERIES IS APPROPRIATE FOR THE BENEFIT PLAN TAKING INTO
ACCOUNT THE OVERALL INVESTMENT POLICY OF THE BENEFIT PLAN AND THE COMPOSITION OF
THE BENEFIT PLAN'S INVESTMENT PORTFOLIO. In addition, fiduciaries should
consider the consequences that would apply if the Trust's assets were considered
plan assets, the applicability of exemptive relief from the prohibited
transaction rules and whether all conditions for such exemptive relief would be
satisfied.
In particular, insurance companies considering the purchase of Certificates
should consult their own benefits or other appropriate counsel with respect to
the United States Supreme Court's decision in John Hancock Mutual Life Insurance
Co. v. Harris Trust & Savings Bank, 114 S. Ct. 517 (1993) ("John John Hancock")
and the applicability of PTE 95-60. In John Hancock, the Supreme Court held that
assets held in an insurance company's general account may be deemed to be "plan
assets" under certain circumstances, however, PTE 95-60 may exempt some or all
of the transactions that could occur as the result of the acquisition and
holding of the Certificates by an insurance company general account from the
penalties normally associated with prohibited transactions. In 1996 Act") may
affect the acquisition of Certificates by insurance company general accounts.
Accordingly, investors should analyze whether John Hancock and PTE 95-60 or any
other exemption may have an impact with respect to their purchase of the
Certificates.
<PAGE>
UNDERWRITING
Underwriters"), the Transferor has agreed to sell to the Underwriters, and each
of the Underwriters has severally agreed to purchase, the principal amount of
the Certificates set forth opposite its name:
Class A Underwriters Principal Amount of
Class A Certificates
[ ]....................... $
Mellon Financial Markets, Inc.................... $
-
Total......................................... $
=
Class B Underwriters Principal Amount of
Class B Certificates
[ ]....................... $
Mellon Financial Markets, Inc.................... $
-
Total......................................... $
=
In the Class A Underwriting Agreement, the Class A Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the Class A Certificates offered hereby if any of the Class A Certificates
are purchased. In the Class B Underwriting Agreement, the Class B Underwriters
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the Class B Certificates offered hereby if any of the Class B
Certificates are purchased. The Underwriters have agreed to reimburse the
Transferor for certain expenses of the issuance and distribution of the
Certificates.
The Class A Underwriters propose initially to offer the Class A
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of _____% of the
principal amount of the Class A Certificates. The Class A Underwriters may
allow, and such dealers may reallow, concessions not in excess of _____% of the
principal amount of the Class A Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class A Underwriters.
The Class B Underwriters propose initially to offer the Class B
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of ______% of
the principal amount of the Class B Certificates. The Class B Underwriters may
allow, and such dealers may reallow, concessions not in excess of ______% of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class B Underwriters.
Each Underwriter has represented and agreed that (a) it has not offered or
sold and, prior to the expiry of the period of six months from the Closing Date,
will not offer or sell any Certificates to persons in the United Kingdom except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which do not constitute an offer
to the public in the United Kingdom for the purposes of the Public Offers of
Securities Regulations 1995, (b) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 of the United Kingdom
with respect to anything done by it in relation to the Certificates in, from or
otherwise involving the United Kingdom and (c) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issue of the Certificates to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 of the United Kingdom or is a person to
whom the document may otherwise lawfully be issued or passed on.
Mellon Financial Markets, Inc. is an affiliate of Mellon Bank, N.A.
The Transferor will indemnify the Underwriters against liabilities relating
to the adequacy of disclosure to investors, including under the Securities Act,
or contribute to payments the Underwriters may be required to make in respect
thereof.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Transferor and the Trust by Carl Krasik, Esq., Associate
General Counsel to Mellon Bank Corporation, Reed Smith Shaw & McClay,
Pittsburgh, Pennsylvania and Stroock & Stroock & Lavan, New York, New York. The
federal income tax matters described under "U.S. Federal Income Tax
Consequences" will be passed upon for the Transferor and the Trust by Stroock &
Stroock & Lavan, New York, New York. Stroock & Stroock & Lavan, New York, New
York will act as counsel for the Underwriters. Certain ERISA matters will be
passed upon for the Transferor and the Trust by Stroock & Stroock & Lavan, New
York, New York. At August 31, 1996, Mr. Krasik held options to purchase 5,950
shares of Mellon Bank Corporation common stock.
<PAGE>
INDEX OF TERMS
Page
1996 Act.................................................................. 85
Accumulation Period Length.................................................49
Actual Principal Receivables................................................7
Additional Receivables......................................................6
Adjusted Investor Interest.................................................10
AFCO........................................................................3
AFCO Acceptance ............................................................3
AFCO Credit.................................................................4
Agreement...................................................................5
Available Investor Principal Collections...................................14
Available Reserve Account Amount...........................................68
Base Rate..................................................................39
Benefit Plans .............................................................84
BIF .......................................................................55
Cede........................................................................3
Cedel.......................................................................4
Cedel Participants.........................................................44
Certificate Owner .........................................................79
Certificate Owners.........................................................28
Certificates ...............................................................3
Class A Additional Interest................................................11
Class A Adjusted Investor Interest.........................................10
Class A Available Funds....................................................11
Class A Certificates........................................................3
Class A Covered Amount.....................................................14
Class A Fixed Allocation...................................................10
Class A Floating Allocation................................................10
Class A Holders ............................................................5
Class A Investor Charge-Off................................................17
Class A Investor Default Amount............................................16
Class A Investor Interest...................................................8
Class A Monthly Interest...................................................11
Class A Monthly Principal..................................................48
Class A Principal Funding Investment Shortfall.............................14
Class A Rate................................................................2
Class A Required Amount....................................................16
Class A Scheduled Payment Date..............................................2
Class A Underwriters.......................................................86
Class A Underwriting Agreement.............................................86
Class B Certificates.......................................................3
Class B Additional Interest................................................12
Class B Available Funds....................................................12
Class B Back-up Servicing Fee..............................................71
Class B Fixed Allocation...................................................57
Class B Floating Allocation................................................57
Class B Holders ............................................................5
Class B Investor Charge-Off................................................18
Class B Investor Default Amount............................................66
Class B Investor Interest...................................................8
Class B Monthly Interest...................................................12
Class B Monthly Principal..................................................64
Class B Rate ...............................................................2
Class B Required Amount....................................................16
Class B Scheduled Payment Date..............................................2
Class B Servicing Fee......................................................71
Class B Underwriters.......................................................86
Class B Underwriting Agreement.............................................86
Closing Date ...............................................................2
Code ......................................................................22
Collateral Available Funds.................................................62
Collateral Charge-Off......................................................67
Collateral Default Amount..................................................66
Collateral Fixed Allocation................................................57
Collateral Floating Allocation.............................................57
Collateral Interest........................................................58
Collateral Interest Holder..................................................8
Collateral Interest Servicing Fee..........................................71
Collateral Monthly Interest................................................63
Collateral Monthly Principal...............................................64
Collateral Rate........................................................... 63
Commission .................................................................3
Controlled Accumulation Amount.............................................64
Controlled Accumulation Period.............................................13
Controlled Deposit Amount..................................................13
Cooperative............................................................... 45
Credit Enhancement..........................................................9
Default Amount.............................................................10
Depositories ..............................................................43
Discount Receivables........................................................7
Distribution Date ..........................................................2
DOL .......................................................................84
DTC........................................................................ 3
DTC Participants...........................................................43
Eligible Receivables........................................................6
Enhancement................................................................ 9
ERISA .....................................................................22
Euroclear...................................................................4
Euroclear Operator.........................................................45
Euroclear Participants.....................................................45
Excess Finance Charge Collections..........................................63
Excess Funding Account.....................................................55
Excess Spread .............................................................17
Exchange Act................................................................3
FASIT .....................................................................81
Final Regulation ..........................................................84
Finance Charge Account.....................................................55
Finance Charge Receivables..................................................7
Financed Premium Percentage................................................40
FIRREA ....................................................................24
Fixed Investor Percentage..................................................57
Floating Investor Percentage...............................................56
Foreign Investor ..........................................................82
Foreign Investors .........................................................82
Holders ....................................................................5
Identified Portfolio........................................................6
Indirect Participants......................................................43
Initial Collateral Interest................................................18
Interest Payment Date.......................................................2
Interest Period ...........................................................11
Investor Default Amount....................................................66
Investor Interest ..........................................................8
Investor Servicing Fee.....................................................71
IRA .......................................................................84
IRS .......................................................................79
John Hancock .............................................................85
LIBOR ......................................................................2
LIBOR Determination Date...................................................47
Loan Agreement ............................................................19
Minimum Aggregate Principal Receivables....................................70
Minimum Transferor Interest................................................70
Monthly Period ............................................................10
Moody's ...................................................................55
Net Servicing Fee Rate.....................................................71
New Issuances ..............................................................2
Notice of Financed Premium.................................................23
OID .......................................................................80
Originator .................................................................3
Originators ................................................................4
Permitted Investments......................................................14
Pooling and Servicing Agreement.............................................3
Portfolio Yield ...........................................................39
Principal Account .........................................................60
Principal Funding Account..................................................13
Principal Funding Account Balance..........................................38
Principal Funding Investment Proceeds......................................14
Principal Receivables.......................................................7
Principal Shortfalls.......................................................65
Principal Terms ...........................................................20
PTE .......................................................................85
Qualified Institution......................................................55
Rapid Amortization Period..................................................16
Rating Agency Condition....................................................65
Reallocated Class B Principal Collections..................................59
Reallocated Collateral Principal Collections...............................59
Reallocated Principal Collections..........................................59
Receivables.................................................................3
Receivables in Defaulted Accounts..........................................10
Receivables in Ineligible Accounts.........................................53
Receivables Purchase Agreement..............................................3
Record Date ...............................................................42
Reference Banks ...........................................................48
Registration Statement......................................................3
Removed Receivables........................................................54
Required Collateral Interest...............................................18
Required Reserve Account Amount............................................67
Reserve Account ...........................................................67
Reserve Account Funding Date...............................................67
Reset Date ................................................................58
Revolving Period ..........................................................13
SAIF ......................................................................55
Series .....................................................................5
Series 1996-1 Supplement....................................................5
Series 1996-1 Termination Date.............................................68
Series Supplement .........................................................20
Service Transfer ..........................................................73
Servicer ...................................................................3
Servicer Default ..........................................................73
Shared Principal Collections...............................................19
Special Tax Counsel........................................................79
Standard & Poor's .........................................................55
State Fund Refund .........................................................26
Tax Opinion ...............................................................20
Telerate Page 3750.........................................................48
Terms and Conditions.......................................................45
Transfer Date .............................................................13
Transferor .................................................................3
Transferor Interest.........................................................2
Transferor Percentage......................................................42
Trigger Event .............................................................23
Trust ......................................................................3
Trust Termination Date.....................................................69
Trustee ....................................................................3
UCC .......................................................................50
Underwriters ..............................................................86
Underwriting Agreement.....................................................86
Unearned Premium ..........................................................23
Variable Interest .........................................................58
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Mellon Bank
Premium Finance Loan Master Trust Asset Backed Certificates (the "Global
Securities") to be issued in Series from time to time (each, a "Series") will be
available only in book-entry form. Investors in the Global Securities may hold
such Global Securities through any of The Depository Trust Company ("DTC"),
Cedel or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary marke t trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system through the
respective Depositary to a DTC Participant. The seller will send instructions to
Cedel or Euroclear through a Cedel Participant or Euroclear Participant at least
one business day prior to settlement. In these cases, Cedel or Euroclear w ill
instruct the respective Depositary, as appropriate, to deliver Global Securities
to the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. The payment will then be reflected in the
account of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value (i.e., the trade fails), receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant s account would instead be valued
as of the actual settlement date. Finally, day traders that use Cedel or
Euroclear and that purchase Global Securities from DTC Participants for delivery
to Cedel Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At lease three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through Cedel or Euroclear for one day (until
the purchase side of the day trade is reflected in their Cedel or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their Cedel or
Euroclear account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of
the trade so that the value date for the purchase from the DTC
Participant is at least one day prior to the value date for the sale to
the Cedel Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisers for specific tax advice concerning their holding and disposing of the
Global Securities.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------- -----------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained or incorporated by reference in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Transferor or any agent or
Underwriter. This Prospectus does not constitute an offer or solicitation by MELLON BANK
anyone in any state in which such offer or solicitation is not authorized or in PREMIUM FINANCE LOAN
which the person making such offer or solicitation MASTER TRUST
is not qualified to do so or to anyone to whom it
is unlawful to make such offer or solicitation. $___________ Class A
Neither the delivery of this Prospectus nor any sale made hereunder shall, under Floating Rate
any circumstances, create any implication that there Asset Backed
has been no change in the affairs of the $_______________ Class A Transferor or Certificates, Series 1996-1
the Receivables since the date Floating Rate hereof or that the information
contained or Asset Backed incorporated by reference herein is correct as of
Certificates, Series 1996-1 any time subsequent to its date.
TABLE OF CONTENTS $___________ Class B
Prospectus Floating Rate
Asset Backed
Available Information........................ Certificates, Series 1996-1
Reports to Certificateholders................
Incorporation of Certain Documents by
Reference.................................. MELLON BANK, N.A.
Prospectus Summary........................... Transferor
Risk Factors.................................
Business of the Originators.................. AFCO Credit
The Receivables.............................. Corporation
Use of Proceeds.............................. AFCO Acceptance
Maturity Assumptions......................... Corporation
Description of the Certificates.............. Originators and Servicers
Description of the Receivables Purchase
Agreement..................................
Certain Legal Aspects of the Receivables.....
U.S. Federal Income Tax Consequences.........
State and Local Taxation.....................
ERISA Considerations.........................
Underwriting.................................
Legal Matters................................ PROSPECTUS
Index of Terms...............................
Annex I: Global Clearance, Settlement and
Tax Documentation Procedures...............
Until ___________ __, 199_, all dealers effecting Underwriters of the Class A
transactions in the Certificates, whether or not and Class B Certificates
participating in this distribution, may be required to deliver a Prospectus. [ ]
This delivery requirement is in addition to the obligation of Mellon Financial Markets, Inc.
dealers to deliver a Prospectus when acting as
Underwriters and with respect to their unsold allotments or subscriptions.
- ---------------------------------------------------- -------------------------------------------
</TABLE>
<PAGE>
[ALTERNATE PAGE]
Prospectus Subject to Completion, dated _________, 1996
$----------------
Mellon Bank Premium Finance Loan Master Trust
$_______________ Class A Floating Rate Asset
Backed Certificates, Series 1996-1
$_______________ Class B Floating Rate Asset
Backed Certificates, Series 1996-1
Mellon Bank, N.A.
Transferor
AFCO Credit Corporation
AFCO Acceptance Corporation
Originators and Servicers
Each Class A Floating Rate Asset Backed Certificate, Series 1996-1
(collectively, the "Class A Certificates") and each Class B Floating Rate Asset
Backed Certificate, Series 1996-1 (collectively, the "Class B Certificates" and,
together with the Class A Certificates, the "Certificates") will represent the
right to receive certain payments from the Mellon Bank Premium Finance Loan
Master Trust (the "Trust"), created pursuant to a pooling and servicing
agreement (the "Pooling and Servicing Agreement") dated December 1, 1996 among
Mellon Bank, N.A., as transferor (the "Transferor"), AFCO Credit Corporation
("AFCO Credit"), as sservicer, AFCO Acceptance Corporation ("AFCO Acceptance"),
as servicer (and together with ARFCO Credit in their capacity as services, the
Servicer"), Premium Financing Specialists, Inc. ("PFSI") as back-up servicer,
____________, as back-up servicer (and together with PFSI, the "Back-up
Trustee"). The assets of the Trust will include (i) premium finance agreements
between either AFCO Credit or AFCO Acceptance (each in its capacity as an
Originator") and commercial borrowers to finance the payment of insurance
premiums on insurance and related sums regarding insurance policies under which
the borrowers are the insureds governed by the law of a State in the United
States of America or the District of Columbia, which loans are transferred from
time Receivables"); (ii) all monies due or to become due with respect to the
Receivables, including all monies received from insurance companies and state
insurance guaranty funds representing returns of unearned portions of insurance
premiums, up to the amount of principal, interest and other charges due on the
related Receivables; (iii) such amounts as may be from time to time held in one
or more trust accounts, which will be established and maintained by the Trustee
pursuant to the Agreement; (iv) any Enhancement issued with respect to any
Series; (v) all of the Transferor's rights under a receivables purchase
Receivables Purchase Agreement"), dated as of December 1, 1996, among the
Transferor and each Originator and (vi) the proceeds of all of the foregoing.
(Cover continued on next page)
There currently is no secondary market for the Certificates, and there is no
assurance that one will develop. Potential investors should consider, among
other things, the information set forth in "Risk Factors" commencing on page
____.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF MELLON BANK, N.A., ANY OF THE ORIGINATORS OR ANY
AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES
NOR THE UNDERLYING RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus is to be used by Mellon Financial Markets, Inc., an
affiliate of Mellon Bank, N.A., in connection with offers and sales related to
market-making transactions in the Certificates in which Mellon Financial
Markets, Inc. acts as principal. Mellon Financial Markets, Inc. may also act as
agent in such transactions. Sales will be made at prices related to the
prevailing prices at the time of sale.
--------------
MELLON FINANCIAL MAREKTS, INC.
December __, 1996
<PAGE>
(Cover continued from previous page)
In addition, the Collateral Interest will be issued to the Collateral Interest
Holder in the initial amount of $____ and will be subordinated to the
Certificates as described herein. The Transferor will also own the undivided
interest in the Trust not represented by the Certificates or other interests
Transferor Interest"). The Transferor may offer from time to time other Series
of certificates which evidence fractional undivided interests in certain New
Issuances." st, which may have terms significantly different from the
Certificates. See "Description of the Certificates--New Issuances."
Interest will accrue, subject to certain limitations described herein, on
the Class A Certificates from December , 1996 (the Closing Date") through but
excluding March 17, 1997 at a rate of __% per annum and during each Interest
Period (as defined herein) thereafter, at the rate of Class A Rate. Interest
will accrue, subject to certain limitations described herein, on the Class B
Certificates from the Closing Date through but excluding March 17, 1997 at a
rate of ___% per annum and during each Interest Period thereafter, at the rate
of _____% per annum above LIBOR prevailing on the LIBOR Class B Rate. The
initial LIBOR Determination Date is March 13, 1997. Interest with respect to the
Certificates will be distributed quarterly on the 15th day of March, June,
September and December (or, if such 15th day is not a business day, the next
business day) and on the Class B Scheduled Payment Date (defined Distribution
Date and ending on the related maturity date or, under certain limited
circumstances described herein, monthly, on or about the 15th day of each
calendar month. Principal on the Class A Certificates is scheduled to be
distributed on the ________ ____ Distribution Date (the "Class A Scheduled
Payment Class A Scheduled Payment Date"), but may be paid earlier or later under
the circumstances described herein. Principal on the Class B Certificates is
Class B Scheduled Payment Date"), but may be paid earlier or later under the
circumstances described herein. See "Maturity Assumptions."
The Class B Certificates will be subordinated to the Class A Certificates
and the Collateral Interest will be subordinated to the Class A Certificates and
the Class B Certificates, as described herein.
No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus, and if given or made, such information or representation must
not be relied upon as having been authorized by the Seller or by the
Underwriter. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy by any person in any jurisdiction in which it is
unlawful for such person to make such an offering or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances imply that the information herein is correct as of any date
subsequent to the date hereof.
<PAGE>
[ALTERNATE PAGE]
UNDERWRITING
This Prospectus is to be used by Mellon Financial Markets, Inc., an
affiliate of Mellon Bank, N.A., in connection with offers and sales related to
market-making transactions in the Certificates in which Mellon Financial
Markets, Inc. acts as principal. Mellon Financial Markets, Inc. may also act as
agent in such transactions. Sales will be made at prices related to the
prevailing prices at the time of sale. Any obligations of Mellon Financial
Markets, Inc. are the sole obligations of Mellon Financial Markets, Inc., and do
not create any obligations on the part of any affiliate of Mellon Financial
Markets, Inc.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will
be passed upon for the Transferor and the Trust by Carl Krasik, Esq., Associate
General Counsel to Mellon Bank Corporation, Reed Smith Shaw & McClay,
Pittsburgh, Pennsylvania and Stroock & Stroock & Lavan, New York, New York. The
federal income tax matters described under "U.S. Federal Income Tax
Consequences" will be passed upon for the Transferor and the Trust by Stroock &
Stroock & Lavan, New York, New York. Stroock & Stroock & Lavan, New York, New
York will act as counsel for the Underwriters. Certain ERISA matters will be
passed upon for the Transferor and the Trust by Stroock & Stroock & Lavan, New
York, New York. At August 31, 1996, Mr. Krasik held options to purchase 5,950
shares of Mellon Bank Corporation common stock.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------- --------------------------------------------
- ---------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained or incorporated by reference in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Transferor or any agent or
Underwriter. This Prospectus does not constitute an offer or solicitation by
anyone in any state in which such
offer or solicitation is not authorized or in MELLON BANK
which the person making such offer or solicitation PREMIUM FINANCE LOAN
is not qualified to do so or to anyone to whom it MASTER TRUST
is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create any implication that there $_______________ Class A
has been no change in the affairs of the Floating Rate
Transferor or the Receivables since the date Asset Backed
hereof or that the information contained or Certificates, Series 1996-1
incorporated by reference herein is correct as of
any time subsequent to its date.
- --------------------------------------------------- $_______________ Class B
Floating Rate
TABLE OF CONTENTS Asset Backed
Prospectus Certificates, Series 1996-1
Available Information........................
Reports to Certificateholders................ MELLON BANK, N.A.
Incorporation of Certain Documents by Transferor
Reference..................................
Prospectus Summary........................... AFCO Credit
Risk Factors................................. Corporation
Business of the Originators.................. AFCO Acceptance
The Receivables.............................. Corporation
Use of Proceeds.............................. Originators and Servicers
Maturity Assumptions.........................
Description of the Certificates..............
Description of the Receivables Purchase
Agreement..................................
Certain Legal Aspects of the Receivables.....
U.S. Federal Income Tax Consequences.........
State and Local Taxation.....................
ERISA Considerations......................... PROSPECTUS
Underwriting.................................
Legal Matters................................
Index of Terms...............................
Annex I: Global Clearance, Settlement and
Tax Documentation Procedures............... Mellon Financial Markets, Inc.
Until ___________ __, 199_, all dealers effecting
transactions in the Certificates, whether or not
participating in this distribution, may be
required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of
dealers to deliver a Prospectus when acting as
Underwriters and with respect to their unsold allotments or subscriptions.
- ---------------------------------------------------- -----------------------------------------------
</TABLE>
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
SEC Registration Fee...........................................$
Printing and Engraving..........................................
Trustee's Fees..................................................
Legal Fees and Expenses.........................................
Blue Sky Fees and Expenses......................................
Accountants' Fees and Expenses..................................
Rating Agency Fees..............................................
Miscellaneous Fees..............................................
Total...........................................................
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Seventh of the Articles of Association of the registrant
provides as follows:
To the fullest extent that the laws of the Commonwealth of
Pennsylvania, as in effect on January 27, 1987 or as thereafter amended, permit
elimination or limitation of the liability of directors, no Director of the
Association shall be personally liable for monetary damages as such for any
action taken, or any failure to take any action as a Director.
This Article Seventh shall not apply to any administrative proceeding
or action instituted by an appropriate bank regulatory agency which proceeding
or action results in a final order assessing civil money penalties or requiring
affirmative action by the Director in the form of making payments to the
Association.
This Article Seventh shall not apply to any actions filed prior to
January 27, 1987, nor to any breach of performance of duty or any failure of
performance of duty by any Director of the Association occurring prior to
January 27, 1987. The provisions of this Article shall be deemed to be a
contract with each Director of the Association who serves as such at any time
while this Section is in effect and each such Director shall be deemed to be
doing so in reliance on the provisions of this Article. Any amendment or repeal
of this Article or adoption of any other provision of the Articles or By-Laws of
the Association which has the effect of increasing Director liability shall
operate prospectively only and shall not affect any action taken, or any failure
to act, prior to the adoption of such amendment, repeal or other provision.
Article Eighth of the Articles of Association of the registrant
provides as follows:
SECTION I. RIGHT TO INDEMNIFICATION. Except as prohibited by law, every
Director and officer of the Association shall be entitled as of right to be
indemnified by the Association against expenses and any liability paid or
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal , administrative, investigative or
other, whether brought by or in the right of the Association or otherwise, in
which he or she may be involved, as a party or otherwise, by reason of such
person being or having been a Director or officer of the Association or by
reason of the fact that such person is or was serving at the request of the
Association as a director, officer, employee, fiduciary or other representative
of another corporation, partnership, joint venture, trust, employee benefit plan
or other entity (such claim, action, suit or proceeding hereinafter being
referred to as "Action"); provided, that no such right of indemnification shall
exist with respect to an Action brought by an indemnitee (as hereinafter
defined) against the Association except as provided in the last sentence of this
Section I. Persons who are not directors or officers of the Association may be
similarly indemnified in respect of service to the Association or to another
such entity at the request of the Association to the extent the Board of
Directors at any time denominates any of such persons as entitled to the
benefits of this Article. As used in this Article, "indemnitee" shall include
each Director and officer of the Association and each other person denominated
by the Board of Directors as entitled to the benefits of this Article,
"expenses" shall include fees and expenses of counsel selected by any such
indemnitee and "liability" shall include amounts of judgments, excise taxes,
fines, penalties and amounts paid in settlement. An indemnitee shall be entitled
to be indemnified pursuant to this Section I for expenses incurred in connection
with any Action brought by an indemnitee against the Association only if (i) the
Action is a claim for indemnity or expenses under Section III of this Article or
otherwise, (ii) the indemnitee is successful in whole or in part in the Action
for which expenses are claimed or (iii) the indemnification for expenses is
included in a settlement of the Action or is awarded by a court.
SECTION II. RIGHT TO ADVANCEMENT OF EXPENSES. Every indemnitee shall be
entitled as of right to have his or her expenses in any Action (other than an
Action brought by such indemnitee against the Association) paid in advance by
the Association prior to final disposition of such Action, subject to any
obligation which may be imposed by law or by provision in the Articles, By-Laws,
agreement or otherwise to reimburse the Association in certain events.
SECTION III. RIGHT OF INDEMNITEE TO INITIATE ACTION. If a written claim
under Section I or Section II of this Article is not paid in full by the
Association within thirty days after such claim has been received by the
Association, the indemnitee may at any time thereafter initiate an Action
against the Association to recover the unpaid amount of the claim and, if
successful in whole or in part, the indemnitee shall also be entitled to be paid
the expense of prosecuting such Action. It shall be a defense to any Action to
recover a claim under Section I that the indemnitee's conduct was such that
under Pennsylvania law the Association is prohibited from indemnifying the
indemnitee for the amount claimed, but the burden of proving such defense shall
be on the Association. Neither the failure of the Association (including its
Board of Directors, independent legal counsel and its shareholders) to have made
a determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances, nor an actual determination by
the Association (including its Board of Directors, independent legal counsel or
its shareholders) that the indemnitee's conduct was such that indemnification is
prohibited by law, shall be a defense to such Action or create a presumption
that the indemnitee's conduct was such that indemnification is prohibited by
law. The only defense to any such Action to receive payment of expenses in
advance under Section II of this Section shall be failure to make an undertaking
to reimburse if such an undertaking is required by law or by provision in the
Articles, By-Laws, agreement or otherwise.
SECTION IV. INSURANCE AND FUNDING. The Association may purchase and
maintain insurance to protect itself and any person eligible to be indemnified
hereunder against any liability or expense asserted or incurred by such person
in connection with any Action, whether or not the Association would have the
power to indemnify such person against such liability or expense by law or under
the provisions of this Article. The Association may create a trust fund, grant a
security interest, cause a letter of credit to be issued or use other means
(whether or not similar to the foregoing) to ensure the payment of such sums as
may become necessary to effect indemnification as provided herein.
SECTION V. NON-EXCLUSIVITY: NATURE AND EXTENT OF RIGHTS. The rights of
indemnification and advancement of expenses provided for in this Article (i)
shall not be deemed exclusive of any other rights, whether now existing or
hereafter created, to which any indemnitee may be entitled under any agreement
or by-law, charter provision, vote of shareholders or directors or otherwise,
(ii) shall be deemed to create contractual rights in favor of each indemnitee,
(iii) shall continue as to each person who has ceased to have the status
pursuant to which he or she was entitled or was denominated as entitled to
indemnification hereunder and shall inure to the benefit of the heirs and legal
representatives of each indemnitee and (iv) shall be applicable to Actions
commenced after the adoption hereof, whether arising from acts or omissions
occurring before or after the adoption hereof. The rights of indemnification
provided for in this Article may not be amended or repealed so as to limit in
any way the indemnification or the right to advancement of expenses provided for
herein with respect to any acts or omissions occurring prior to the adoption of
any such amendment or repeal.
SECTION VI. EFFECTIVE DATE. This Article Eighth shall apply to every
Action other than an Action filed prior to January 27, 1987, except that it
shall not apply to the extent that Pennsylvania law prohibits its application to
any breach of performance of duty or any failure of performance of duty by an
indemnitee occurring prior to January 27, 1987.
SECTION VII. REGULATORY EXCLUSION. Nothing in this Article shall
authorize the Association to indemnify or to provide insurance which would
indemnify any person against expenses or penalties incurred in an administrative
proceeding or action instituted by an appropriate bank regulatory agency which
proceeding or action results in a final order assessing civil money penalties,
and nothing in this Article shall authorize the Association to indemnify any
person against expenses or payments incurred in such an administrative
proceeding or action which results in a final order requiring affirmative action
by such person in the form of payment to the Association.
Article Two of the By-Laws of the registrant provides as follows:
SECTION 12. PERSONAL LIABILITY FOR MONETARY DAMAGES. (a) To the fullest
extent that the laws of the Commonwealth of Pennsylvania, as in effect on
January 27, 1987 or as thereafter amended, permit elimination or limitation of
the liability of directors, no Director of the Association shall be personally
liable for monetary damages as such for any action taken, or any failure to take
any action, as a Director.
(b) This Section 12 shall not apply to any administrative proceeding or
action instituted by an appropriate bank regulatory agency which proceeding or
action results in a final order assessing civil money penalties or requiring
affirmative action by the Director in the form of making payments to the
Association.
(c) This Section 12 shall not apply to any actions filed prior to
January 27, 1987, nor to any breach of performance of duty or any failure of
performance of duty by any Director of the Association occurring prior to
January 27, 1987. The provisions of this Section shall be deemed to be a
contract with each Director of the Association who serves as such at any time
while this Section is in effect and each such Director shall be deemed to be
doing so in reliance on the provisions of this Section. Any amendment repeal of
this Section or adoption of any other provision of the By-Laws or the Articles
of the Association which has the effect of increasing Director liability shall
operate prospectively only and shall not affect any action taken, or any failure
to act, prior to the adoption of such amendment, repeal or other provision.
<PAGE>
ITEM 16. EXHIBITS
1.1 Forms of Underwriting Agreements.
3.1 Articles of Association (both current and revised).
3.2 By-Laws.
4.1 Form of Pooling and Servicing Agreement.
4.2 Form of Series 1996-1 Supplement.
4.3 Form of Receivables Purchase Agreement.
5.1 Opinion of Stroock & Stroock & Lavan with respect to legality.
8.1 Opinion of Stroock & Stroock & Lavan with respect to tax
matters (included in opinion filed as Exhibit 5.1).
10.1 Form of Premium Finance Loan Agreements.
23.1 Consent of Stroock & Stroock & Lavan (included in opinion
filed as Exhibit 5.1).
24.1 Power of Attorney.**
- ---------------
** Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; (iii) 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; provided, however, that (a)(i) and
(a)(ii) will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, 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) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(e) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) That, for purposes of determining any liability under the
Securities Act of 1933, 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)(i) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this Registration Statement as of the time it was declared effective.
(g) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
<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 Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pittsburgh, Commonwealth of
Pennsylvania, on November 29, 1996.
MELLON BANK, N.A.
as originator of the Trust and
registrant
By: /s/ Frank V. Cahouet
Frank V. Cahouet
Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed on November 29, 1996 by
the following persons in the capacities indicated.
Signature Title
By: /s/ Frank V. Cahouet Chairman, President and Chief
Frank V. Cahouet Executive Officer
Principal Financial Officer and
Principal Accounting Officer:
By: /s/ Steven G. Elliott Vice Chairman and Chief
Steven G. Elliott Financial Officer
Board of Directors:
By: Director
*
Dwight L. Allison, Jr.
By: Director
*
Burton C. Borgelt
By: Director
*
Carol R. Brown
By: Director
*
J.W. Connolly
By: Director
*
Charles A. Corry
By: Director
*
C. Frederick Fetterolf
By: Director
*
Ira J. Gumberg
By: Director
*
Pemberton Hutchinson
By: Director
*
Rotan E. Lee
By: Director
*
Andrew W. Mathieson
By: Director
*
Edward J. McAniff
By: Director
*
Robert Mehrabian
By: Director
*
Seward Prosser Mellon
By: Director
*
David S. Shapira
By: Director
*
W. Keith Smith
By: Director
*
Joab L. Thomas
By: Director
*
Wesley W. von Schack
By: Director
*
William J. Young
*By: /s/ Carl Krasik
Carl Krasik
Attorney-in-fact
November 29, 1996
$-------------
MELLON BANK PREMIUM FINANCE LOAN MASTER TRUST
CLASS A FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1996-1
CLASS A UNDERWRITING AGREEMENT
____________________, 1996
CS FIRST BOSTON CORPORATION
as Representative of the
Several Underwriters
55 East 52nd Street
Park Avenue Plaza
New York, New York 10055
Ladies and Gentlemen:
Section 1. Introductory. AFCO Credit Corporation, a New York
corporation ("AFCO Credit"), and AFCO Acceptance Corporation, a California
corporation ("AFCO Acceptance" and together with AFCO Credit in their capacity
as servicer, the "Servicer" and in their capacity as originators, the
"Originators") propose to convey the Receivables arising from certain insurance
premium finance loans to Mellon Bank, N.A., a national banking association
organized under the laws of the United States of America (the "Transferor"). The
Transferor proposes to convey such Receivables and other rights to the Mellon
Bank Premium Finance Loan Master Trust (the "Trust"), and proposes to cause the
Trust to sell to the Underwriters named in Schedule I hereto (the
"Underwriters"), for whom you are acting as representative (the
"Representative"), $_____________ aggregate initial principal amount of Class A
Floating Rate Asset Backed Certificates, Series 1996-1 (the "Class A
Certificates"), in the Trust, the terms of which are described in the Prospectus
(as defined below). It is understood that Transferor is currently entering into
a Class B Underwriting Agreement dated the date hereof (the "Class B
Underwriting Agreement") among the Transferor and the Underwriters named on
Schedule I thereto (the "Class B Underwriters") providing for the sale of
$____________ aggregate initial principal amount of Class B Floating Rate Asset
Backed Certificates, Series 1996-1 (the "Class B Certificates"). The Class A
Certificates and the Class B Certificates are referred to herein collectively as
the "Certificates." This Agreement and the Class B Underwriting Agreement are
referred to herein collectively as the "Underwriting Agreements."
The Receivables will be conveyed by the Originators to the Transferor
pursuant to the Receivables Purchase Agreement dated as of December 1, 1996 (the
"Receivables Purchase Agreement") between the Originators and the Transferor.
The Receivables will be conveyed by the Transferor to the Trust and the
Certificates will be issued pursuant to a Pooling and Servicing Agreement, dated
as of December 1, 1996 (the "P&S") among the Transferor, the Servicer, Premium
Financing Specialists, Inc., as back-up servicer (the "Back-up Servicer") and
The First National Bank of Chicago, as trustee (the "Trustee"), and the Series
1996-1 Supplement to the P&S, to be dated as of ___________, 1996 (the
"Supplement"), between the same parties. The P&S and the Supplement are referred
to herein collectively as the "Pooling and Servicing Agreement." In addition,
the Transferor, Servicer, [Back-up Servicer], Trustee and _____________ (the
"Collateral Interest Holder") will enter into a Loan Agreement to be dated as of
the Closing Date (the "Loan Agreement") pursuant to which the Collateral
Interest Holder will acquire _____________ aggregate initial principal amount of
the Collateral Interest (the "Collateral Interest"), which will act as Credit
Enhancement for the Certificates.
Capitalized terms used herein (including in the Introductory hereto)
that are not otherwise defined shall have the meanings ascribed thereto in the
Pooling and Servicing Agreement.
Section 2. Representations and Warranties of Transferor. (a) Transferor
represents and warrants to, and agrees with, each Underwriter as set forth in
this Section 2. Certain terms used in this Section 2 are defined in paragraph
(i) below.
(i) Transferor meets the requirements for use of Form S-3
under the Securities Act and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (Registration
No. 333-11961, including a related preliminary prospectus, on such Form
for the registration under the Securities Act, of the Certificates.
Transferor may have filed one or more amendments thereto, including the
related preliminary prospectus, each of which has previously been
furnished to the Representative. Transferor will next file with the
Commission (A) prior to the effectiveness of such registration
statement, a further amendment thereto (including the form of final
prospectus relating to the Class A Certificates) or (B) after
effectiveness of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b)(1) or (4) under the Securities
Act. In the case of clause (B), Transferor has included in such
registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the
Securities Act and the rules thereunder to be included in the
Prospectus with respect to the Class A Certificates and the offering
thereof. As filed, such amendment and form of final prospectus shall
include all Rule 430A Information, together with all other such
required information, with respect to the Class A Certificates and the
offering thereof and, except to the extent the Underwriters shall agree
in writing to a modification, shall be in all substantive respects in
the form furnished to the Representative prior to the Execution Time
or, to the extent not completed at the Execution Time, shall contain
only such specific additional information and other changes (beyond
that contained in the latest preliminary prospectus which has
previously been furnished to the Representative) as Transferor has
advised the Representative, prior to the Execution Time, will be
included or made therein. If the Registration Statement contains the
undertakings specified by item 512(a) of Regulation S-K, the
Registration Statement, at the Execution Time, meets the requirements
set forth in Rule 415(a)(1)(x).
The terms that follow, when used in this Agreement, have the
meanings indicated. The term "Effective Date" means each date that the
Registration Statement and any post-effective amendment or amendments
thereto became or become effective. "Execution Time" means the date and
time that this Agreement is executed and delivered by the parties
hereto. "Preliminary Prospectus" means any preliminary prospectus
referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement which, at the Effective Date,
omits Rule 430A Information. "Prospectus" means the form of prospectus
relating to the Class A Certificates that is first filed with the
Commission pursuant to Rule 424(b) or, if no filing pursuant to Rule
424(b) is required, means the prospectus relating to the Class A
Certificates included in the Registration Statement at the Effective
Date. "Registration Statement" means the registration statement
referred to in the preceding paragraph and any registration statement
required to be filed under the Securities Act or rules thereunder,
including incorporated documents, exhibits and financial statements, in
the form in which it has or shall become effective and, in the event
any post-effective amendment thereto becomes effective prior to the
Closing Date, shall also mean such registration statement as so
amended. Such term shall include Rule 430A Information deemed to be
included therein at the Effective Date as provided by Rule 430A. "Rule
424," "Rule 430A," "Rule 415" and "Regulation S-K" refer to such rules
or regulations under the Securities Act. "Rule 430A Information" means
information with respect to the Class A Certificates and the offering
thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. [Any reference herein to the
Registration Statement, or the Prospectus shall be deemed to refer to
and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 which were filed under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), on or before the Effective
Date of the Registration Statement or the issue date of the Prospectus,
as the case may be; and] any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement
or Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date of the
Registration Statement, or the issue date of the Prospectus, as the
case may be, deemed to be incorporated therein by reference.
(ii) On the Effective Date, the Registration Statement did or
will comply in all material respects with the applicable requirements
of the Securities Act and the rules thereunder; on the Effective Date
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date, the Prospectus (as amended and
together with any supplements thereto) did or will comply in all
material respects with the applicable requirements of the Securities
Act and the rules thereunder; on the Effective Date, the Registration
Statement did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date of any
filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus
(as amended and together with any supplements thereto) will not,
include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that Transferor makes no representations or
warranties as to the information contained in or omitted from the
Registration Statement or the Prospectus (or any supplements thereto)
in reliance upon and in conformity with information furnished in
writing to Transferor by any Underwriter specifically for use in
connection with the preparation of the Registration Statement or the
Prospectus (or any supplements thereto).
(iii) Transferor is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States, and has all requisite power, authority and legal right
to own its properties and conduct its business as described in the
Registration Statement and the Prospectus and to execute, deliver and
perform the Underwriting Agreements, the Pooling and Servicing
Agreement, the Receivables Purchase Agreement and the Loan Agreement
(collectively the "Specified Agreements"), to authorize the issuance of
the Certificates and the Collateral Interest and to consummate the
transactions contemplated hereby.
(iv) Transferor is duly qualified to do business and is in
good standing (or is exempt from such requirement) in any state
required in order to conduct its business, and has obtained all
necessary licenses and approvals with respect to Transferor required
under Federal and Pennsylvania law.
(v) The execution, delivery and performance by Transferor of
the Specified Agreements, the issuance of the Certificates and the
Collateral Interest and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary action or proceedings.
(vi) This Agreement has been duly executed and delivered by
Transferor.
(vii) Transferor has authorized the conveyance of the
Receivables to the Trust, and Transferor has authorized the Trust to
issue and sell the Certificates and the Collateral Interest.
(viii) The execution, delivery and performance by Transferor
of the Specified Agreements, the issuance of the Certificates and the
Collateral Interest and the fulfillment of the terms hereof and thereof
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time
or both) a default under, or (other than the Lien of the Pooling and
Servicing Agreement) result in the creation or imposition of any Lien
under any material indenture, contract, agreement, mortgage, deed of
trust or other instrument to which Transferor is a party or by which it
or any of its properties are bound.
(ix) The execution, delivery and performance by Transferor of
the Specified Agreements, the issuance of the Certificates and the
Collateral Interest and the fulfillment of the terms hereof and
thereof, will not conflict with or violate any Requirements of Law
applicable to Transferor.
(x) There are no proceedings or investigations pending or, to
the best knowledge of Transferor, threatened against Transferor before
any court, regulatory body, administrative agency, arbitrator or other
tribunal or governmental instrumentality (A) asserting the invalidity
of any Specified Agreement or the Certificates or the Collateral
Interest, (B) seeking to prevent the issuance of the Certificates or
the Collateral Interest or the consummation of any of the transactions
contemplated by the Specified Agreements, (C) seeking any determination
or ruling that, in the reasonable judgment of Transferor, would
materially and adversely affect the performance by Transferor of its
obligations under any Specified Agreement, (D) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of any Specified Agreements or the
Certificates or the Collateral Interest, or (E) seeking to affect
adversely the income tax attributes of the Trust, as described in the
Prospectus under the heading "U.S. Federal Income Tax Consequences";
and there are no contracts or documents of Transferor that are required
to be filed as exhibits to the Registration Statement by the Securities
Act or by the rules and regulations of the Commissioner promulgated
under the Securities Act (the "Rules and Regulations") that have not
been so filed.
(xi) All approvals, authorizations, consents, orders and other
actions of any Person or of any governmental body or official required
in connection with the execution and delivery of the Specified
Agreements, the issuance of the Certificates and the Collatera1
Interest and the performance of the transactions contemplated hereby
and thereby and the fulfillment of the terms hereof and thereof, have
been obtained.
(xii) Transferor has delivered to the Representative complete
and correct copies of (A) publicly available portions of the
Consolidated Reports of Condition and Income of Transferor for the
years ended December 31, 1993, 1994 and 1995, as submitted to the
Comptroller of the Currency; and (B) the December 31, 1993, 1994 and
1995, audited consolidated balance sheets of Mellon Bank Corporation
which are included at page __ of Mellon Bank Corporation's 1994 and
1995 Annual Reports to Stockholders. Except as otherwise set forth
therein, (x) there has been no material adverse change in the condition
(financial or otherwise) of Transferor and (y) there have been no
transactions entered into by Transferor, other than those in the
ordinary course of its business, that are material with respect to
Transferor.
(xiii) Any taxes, fees and other governmental charges in
connection with the execution, delivery and performance of the
Specified Agreements and the Certificates and the Collateral Interest
shall have been paid by Transferor or will be paid by Transferor at or
prior to the Closing Date to the extent then due.
(xiv) The Certificates and the Collateral Interest have been
duly and validly authorized. The Certificates, when validly
authenticated, issued and delivered in accordance with the Pooling and
Servicing Agreement and sold to the Underwriters as provided herein and
to the Class B Underwriters pursuant to the Class B Underwriting
Agreement, will be duly and validly issued and outstanding and entitled
to the benefits of the Pooling and Servicing Agreement, and, together
with the Pooling and Servicing Agreement, the Loan Agreement and the
Collateral Interest will conform in all material respects to the
descriptions thereof and the statements in relation thereto contained
in the Prospectus.
(xv) Assuming the due authorization, execution and delivery
thereof by the other parties thereto, the Specified Agreements
constitute and the Certificates and the Collateral Interest, when
validly issued and, in the case of the Certificates, validly
authenticated and delivered in accordance with the Pooling and
Servicing Agreement and sold to the Underwriters as provided herein and
to the Class B Underwriters pursuant to the Class B Underwriting
Agreement will constitute, the legal, valid and binding agreement of
Transferor enforceable in accordance with its respective terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting enforcement
of creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(xvi) On the Closing Date, Transferor will have good and
marketable title to the Receivables and other property transferred by
it to the Trust pursuant to the Pooling and Servicing Agreement, free
and clear of Liens (other than the Lien of the Pooling and Servicing
Agreement), and will not have assigned to any Person (other than the
Trustee) any of its right, title or interest in any of such Receivables
or such other property or in the Pooling and Servicing Agreement, and
the Underwriters and the Class B Underwriters will have good and
marketable title to Certificates, free and clear of all Liens when
validly authenticated, issued and delivered in accordance with the
Pooling and Servicing Agreement and sold to the Underwriters as
provided herein and to the Class B Underwriters pursuant to the Class B
Underwriting Agreement.
(xvii) At the time of each transfer of Receivables by
Transferor to the Trust after the Closing Date, Transferor will have
good and marketable title to all Receivables and the other property
being transferred by it to the Trust on such day, free and clear of
Liens (other than the Lien of the Pooling and Servicing Agreement), and
will not have sold to any Person (other than the Trustee) any of its
right, title or interest in any of such Receivables or such other
property.
(xviii) Neither Transferor nor the Trust is an "investment
company" or "controlled" by an "investment company" as such terms are
defined in the Investment Company Act.
(xix) As of the Closing Date each of the representations and
warranties of Transferor deemed made pursuant to the Pooling and
Servicing Agreement will be true and correct, and, as of each other
date on which Transferor is deemed, pursuant to the terms of the
Pooling and Servicing Agreement, to make any of the representations and
warranties set forth therein, and in Officer's Certificates of
Transferor delivered on each such date pursuant to the Pooling and
Servicing Agreement, will be true and correct and the Underwriters may
rely on such representations and warranties as if they were set forth
herein in full.
(b) Any Officer's Certificate signed by any officer of Transferor and
delivered to the Representative or its counsel shall be deemed a representation
and warranty of Transferor to the Underwriters as to the matters covered
thereby.
Section 3. Purchase and Sale. On the basis of the representations,
warranties and agreements herein contained, but subject to the terms and
conditions herein set forth, Transferor agrees to cause the Trust to sell to
each Underwriter, and each Underwriter agrees, severally and not jointly, except
as set forth in Section 9 below, to purchase the respective initial principal
amount of Class A Certificates set forth opposite such Underwriter's name in
Schedule I hereto, at a purchase price of ______% of the aggregate principal
amount thereof.
The Class A Certificates will initially be represented by one or more
certificates representing $________, aggregate initial principal amount, each of
which will be registered in the name of Cede & Co., the nominee of The
Depository Trust Company ("DTC") (such certificates, the "DTC Certificates").
The interests of beneficial owners of the DTC Certificates will be represented
by book entries on the records of DTC and participating members thereof.
Definitive certificates evidencing the Class A Certificates will be available
only under the limited circumstances specified in the Pooling and Servicing
Agreement.
Delivery of the DTC Certificates shall be made to the accounts of the
several Underwriters at the office of DTC, 55 Water Street, 49th Floor, New
York, New York 10004, against payment by the several Underwriters of the
purchase price therefor to or upon the order of Transferor in immediately
available funds at the office of Stroock & Stroock & Lavan, New York, New York
at 10:00 a.m., New York time, on ______________, 1996, or at such other time not
later than seven full business days thereafter as Transferor and the
Underwriters determine, such time being herein referred to as the "Closing
Date". The certificates evidencing the DTC Certificates will be made available
for checking at the office of Stroock & Stroock & Lavan at Seven Hanover Square,
New York, New York 10004, at least 24 hours prior to the Closing Date.
Section 4. Offering by the Underwriters. (a) It is understood that the
Underwriters propose to offer the Class A Certificates for sale to the public as
set forth in the Prospectus.
(b) Each Underwriter agrees that if it is a foreign broker dealer not
eligible for membership in the National Association of Securities Dealers, Inc.
(the "NASD"), it will not effect any transaction in the Class A Certificates
within the United States or induce or attempt to induce the purchase of or sale
of the Class A Certificates within the United States, except that it shall be
permitted to make sales to other Underwriters or to its United States
affiliates; provided that such sales are made in compliance with an exemption of
certain foreign brokers or dealers under Rule 15a-6 under the Exchange Act and
in conformity with the Rules of Fair Practice of the NASD as such Rules apply to
non-NASD brokers or dealers.
(c) Each Underwriter represents and agrees that (i) it has not offered
or sold and, prior to the expiry of the period of six months from the Closing
Date, will not offer or sell any Class A Certificates to Persons in the United
Kingdom except to Persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of the
United Kingdom with respect to anything done by it in relation to the Class A
Certificates in, from or otherwise involving the United Kingdom; (iii) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issue of the Class A
Certificates to a Person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
of the United Kingdom or is a Person to whom the document may otherwise lawfully
be issued or passed on.
Section 5. Certain Agreements of Transferor. Transferor covenants and
agrees with the several Underwriters that:
(a) Transferor will use its best efforts to cause the Registration
Statement, and any amendment thereto, if not effective at the Execution Time, to
become effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Prospectus is otherwise required under
Rule 424(b), Transferor will file the Prospectus, properly completed, pursuant
to Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Underwriters of such timely filing. Transferor will promptly
advise the Underwriters (i) when the Registration Statement, and any amendment
thereto, shall have become effective, (ii) when the Prospectus, and any
supplement thereto, shall have been filed with the Commission pursuant to Rule
424(b), (iii) of any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for any additional
information, (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the institution or threat of
any proceeding for that purpose and (v) of the receipt by Transferor of any
notification with respect to the suspension of the qualification of the Class A
Certificates for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. Transferor will not file any amendment of the
Registration Statement or supplement to the Prospectus unless a copy has been
furnished to the Representative for its review prior to such filing. Transferor
will use its best efforts to prevent the issuance of any such stop order and, if
issued, to obtain as soon as possible the lifting thereof.
(b) If, at any time when a Prospectus relating to the Class A
Certificates is required to be delivered under the Securities Act, any event
occurs as a result of which such Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or if it shall be
necessary at any time to amend or supplement such Prospectus to comply with the
Securities Act or the Exchange Act or the Rules and Regulations thereunder,
Transferor promptly will prepare and file with the Commission an amendment or
supplement that will effect such compliance. Neither the consent of any
Underwriter to, nor the delivery by any Underwriter of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth in
Section 6 hereof.
(c) As soon as practicable, but not later than the Availability Date
(as defined below), Transferor will cause the Trustee to make generally
available to the Holders of the Class A Certificates and to the Representative
an earnings statement with respect to the Trust covering a period of at least 12
months beginning after the Effective Date that will satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 under the Securities Act. For
the purpose of the preceding sentence, "Availability Date" means the 45th day
after the end of the fourth fiscal quarter following the fiscal quarter that
includes the Effective Date, except that, if such fourth fiscal quarter is the
last quarter of Transferor's fiscal year, "Availability Date" means the 90th day
after the end of such fourth fiscal quarter.
(d) Transferor will furnish to the Underwriters copies of the
Registration Statement as originally filed and each amendment thereto (in each
case at least three of which will be signed and will include all exhibits), each
related Preliminary Prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as the Underwriters may reasonably request. Transferor will furnish
or cause to be furnished to the Representative copies of all reports on Form SR
required by Rule 463 under the Securities Act.
(e) Transferor will arrange for the qualification of the Class A
Certificates for sale under the laws of such jurisdictions in the United States
as the Underwriters may reasonably designate and will continue such
qualifications in effect so long as required for the distribution of the Class A
Certificates, provided that Transferor shall not be obligated to qualify to do
business nor become subject to service of process generally, but only to the
extent required for such qualification, in any jurisdiction in which it is not
currently so qualified, and will arrange for the determination of the legality
of the Class A Certificates for purchase by institutional investors.
(f) So long as any of the Class A Certificates are outstanding,
Transferor will deliver or cause to be delivered to the Underwriters (i) copies
of each report mailed to the Trustee or the Series 1996-1 Holders, as soon as
such report is mailed to the Trustee or such Holders, (ii) the annual statement
as to compliance and the annual statement of a firm of independent public
accountants furnished to the Trustee pursuant to Sections 3.5 and 3.6 of the
Pooling and Servicing Agreement, as soon as such statements are furnished to the
Trustee, (iii) copies of all documents required to be filed with the Commission
pursuant to the Exchange Act or any order of the Commission thereunder, and (iv)
such other information concerning Transferor, the Certificates or the Trust as
the Underwriters may reasonably request from time to time.
(g) Transferor will pay all expenses incident to the performance of its
obligations under this Agreement, including without limitation, (i) expenses of
preparing, printing, reproducing and distributing the Registration Statement and
each amendment thereto, the preliminary prospectuses, the Prospectus (including
any amendments and supplements thereto), the Receivables Purchase Agreement, the
Pooling and Servicing Agreement, the Loan Agreement and the Class A
Certificates, (ii) the fees and disbursements of the Trustee and its counsel,
(iii) the fees and disbursements of the independent public accountants of
Transferor and, to the extent previously agreed, fees and disbursements of
counsel to Transferor, (iv) the fees charged by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Service, a division of The McGraw Hill
Companies, Inc. ("Standard & Poor's" and together with Moody's, the "Rating
Agencies") in connection with the rating of the Class A Certificates and the
Collateral Interest, as applicable, (v) the fees of DTC in connection with the
book-entry registration of the DTC Certificate, (vi) to the extent previously
agreed, the fees and expenses of Stroock & Stroock & Lavan in its roles as
underwriters' counsel and (vii) expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto) to the Underwriters, and will reimburse the Underwriters for any
expenses (including reasonable fees and disbursements of counsel) incurred by
the Underwriters pursuant to Section 5(e) hereof in connection with the
qualification of the Class A Certificates for sale and determination of their
eligibility for investment under the laws of such jurisdictions in the United
States as the Underwriters may designate.
(h) On or before the Closing Date, Transferor shall cause its books and
records (including any computer records) to be marked relating to the
Receivables to be transferred to the Trust, to show the transfer to the Trust of
such Receivables, and from and after the Closing Date Transferor shall not take
any action inconsistent with the transfer to the Trust of such Receivables,
other than as permitted by the Pooling and Servicing Agreement.
(i) For a period of 30 days from the date hereof, none of Transferor or
any of its affiliates or any trust formed by it or any of its affiliates will,
without the prior written consent of the Underwriters, directly or indirectly,
offer, sell or contract to sell or announce the offering of, in a public or
private transaction, any other collateralized securities similar to the Class A
Certificates (other than the Class B Certificates and the Collateral Interest)
representing interests in insurance premium finance loans.
(j) So long as any Class A Certificates are outstanding, Transferor
will cause to be delivered to the Underwriters a reliance letter relating to
each Opinion of Counsel delivered to the Trustee or any Rating Agency by counsel
to Transferor pursuant to the Pooling and Servicing Agreement at the time such
opinion is delivered.
(k) To the extent, if any, that the rating provided with respect to the
Class A Certificates by any Rating Agency is conditional upon the furnishing of
documents or the taking of any other actions by Transferor, Transferor shall
furnish such documents and take any such other actions as may be required.
Section 6. Conditions of the Obligations of the Underwriters. The
obligation of the Underwriters to purchase and pay for the Class A Certificates
will be subject to the accuracy of the representations and warranties on the
part of Transferor herein as of the Execution Time and the Closing Date, to the
accuracy of the statements of the officers of the Originators and Transferor
made pursuant to the provisions hereof, to the performance by the Transferor of
their respective obligations hereunder and to the following additional
conditions precedent:
(a) (i) On the date of this Agreement, the Underwriters and Transferor
shall have received a letter, dated the date of delivery thereof (which, if the
Effective Time is prior to the execution and delivery of this Agreement, shall
be on or prior to the date of this Agreement or, if the Effective Time is
subsequent to the execution and delivery of this Agreement, shall be prior to
the filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to the Effective Time), of KPMG Peat Marwick
("Peat Marwick") confirming that they are independent public accountants within
the meaning of the Securities Act and the Rules and Regulations, substantially
in the form of the draft to which the Underwriters have previously agreed and
otherwise in form and substance satisfactory to the Underwriters and counsel for
the Underwriters, and (ii) on the Closing Date, the Underwriters and Transferor
shall have received a letter, dated as of the Closing Date, from Peat Marwick
updating the letter referred to in clause (i) above, in form and substance
satisfactory to the Underwriters and counsel for the Underwriters.
(b) If the Registration Statement has not become effective prior to the
Execution Time, unless the Underwriters agree in writing to a later time, the
Registration Statement shall have become effective not later than 10:00 a.m. New
York time on the date of this Agreement (or the next day, if this Agreement is
executed after the close of business on the date hereof); if filing of the
Prospectus, or any supplements thereto, is required pursuant to Rule 424(b), the
Prospectus shall have been filed in the manner and within the time period
required by Rule 424(b); and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
any of the Originators or Transferor which, in the judgment of the Underwriters
materially impairs the investment quality of the Class A Certificates; (ii) any
downgrading in the rating of any debt securities of Mellon Bank Corporation or
any of its direct or indirect subsidiaries by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Act), or any public announcement that any such organization has
under surveillance or review its rating of any such debt securities (other than
an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any suspension or
limitation of trading in securities generally on the New York Stock Exchange or
any setting of minimum prices for trading on such exchange, or any suspension of
trading of any securities of Transferor on any exchange or in the
over-the-counter market; (iv) any banking moratorium declared by Federal, New
York or Pennsylvania authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Underwriters, the effect of and such
outbreak, escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the Class
A Certificates.
(d) The Representative shall have received:
(1) The favorable opinion or opinions of internal counsel of
Transferor and/or of Reed Smith Shaw & McClay, counsel to Transferor,
dated the Closing Date and satisfactory in form and substance to the
Representative and its counsel, and in the aggregate substantially to
the effect that:
(i) Transferor has been duly organized as an
association licensed as a national banking association and is
validly existing and in good standing under the laws of the
United States, is duly qualified to do business and is in good
standing under the laws of each jurisdiction other than where
the failure to be so qualified would not have a material
adverse effect on Transferor's business, and has full
corporate power and authority to own its properties, to
conduct its business as described in the Registration
Statement and the Prospectus, to enter into and perform its
obligations under the Specified Agreements, to execute the
Certificates and to consummate the transactions contemplated
hereby and thereby;
(ii) each of the Specified Agreements and the
Certificates have each been duly authorized, executed and
delivered by Transferor;
(iii) neither the execution and delivery of the
Specified Agreements, nor the issuance or delivery of the
Certificates, nor the consummation of any of the transactions
contemplated herein or therein, nor the fulfillment of the
terms of the Certificates or the Specified Agreements, will
conflict with or violate, result in a material breach of or
constitute a default under (A) any Requirements of Law
applicable to Transferor or any statute or regulation
currently applicable to the Trust, (B) any term or provision
of any order known to such counsel to be currently applicable
to Transferor or the Trust of any court, regulatory body,
administrative agency or governmental body having jurisdiction
over Transferor or the Trust, as the case may be, or (C) any
term or provision of any indenture or other agreement or
instrument known to such counsel to which Transferor or the
Trust is a party or by which either of them or any of their
properties are bound;
(iv) except as otherwise disclosed in the Prospectus
(and any supplements thereto) or the Registration Statement,
there is no pending or, to the best knowledge of such counsel,
threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator with
respect to the Trust, the Certificates, the Specified
Agreements or any of the transactions contemplated herein or
therein or with respect to Transferor which, in the case of
any such action, suit or proceeding with respect to Transferor
if adversely determined, would have a material adverse effect
on the Certificates or the Trust or upon the ability of
Transferor to perform its obligations under the Pooling and
Servicing Agreement or the Loan Agreement; and the statements
included in the Registration Statement and the Prospectus (and
any amendments or supplements thereto) describing (A) legal
proceedings relating to Transferor and (B) the insurance
premium finance loan agreements in each case fairly summarize
the matters therein described;
(v) such counsel has no reason to believe that at the
Effective Date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (and
any amendments or supplements thereto as of the Closing Date)
includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading (other than financial and statistical
information contained therein as to which such counsel need
express no opinion) (such opinion may be limited to the
sections of the Prospectus under the headings ["Prospectus
Summary--Transferor," "Prospectus Summary--Servicer,"
"Maturity Assumptions," "Business of the Originators," and
"The Receivables"] and the parallel sections of the
Registration Statement and Exhibit ___ thereto; and
(vi) no approval, authorization, consent, order,
registration, filing, qualification, license or permit of or
with any court or governmental agency or body is required for
the consummation by Transferor or the Trust of the
transactions contemplated in the Specified Agreements, except
such as have been obtained under the Securities Act and such
as may be required under the blue sky laws of any jurisdiction
inside the United States in connection with the purchase and
distribution of the Class A Certificates by the Underwriters
and such filings or other approvals (specified in such
opinion) as have been made or obtained.
In rendering such opinion counsel may rely as to matters of
fact, to the extent deemed proper and as stated therein, on
certificates of responsible officers of the Trust, Transferor and
public officials. References to the Prospectus in this paragraph (d)
include any supplements thereto.
(2) The favorable opinion of Stroock & Stroock & Lavan,
counsel for the Underwriters, dated the Closing Date and to the effect
that:
(i) the Certificates, when executed, authenticated
and delivered as specified in the Pooling and Servicing
Agreement, and delivered against payment of the consideration
specified herein, will be duly and validly issued and
outstanding and entitled to the benefits of the Pooling and
Servicing Agreement;
(ii) each of the Receivables Purchase Agreement and
the Pooling and Servicing Agreement constitutes and the
Certificates, when validly issued and validly authenticated
and delivered in accordance with the Pooling and Servicing
Agreement and sold to the Underwriters as provided herein and
to the Class B Underwriters pursuant to the Class B
Underwriting Agreement, will constitute, the legal, valid and
binding agreement of Transferor, enforceable in accordance
with its terms (subject, as to enforcement or remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally from time
to time in effect and to the application of general principles
of equity);
(iii) the Loan Agreement constitutes the legal, valid
and binding agreement of Transferor, enforceable in accordance
with its terms (subject, as to enforcement or remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally from time
to time in effect and to the application of general principles
of equity);
(iv) the Registration Statement has become effective
under the Securities Act, and, to the best of their knowledge
and information, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or
contemplated under the Securities Act, and the Registration
Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the
requirements of the Securities Act and the Rules and
Regulations. Such counsel has no reason to believe that at the
Effective Date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (and
any supplements thereto as of the Closing Date) includes any
untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading (other than financial and statistical information
contained therein as to which such counsel need express no
opinion);
(v) the Certificates and the Pooling and Servicing
Agreement each conform in all material respects with the
description thereof contained in the Registration Statement
and the Prospectus;
(vi) the Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of
1939, as amended;
(vii) the Trust is not an "investment company" within
the meaning of the Investment Company Act;
(viii) the statements in the Registration Statement
under the heading "Certain Legal Aspects of the
Receivables-Transfer of Receivables", "U.S. Federal Income
Tax Consequences" and "ERISA Considerations" to the extent
that they constitute statements of matters of law or legal
conclusions with respect thereto, have been prepared or
reviewed by such counsel and are correct in all material
respects;
(ix) the Receivables constitute "general intangibles"
as defined in the Uniform Commercial Code in the State of
New York; and
(x) (x) the Certificates will properly be treated as
indebtedness for federal income tax purposes and (y) the Trust
will not be classified as an association or a publicly traded
partnership taxable as a corporation for federal income tax
purposes.
In rendering such opinion, Stroock & Stroock & Lavan may rely on the
opinions of Reed Smith Shaw & McClay and internal counsel to Transferor and
Originators, as to the matters dealt with in such opinions.
(3) The favorable opinion of Reed Smith Shaw & McClay, counsel to
Transferor, dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel, and substantially to
the effect that:
(i) the Receivables constitute "general intangibles" as
defined in the Uniform Commercial Code in effect in the
State of Pennsylvania;
(ii) Uniform Commercial Code financing statements
with respect to the Investor Interest in the Receivables and
the proceeds thereof have been filed in the office of the
Pennsylvania [Secretary of State]. No other filings or other
actions, with respect to the Trustee's interest in the
Receivables transferred and to be transferred by Transferor to
the Trust, are necessary to perfect the interest of the
Trustee in the Receivables, and the proceeds thereof, against
third parties, except that appropriate continuation statements
must be filed at five-year intervals;
(iii) in the event that a court were to conclude that
the assignment of the Receivables, all documents and
instruments relating thereto and all proceeds thereof to the
Trustee pursuant to the Pooling and Servicing Agreement was
not a sale, the Pooling and Servicing Agreement, together with
the filing of the financing statements referred to in
paragraph (v) above, create a first priority perfected
security interest in the Receivables transferred and to be
transferred by Transferor to the Trust, all documents and
instruments relating thereto and all proceeds thereof subject
to no prior Liens (in rendering such opinion counsel may take
such exceptions as are appropriate and reasonably acceptable
under the circumstances); and
(iv) the Certificates will properly be treated as
indebtedness for Pennsylvania state tax purposes.
(4) The favorable opinion or opinions of internal counsel of each
of the Originators and/or of Reed Smith Shaw & McClay, counsel to
Originators, dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel, and in the aggregate
substantially to the effect that:
(i) each of the Originators has been duly organized and
licensed as a corporation and is validly existing and in
good standing under the laws of New York and California,
respectively, is duly qualified to do business and is in
good standing under the laws of each jurisdiction where it
conducts its business other than where the failure to be so
qualified would not have a material adverse effect on
Originator's business, and has full corporate power and
authority to own its properties, to conduct its business as
described in the Registration Statement and the Prospectus,
to enter into and perform its obligations under the
Specified Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby;
(ii) each of the Specified Agreements to which it is a
party has been duly authorized, executed and delivered by
Transferor;
(iii) neither the execution and delivery of the
Specified Agreements to which it is a party, nor the
consummation of any of the transactions contemplated herein
or therein, nor the fulfillment of the terms of the
Specified Agreements, will conflict with or violate, result
in a material breach of or constitute a default under (A)
any Requirements of Law applicable to either of the
Originators or any statute or regulation currently
applicable, (B) any term or provision of any order known to
such counsel to be currently applicable to either of the
Originators of any court, regulatory body, administrative
agency or governmental body having jurisdiction over either
of the Originators, as the case may be, or (C) any term or
provision of any indenture or other agreement or instrument
known to such counsel to which either of the Originators is
a party or by which either of them or any of their
properties are bound;
(iv) except as otherwise disclosed in the Prospectus
(and any supplements thereto) or the Registration Statement,
there is no pending or, to the best knowledge of such
counsel, threatened action, suit or proceeding before any
court or governmental agency, authority or body or any
arbitrator with respect to the Specified Agreements to which
the Originators are a party or any of the transactions
contemplated herein or therein or with respect to the
Originators which, in the case of any such action, suit or
proceeding with respect to either of the Originators if
adversely determined, would have a material adverse effect
on the Certificates or the Trust or upon the ability of
either of the Originators to perform its obligations under
the Specified Agreements; and the statements included in the
Registration Statement, and the Prospectus (and any
supplements thereto) describing (A) legal proceedings
relating to the Originators and (B) the insurance premium
finance loan agreements, regulation of premium finance
companies and state insurance funds [other regulatory
matters?] in each case fairly summarize the matters therein
described;
(v) such counsel has no reason to believe that at the
Effective Date the Registration Statement contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading or that the
Prospectus (and any supplements thereto as of the Closing
Date) includes any untrue statement of a material fact or
omits to state a material fact necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading (other than financial
and statistical information contained therein as to which
such counsel need express no opinion) (such opinion may be
limited to the sections of the Prospectus under the headings
"Prospectus Summary -- Trust Assets," "Business of the
Originators," and "the Receivables;
(vi) no approval, authorization, consent, order,
registration, filing, qualification, license or permit of or
with any court or governmental agency or body is required
for the consummation by the Originators or the Trust of the
transactions contemplated in the Specified Agreements to
which the Originators are a party, except such as have been
obtained under the Securities Act and such as may be
required under the blue sky laws of any jurisdiction inside
the United States in connection with the purchase and
distribution of the Class A Certificates by the Underwriters
and such filings or other approvals (specified in such
opinion) as have been made or obtained; and
(vii) such counsel has been advised of the Originators'
standard operating procedures relating to the Originators'
acquisition of a perfected first priority security interest
in the unearned premiums securing the obligations of the
borrowers under insurance premium finance agreements
originated by Originators in the ordinary course of the
Originators' business. Assuming that the Originators'
standard operating procedures are followed with respect to
the perfection of security interests in the unearned
premiums relating to the Receivables (such counsel having no
reason to believe that the Originators has not or will not
continue to follow its standard operating procedures in
connection with the perfection of security interests in
unearned premiums), the Originator has acquired or will
acquire a perfected first priority security interest in the
unearned premiums relating to the Receivables.
In rendering such opinion counsel may rely as to matters of fact,
to the extent deemed proper and as stated therein, on certificates of
responsible officers of the Trust, Transferor and public officials.
References to the Prospectus in this paragraph (d) include any
supplements thereto.
(5) The favorable opinion or opinions of internal counsel of
Back-up Servicer and/or of Withrop & Gage, L.C., counsel to Back-up
Servicer, dated the Closing Date and satisfactory in form and substance
to the Representative and its counsel, and in the aggregate
substantially to the effect that:
(i) Back-up Servicer has been duly organized and
licensed as a corporation and is validly existing and in good
standing under the laws of _____________, is duly qualified to
do business and is in good standing under the laws of each
jurisdiction other than where the failure to be so qualified
would not have a material adverse effect on Back-up Servicer's
business, and has full corporate power and authority to own
its properties, to conduct its business as described in the
Registration Statement and the Prospectus, to enter into and
perform its obligations under the Pooling and Servicing
Agreement, and to consummate the transactions contemplated
hereby and thereby;
(ii) each of the Specified Agreements as to which it is
a party to have been duly authorized, executed and delivered
by Back-up Servicer;
(iii) the execution of the Pooling and Servicing
Agreement will not conflict with or violate, result in a
material breach of or constitute a default under (A) any
Requirements of Law applicable to Back-up Servicer, (B) any
term or provision of any order known to such counsel to be
currently applicable to Back-up Servicer of any court,
regulatory body, administrative agency or governmental body
having jurisdiction over Back-up Servicer, as the case may
be, or (C) any term or provision of any indenture or other
agreement or instrument known to such counsel to which
Back-up Servicer is a party or by which any of Back-up
Servicer's properties are bound;
(iv) assuming the laws of the State of __________ are
the same as the laws of the State of _____________, the
Pooling and Servicing Agreement constitutes the legal, valid
and binding obligation of the Back-up Servicer, enforceable
in accordance with its respective terms, except that (y) the
enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights and
(z) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought;
(6) Reliance letters relating to each opinion rendered to the
Trustee or any Rating Agency by Reed, Smith, Shaw & McClay or any other
counsel to Transferor in connection with the rating of the
Certificates.
(7) The favorable opinion of ____________________, counsel to
the Trustee, dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel to the effect that:
(i) The Trustee has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the United States of America with full power and
authority (corporate and other) to own its properties and
conduct its business, as presently conducted by it, and to
enter into and perform its obligations under the Specified
Agreements to which it is a party and to issue the
Certificates and the Collateral Interest;
(ii) each of the Specified Agreements to which it is a
party has been duly authorized, executed and delivered by
the Trustee;
(iii) assuming the laws of the State of Illinois are
the same as the laws of the State of New York, the Specified
Agreements to which it is a party constitute the legal,
valid and binding obligation of the Trustee, enforceable in
accordance with their respective terms, except that (y) the
enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights and
(z) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought;
(iv) the Certificates have been duly executed,
authenticated and delivered by the Trustee;
(v) neither the execution and delivery by the Trustee
of the Specified Agreements to which it is a party nor the
consummation of any of the transactions by the Trustee
contemplated thereby required the consent or approval of,
the giving of notice to, the registration with or the taking
of any other action with respect to, any governmental
authority or agency under any existing federal or state law
governing the banking or trust powers of the Trustee; and
(vi) the execution and delivery of the Specified
Agreements to which it is a party by the Trustee and the
performance by the Trustee of their respective terms do not
conflict with or result in a violation of (A) any law or
regulation of the United States of America or the State of
Illinois governing trust powers of the Trustee, (B) the
Articles of Association or By-Laws of the Trustee, or (C) to
the best of their knowledge, any indenture, lease, or other
material agreement to which the Trustee is a party or to
which its assets are subject.
(e) The Representative shall have received a certificate dated the Closing
Date of the President, any Vice President, the Treasurer or any Assistant
Treasurer, of Transferor in which such officer shall state that the
representations and warranties of Transferor in this Agreement are true and
correct, and that Transferor has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission, and subsequent to the date of
the most recent financial statements of Transferor delivered to the
Representative hereunder, there has been no material adverse change in the
condition, financial or otherwise, whether or not arising from transactions in
the ordinary course of business, of Transferor except as set forth in or
contemplated by the Registration Statement and the Prospectus.
(f) The Representative shall have received a certificate dated the Closing
Date of the President, any Vice President, the Treasurer or any Assistant
Treasurer, of each of the Originators in which such officer shall state that the
representations and warranties of each of the Originators in Specified
Agreements to which it is a party are true and correct, and that each of the
Originators has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing Date.
(g) The Class A Certificates shall be rated ["Aaa"] by Moody's and ["AAA"]
by Standard & Poor's, and the Class B Certificates shall be rated at least
["A2"] by Moody's and ["A"] by Standard & Poor's.
(h) The Representative shall have received evidence satisfactory to it and
its counsel that, on or before the Closing Date, UCC-1 financing statements have
been filed in the office of the Secretary of State of the State of New York and
the office of [the Secretary of State of the State of California] reflecting the
interest of the Transferor in the Receivables and the office of the [Secretary
of State] of Pennsylvania reflecting the interest of the Trust in the
Receivables and the proceeds thereof.
(i) The Representative and Transferor shall have received from counsel for
the Collateral Interest Holder reasonably acceptable to the Representative and
Transferor, the favorable opinion or opinions, dated the Closing Date and
satisfactory in form and substance to the Representative, its counsel,
Transferor and its counsel, and in the aggregate substantially to the effect
that:
(1) The Collateral Interest Holder is a corporation duly
organized and validly existing under the laws of the State of
___________ and has the corporate power and authority under the laws of
the State of ___________ to execute, deliver and perform its
obligations under the Loan Agreement;
(2) the Loan Agreement has been duly and validly authorized,
executed and delivered by the Collateral Interest Holder and
constitutes the legal, valid and legally binding obligation of the
Collateral Interest Holder enforceable against the Collateral Interest
Holder in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
liquidation, moratorium, readjustment of debt or other similar laws
affecting the enforcement of creditors' rights generally, as such laws
may be applied in the event of a bankruptcy, insolvency,
reorganization, liquidation, moratorium, readjustment of debt of, or
the appointment of a receiver with respect to the property of, or a
similar event applicable to the Collateral Interest Holder; and
(3) all consents, approvals, authorizations, licenses, rulings
or orders of or actions by any ___________ or federal governmental
authority and all filings, recordings or publications, if any, required
on the part of the Collateral Interest Holder in connection with the
execution, delivery or performance by the Collateral Interest Holder of
the Loan Agreement have been obtained or made and are in full force and
effect.
(j) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall not have been any
change, or any development involving a prospective change, in or affecting the
business or properties of the Trust any Originator or Transferor the effect of
which, in any case referred to above, is, in the judgment of the Underwriters,
so material and adverse as to make it impractical or inadvisable to proceed with
the offering or the delivery of the Class A Certificates as contemplated by the
Registration Statement and the Prospectus (and any supplements thereto).
(k) Each of the representations and warranties of the Originators,
Back-up Servicer and Transferor contained in the Specified Agreements are true
and correct as of the Closing Date.
(l) Simultaneously with or prior to the Closing Date, $__________
aggregate initial principal amount of the Class B Certificates shall have been
sold to the Class B Underwriters.
Transferor will provide or cause to be provided to the Underwriters
such conformed copies of such opinions, certificates, letters and documents as
the Underwriters may reasonably request.
Section 7. Indemnification and Contribution. (a) Transferor will
indemnify and hold harmless each Underwriter and each Person who controls any
Underwriter within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which the Underwriters or any of
them may become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter and each Person who
controls any Underwriter within the meaning of the Securities Act for any actual
legal or other expenses reasonably incurred by the Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that Transferor will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such documents
in reliance upon and in conformity with written information furnished to
Transferor by any Underwriter specifically for use therein.
(b) Each Underwriter, severally, agrees to indemnify and hold harmless
Transferor against any losses, claims, damages or liabilities to which
Transferor may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the Prospectus or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to Transferor by such Underwriter specifically for use
therein, and will reimburse any actual legal or other expenses reasonably
incurred by Transferor in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action or the assertion by a third party of
a claim, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under subsection (a) or (b) above, notify
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party except and to the extent of any prejudice to
such indemnifying party arising from such failure to provide such notice. In
case any such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by Transferor on the
one hand and the Underwriters on the other from the offering of the Class A
Certificates or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of Transferor on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by Transferor on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Class A Certificates (before
deducting expenses) received by Transferor bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by Transferor or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to the
Class A Certificates purchased by such Underwriter hereunder. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of Transferor under this Section shall be in
addition to any liability that Transferor may otherwise have and shall extend,
upon the same terms and conditions, to each Person, if any, who controls any
Underwriter within the meaning of the Securities Act; and the obligations of any
Underwriter under this Section shall be in addition to any liability that such
Underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each director of Transferor, to each officer of Transferor who
signed the Registration Statement and to each Person, if any, who controls
Transferor within the meaning of the Securities Act.
Section 8. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of Transferor or its officers and of the Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation or statement as to the results thereof, made by or on
behalf of the Underwriters, Transferor or any of their respective
representatives, officers or directors or any controlling Person, and will
survive delivery of and payment for the Class A Certificates. If for any reason
the purchase of the Class A Certificates by the Underwriters is not consummated,
Transferor shall remain responsible for the expenses to be paid or reimbursed by
Transferor pursuant to Section 5(g) hereof and the respective obligations of
Transferor and the Underwriters pursuant to Section 7 hereof shall remain in
effect. If the purchase of the Class A Certificates by the Underwriters is not
consummated for any reason other than solely because of the occurrence of any
event specified in clause (iii), (iv) or (v) of Section 6(c) hereof, Transferor
will reimburse the Underwriters for all actual out-of-pocket expenses (including
fees and disbursements of counsel to the extent previously agreed) reasonably
incurred by them in connection with the offering of the Class A Certificates.
Section 9. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the Class A Certificates agreed to be
purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the amount
of Class A Certificates set forth opposite their names in Schedule I hereto
bears to the aggregate amount of Class A Certificates set forth opposite the
names of all the remaining Underwriters) the Class A Certificates which the
defaulting Underwriter or Underwriters agreed but failed to purchase; provided,
however, that in the event that the aggregate amount of Class A Certificates
which the defaulting Underwriter or Underwriters agreed but failed to purchase
shall exceed 10% of the aggregate principal amount of Class A Certificates set
forth in Schedule I hereto, the remaining Underwriters shall have the right to
purchase all, but shall not be under any obligation to purchase any, of the
Class A Certificates, and if such nondefaulting Underwriters do not purchase all
the Class A Certificates, this Agreement will terminate without liability to any
non-defaulting Underwriter, the Trust or Transferor. In the event of a default
by any Underwriter as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as the Underwriters shall
determine in order that the required changes in the Registration Statement and
the Prospectus (and any supplements thereto) or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to Transferor and any
nondefaulting Underwriter for damages occasioned by its default hereunder.
Section 10. Notices. All communications hereunder will be in writing
and, if sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to them c/o CS First Boston Corporation, 55 East 52nd Street, Park
Avenue Plaza, New York, New York 10055, Attention: Investment Banking Department
Transactions Advisory Group; or if sent to Transferor will be mailed, delivered
or telegraphed and confirmed to it at Mellon Bank, N.A., One Mellon Bank Center,
Pittsburgh, Pennsylvania, 15258, Attention: _______________.
Section 11. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers and directors and controlling Persons referred to in Section 7 hereof,
and no other Person will have any right or obligation hereunder.
Section 12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
Section 13. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to any otherwise applicable principles of conflicts of laws.
Section 14. Miscellaneous. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
Section 15. Representative. The Representative will act for the several
Underwriters in connection with this Agreement and the transactions contemplated
hereby and any action under this Agreement taken by the Representative will be
binding upon all the Underwriters.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts duplicate
hereof, whereupon it will become a binding agreement between Transferor and the
several Underwriters in accordance with its terms.
Very truly yours,
MELLON BANK, N.A.
By: ____________________________
Name: _______________
Title: ________________
The foregoing Underwriting Agreement
is hereby confirmed and accepted,
as of the date first above written:
CS FIRST BOSTON CORPORATION
By: _______________________
Name:
Title:
For itself and the other
Underwriters named in
Schedule I to the foregoing
Underwriting Agreement.
<PAGE>
SCHEDULE I
Underwriter Amount
CS First Boston Corporation........................................$__________
- -------------------................................................$----------
Mellon Financial Markets, Inc......................................$__________
$-------------
MELLON BANK PREMIUM FINANCE LOAN MASTER TRUST
CLASS B FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1996-1
CLASS B UNDERWRITING AGREEMENT
____________________, 1996
CS FIRST BOSTON CORPORATION
as Representative of the
Several Underwriters
55 East 52nd Street
Park Avenue Plaza
New York, New York 10055
Ladies and Gentlemen:
Section 1. Introductory. AFCO Credit Corporation, a New York
corporation ("AFCO Credit"), and AFCO Acceptance Corporation, a California
corporation ("AFCO Acceptance" and together with AFCO Credit in their capacity
as servicer, the "Servicer" and in their capacity as originators, the
"Originators") propose to convey the Receivables arising from certain insurance
premium finance loans to Mellon Bank, N.A., a national banking association
organized under the laws of the United States of America (the "Transferor"). The
Transferor proposes to convey such Receivables and other rights to the Mellon
Bank Premium Finance Loan Master Trust (the "Trust"), and proposes to cause the
Trust to sell to the Underwriters named in Schedule I hereto (the
"Underwriters"), for whom you are acting as representative (the
"Representative"), $_____________ aggregate initial principal amount of Class B
Floating Rate Asset Backed Certificates, Series 1996-1 (the "Class B
Certificates"), in the Trust, the terms of which are described in the Prospectus
(as defined below). It is understood that Transferor is currently entering into
a Class A Underwriting Agreement dated the date hereof (the "Class A
Underwriting Agreement") among the Transferor and the Underwriters named on
Schedule I thereto (the "Class A Underwriters") providing for the sale of
$____________ aggregate initial principal amount of Class A Floating Rate Asset
Backed Certificates, Series 1996-1 (the "Class A Certificates"). The Class B
Certificates and the Class A Certificates are referred to herein collectively as
the "Certificates." This Agreement and the Class A Underwriting Agreement are
referred to herein collectively as the "Underwriting Agreements."
The Receivables will be conveyed by the Originators to the Transferor
pursuant to the Receivables Purchase Agreement dated as of December 1, 1996 (the
"Receivables Purchase Agreement") between the Originators and the Transferor.
The Receivables will be conveyed by the Transferor to the Trust and the
Certificates will be issued pursuant to a Pooling and Servicing Agreement, dated
as of December 1, 1996 (the "P&S") among the Transferor, the Servicer, Premium
Financing Specialists, Inc., as back-up servicer (the "Back-up Servicer") and
The First National Bank of Chicago, as trustee (the "Trustee"), and the Series
1996-1 Supplement to the P&S, to be dated as of ___________, 1996 (the
"Supplement"), between the same parties. The P&S and the Supplement are referred
to herein collectively as the "Pooling and Servicing Agreement." In addition,
the Transferor, Servicer, [Back-up Servicer], Trustee and _____________ (the
"Collateral Interest Holder") will enter into a Loan Agreement to be dated as of
the Closing Date (the "Loan Agreement") pursuant to which the Collateral
Interest Holder will acquire _____________ aggregate initial principal amount of
the Collateral Interest (the "Collateral Interest"), which will act as Credit
Enhancement for the Certificates.
Capitalized terms used herein (including in the Introductory hereto)
that are not otherwise defined shall have the meanings ascribed thereto in the
Pooling and Servicing Agreement.
Section 2. Representations and Warranties of Transferor. (a) Transferor
represents and warrants to, and agrees with, each Underwriter as set forth in
this Section 2. Certain terms used in this Section 2 are defined in paragraph
(i) below.
(i) Transferor meets the requirements for use of Form S-3
under the Securities Act and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (Registration
No. 333-11961, including a related preliminary prospectus, on such Form
for the registration under the Securities Act, of the Certificates.
Transferor may have filed one or more amendments thereto, including the
related preliminary prospectus, each of which has previously been
furnished to the Representative. Transferor will next file with the
Commission (A) prior to the effectiveness of such registration
statement, a further amendment thereto (including the form of final
prospectus relating to the Class B Certificates) or (B) after
effectiveness of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b)(1) or (4) under the Securities
Act. In the case of clause (B), Transferor has included in such
registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the
Securities Act and the rules thereunder to be included in the
Prospectus with respect to the Class B Certificates and the offering
thereof. As filed, such amendment and form of final prospectus shall
include all Rule 430A Information, together with all other such
required information, with respect to the Class B Certificates and the
offering thereof and, except to the extent the Underwriters shall agree
in writing to a modification, shall be in all substantive respects in
the form furnished to the Representative prior to the Execution Time
or, to the extent not completed at the Execution Time, shall contain
only such specific additional information and other changes (beyond
that contained in the latest preliminary prospectus which has
previously been furnished to the Representative) as Transferor has
advised the Representative, prior to the Execution Time, will be
included or made therein. If the Registration Statement contains the
undertakings specified by item 512(a) of Regulation S-K, the
Registration Statement, at the Execution Time, meets the requirements
set forth in Rule 415(a)(1)(x).
The terms that follow, when used in this Agreement, have the
meanings indicated. The term "Effective Date" means each date that the
Registration Statement and any post-effective amendment or amendments
thereto became or become effective. "Execution Time" means the date and
time that this Agreement is executed and delivered by the parties
hereto. "Preliminary Prospectus" means any preliminary prospectus
referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement which, at the Effective Date,
omits Rule 430A Information. "Prospectus" means the form of prospectus
relating to the Class B Certificates that is first filed with the
Commission pursuant to Rule 424(b) or, if no filing pursuant to Rule
424(b) is required, means the prospectus relating to the Class B
Certificates included in the Registration Statement at the Effective
Date. "Registration Statement" means the registration statement
referred to in the preceding paragraph and any registration statement
required to be filed under the Securities Act or rules thereunder,
including incorporated documents, exhibits and financial statements, in
the form in which it has or shall become effective and, in the event
any post-effective amendment thereto becomes effective prior to the
Closing Date, shall also mean such registration statement as so
amended. Such term shall include Rule 430A Information deemed to be
included therein at the Effective Date as provided by Rule 430A. "Rule
424," "Rule 430A," "Rule 415" and "Regulation S-K" refer to such rules
or regulations under the Securities Act. "Rule 430A Information" means
information with respect to the Class B Certificates and the offering
thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. [Any reference herein to the
Registration Statement, or the Prospectus shall be deemed to refer to
and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 which were filed under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), on or before the Effective
Date of the Registration Statement or the issue date of the Prospectus,
as the case may be; and] any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement
or Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date of the
Registration Statement, or the issue date of the Prospectus, as the
case may be, deemed to be incorporated therein by reference.
(ii) On the Effective Date, the Registration Statement did or
will comply in all material respects with the applicable requirements
of the Securities Act and the rules thereunder; on the Effective Date
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date, the Prospectus (as amended and
together with any supplements thereto) did or will comply in all
material respects with the applicable requirements of the Securities
Act and the rules thereunder; on the Effective Date, the Registration
Statement did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date of any
filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus
(as amended and together with any supplements thereto) will not,
include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that Transferor makes no representations or
warranties as to the information contained in or omitted from the
Registration Statement or the Prospectus (or any supplements thereto)
in reliance upon and in conformity with information furnished in
writing to Transferor by any Underwriter specifically for use in
connection with the preparation of the Registration Statement or the
Prospectus (or any supplements thereto).
(iii) Transferor is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States, and has all requisite power, authority and legal right
to own its properties and conduct its business as described in the
Registration Statement and the Prospectus and to execute, deliver and
perform the Underwriting Agreements, the Pooling and Servicing
Agreement, the Receivables Purchase Agreement and the Loan Agreement
(collectively the "Specified Agreements"), to authorize the issuance of
the Certificates and the Collateral Interest and to consummate the
transactions contemplated hereby.
(iv) Transferor is duly qualified to do business and is in
good standing (or is exempt from such requirement) in any state
required in order to conduct its business, and has obtained all
necessary licenses and approvals with respect to Transferor required
under Federal and Pennsylvania law.
(v) The execution, delivery and performance by Transferor of
the Specified Agreements, the issuance of the Certificates and the
Collateral Interest and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary action or proceedings.
(vi) This Agreement has been duly executed and delivered by
Transferor.
(vii) Transferor has authorized the conveyance of the
Receivables to the Trust, and Transferor has authorized the Trust to
issue and sell the Certificates and the Collateral Interest.
(viii) The execution, delivery and performance by Transferor
of the Specified Agreements, the issuance of the Certificates and the
Collateral Interest and the fulfillment of the terms hereof and thereof
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time
or both) a default under, or (other than the Lien of the Pooling and
Servicing Agreement) result in the creation or imposition of any Lien
under any material indenture, contract, agreement, mortgage, deed of
trust or other instrument to which Transferor is a party or by which it
or any of its properties are bound.
(ix) The execution, delivery and performance by Transferor of
the Specified Agreements, the issuance of the Certificates and the
Collateral Interest and the fulfillment of the terms hereof and
thereof, will not conflict with or violate any Requirements of Law
applicable to Transferor.
(x) There are no proceedings or investigations pending or, to
the best knowledge of Transferor, threatened against Transferor before
any court, regulatory body, administrative agency, arbitrator or other
tribunal or governmental instrumentality (A) asserting the invalidity
of any Specified Agreement or the Certificates or the Collateral
Interest, (B) seeking to prevent the issuance of the Certificates or
the Collateral Interest or the consummation of any of the transactions
contemplated by the Specified Agreements, (C) seeking any determination
or ruling that, in the reasonable judgment of Transferor, would
materially and adversely affect the performance by Transferor of its
obligations under any Specified Agreement, (D) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of any Specified Agreements or the
Certificates or the Collateral Interest, or (E) seeking to affect
adversely the income tax attributes of the Trust, as described in the
Prospectus under the heading "U.S. Federal Income Tax Consequences";
and there are no contracts or documents of Transferor that are required
to be filed as exhibits to the Registration Statement by the Securities
Act or by the rules and regulations of the Commissioner promulgated
under the Securities Act (the "Rules and Regulations") that have not
been so filed.
(xi) All approvals, authorizations, consents, orders and other
actions of any Person or of any governmental body or official required
in connection with the execution and delivery of the Specified
Agreements, the issuance of the Certificates and the Collatera1
Interest and the performance of the transactions contemplated hereby
and thereby and the fulfillment of the terms hereof and thereof, have
been obtained.
(xii) Transferor has delivered to the Representative complete
and correct copies of (A) publicly available portions of the
Consolidated Reports of Condition and Income of Transferor for the
years ended December 31, 1993, 1994 and 1995, as submitted to the
Comptroller of the Currency; and (B) the December 31, 1993, 1994 and
1995, audited consolidated balance sheets of Mellon Bank Corporation
which are included at page __ of Mellon Bank Corporation's 1994 and
1995 Annual Reports to Stockholders. Except as otherwise set forth
therein, (x) there has been no material adverse change in the condition
(financial or otherwise) of Transferor and (y) there have been no
transactions entered into by Transferor, other than those in the
ordinary course of its business, that are material with respect to
Transferor.
(xiii) Any taxes, fees and other governmental charges in
connection with the execution, delivery and performance of the
Specified Agreements and the Certificates and the Collateral Interest
shall have been paid by Transferor or will be paid by Transferor at or
prior to the Closing Date to the extent then due.
(xiv) The Certificates and the Collateral Interest have been
duly and validly authorized. The Certificates, when validly
authenticated, issued and delivered in accordance with the Pooling and
Servicing Agreement and sold to the Underwriters as provided herein and
to the Class A Underwriters pursuant to the Class A Underwriting
Agreement, will be duly and validly issued and outstanding and entitled
to the benefits of the Pooling and Servicing Agreement, and, together
with the Pooling and Servicing Agreement, the Loan Agreement and the
Collateral Interest will conform in all material respects to the
descriptions thereof and the statements in relation thereto contained
in the Prospectus.
(xv) Assuming the due authorization, execution and delivery
thereof by the other parties thereto, the Specified Agreements
constitute and the Certificates and the Collateral Interest, when
validly issued and, in the case of the Certificates, validly
authenticated and delivered in accordance with the Pooling and
Servicing Agreement and sold to the Underwriters as provided herein and
to the Class A Underwriters pursuant to the Class A Underwriting
Agreement will constitute, the legal, valid and binding agreement of
Transferor enforceable in accordance with its respective terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting enforcement
of creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(xvi) On the Closing Date, Transferor will have good and
marketable title to the Receivables and other property transferred by
it to the Trust pursuant to the Pooling and Servicing Agreement, free
and clear of Liens (other than the Lien of the Pooling and Servicing
Agreement), and will not have assigned to any Person (other than the
Trustee) any of its right, title or interest in any of such Receivables
or such other property or in the Pooling and Servicing Agreement, and
the Underwriters and the Class A Underwriters will have good and
marketable title to Certificates, free and clear of all Liens when
validly authenticated, issued and delivered in accordance with the
Pooling and Servicing Agreement and sold to the Underwriters as
provided herein and to the Class A Underwriters pursuant to the Class A
Underwriting Agreement.
(xvii) At the time of each transfer of Receivables by
Transferor to the Trust after the Closing Date, Transferor will have
good and marketable title to all Receivables and the other property
being transferred by it to the Trust on such day, free and clear of
Liens (other than the Lien of the Pooling and Servicing Agreement), and
will not have sold to any Person (other than the Trustee) any of its
right, title or interest in any of such Receivables or such other
property.
(xviii) Neither Transferor nor the Trust is an "investment
company" or "controlled" by an "investment company" as such terms are
defined in the Investment Company Act.
(xix) As of the Closing Date each of the representations and
warranties of Transferor deemed made pursuant to the Pooling and
Servicing Agreement will be true and correct, and, as of each other
date on which Transferor is deemed, pursuant to the terms of the
Pooling and Servicing Agreement, to make any of the representations and
warranties set forth therein, and in Officer's Certificates of
Transferor delivered on each such date pursuant to the Pooling and
Servicing Agreement, will be true and correct and the Underwriters may
rely on such representations and warranties as if they were set forth
herein in full.
(b) Any Officer's Certificate signed by any officer of Transferor and
delivered to the Representative or its counsel shall be deemed a representation
and warranty of Transferor to the Underwriters as to the matters covered
thereby.
Section 3. Purchase and Sale. On the basis of the representations,
warranties and agreements herein contained, but subject to the terms and
conditions herein set forth, Transferor agrees to cause the Trust to sell to
each Underwriter, and each Underwriter agrees, severally and not jointly, except
as set forth in Section 9 below, to purchase the respective initial principal
amount of Class B Certificates set forth opposite such Underwriter's name in
Schedule I hereto, at a purchase price of ______% of the aggregate principal
amount thereof.
The Class B Certificates will initially be represented by one or more
certificates representing $________, aggregate initial principal amount, each of
which will be registered in the name of Cede & Co., the nominee of The
Depository Trust Company ("DTC") (such certificates, the "DTC Certificates").
The interests of beneficial owners of the DTC Certificates will be represented
by book entries on the records of DTC and participating members thereof.
Definitive certificates evidencing the Class B Certificates will be available
only under the limited circumstances specified in the Pooling and Servicing
Agreement.
Delivery of the DTC Certificates shall be made to the accounts of the
several Underwriters at the office of DTC, 55 Water Street, 49th Floor, New
York, New York 10004, against payment by the several Underwriters of the
purchase price therefor to or upon the order of Transferor in immediately
available funds at the office of Stroock & Stroock & Lavan, New York, New York
at 10:00 a.m., New York time, on ______________, 1996, or at such other time not
later than seven full business days thereafter as Transferor and the
Underwriters determine, such time being herein referred to as the "Closing
Date". The certificates evidencing the DTC Certificates will be made available
for checking at the office of Stroock & Stroock & Lavan at Seven Hanover Square,
New York, New York 10004, at least 24 hours prior to the Closing Date.
Section 4. Offering by the Underwriters. (a) It is understood that the
Underwriters propose to offer the Class B Certificates for sale to the public as
set forth in the Prospectus.
(b) Each Underwriter agrees that if it is a foreign broker dealer not
eligible for membership in the National Association of Securities Dealers, Inc.
(the "NASD"), it will not effect any transaction in the Class B Certificates
within the United States or induce or attempt to induce the purchase of or sale
of the Class B Certificates within the United States, except that it shall be
permitted to make sales to other Underwriters or to its United States
affiliates; provided that such sales are made in compliance with an exemption of
certain foreign brokers or dealers under Rule 15a-6 under the Exchange Act and
in conformity with the Rules of Fair Practice of the NASD as such Rules apply to
non-NASD brokers or dealers.
(c) Each Underwriter represents and agrees that (i) it has not offered
or sold and, prior to the expiry of the period of six months from the Closing
Date, will not offer or sell any Class B Certificates to Persons in the United
Kingdom except to Persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of the
United Kingdom with respect to anything done by it in relation to the Class B
Certificates in, from or otherwise involving the United Kingdom; (iii) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issue of the Class B
Certificates to a Person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
of the United Kingdom or is a Person to whom the document may otherwise lawfully
be issued or passed on.
Section 5. Certain Agreements of Transferor. Transferor covenants and
agrees with the several Underwriters that:
(a) Transferor will use its best efforts to cause the Registration
Statement, and any amendment thereto, if not effective at the Execution Time, to
become effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Prospectus is otherwise required under
Rule 424(b), Transferor will file the Prospectus, properly completed, pursuant
to Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Underwriters of such timely filing. Transferor will promptly
advise the Underwriters (i) when the Registration Statement, and any amendment
thereto, shall have become effective, (ii) when the Prospectus, and any
supplement thereto, shall have been filed with the Commission pursuant to Rule
424(b), (iii) of any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for any additional
information, (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the institution or threat of
any proceeding for that purpose and (v) of the receipt by Transferor of any
notification with respect to the suspension of the qualification of the Class B
Certificates for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. Transferor will not file any amendment of the
Registration Statement or supplement to the Prospectus unless a copy has been
furnished to the Representative for its review prior to such filing. Transferor
will use its best efforts to prevent the issuance of any such stop order and, if
issued, to obtain as soon as possible the lifting thereof.
(b) If, at any time when a Prospectus relating to the Class B
Certificates is required to be delivered under the Securities Act, any event
occurs as a result of which such Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or if it shall be
necessary at any time to amend or supplement such Prospectus to comply with the
Securities Act or the Exchange Act or the Rules and Regulations thereunder,
Transferor promptly will prepare and file with the Commission an amendment or
supplement that will effect such compliance. Neither the consent of any
Underwriter to, nor the delivery by any Underwriter of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth in
Section 6 hereof.
(c) As soon as practicable, but not later than the Availability Date
(as defined below), Transferor will cause the Trustee to make generally
available to the Holders of the Class B Certificates and to the Representative
an earnings statement with respect to the Trust covering a period of at least 12
months beginning after the Effective Date that will satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 under the Securities Act. For
the purpose of the preceding sentence, "Availability Date" means the 45th day
after the end of the fourth fiscal quarter following the fiscal quarter that
includes the Effective Date, except that, if such fourth fiscal quarter is the
last quarter of Transferor's fiscal year, "Availability Date" means the 90th day
after the end of such fourth fiscal quarter.
(d) Transferor will furnish to the Underwriters copies of the
Registration Statement as originally filed and each amendment thereto (in each
case at least three of which will be signed and will include all exhibits), each
related Preliminary Prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as the Underwriters may reasonably request. Transferor will furnish
or cause to be furnished to the Representative copies of all reports on Form SR
required by Rule 463 under the Securities Act.
(e) Transferor will arrange for the qualification of the Class B
Certificates for sale under the laws of such jurisdictions in the United States
as the Underwriters may reasonably designate and will continue such
qualifications in effect so long as required for the distribution of the Class B
Certificates, provided that Transferor shall not be obligated to qualify to do
business nor become subject to service of process generally, but only to the
extent required for such qualification, in any jurisdiction in which it is not
currently so qualified, and will arrange for the determination of the legality
of the Class B Certificates for purchase by institutional investors.
(f) So long as any of the Class B Certificates are outstanding,
Transferor will deliver or cause to be delivered to the Underwriters (i) copies
of each report mailed to the Trustee or the Series 1996-1 Holders, as soon as
such report is mailed to the Trustee or such Holders, (ii) the annual statement
as to compliance and the annual statement of a firm of independent public
accountants furnished to the Trustee pursuant to Sections 3.5 and 3.6 of the
Pooling and Servicing Agreement, as soon as such statements are furnished to the
Trustee, (iii) copies of all documents required to be filed with the Commission
pursuant to the Exchange Act or any order of the Commission thereunder, and (iv)
such other information concerning Transferor, the Certificates or the Trust as
the Underwriters may reasonably request from time to time.
(g) Transferor will pay all expenses incident to the performance of its
obligations under this Agreement, including without limitation, (i) expenses of
preparing, printing, reproducing and distributing the Registration Statement and
each amendment thereto, the preliminary prospectuses, the Prospectus (including
any amendments and supplements thereto), the Receivables Purchase Agreement, the
Pooling and Servicing Agreement, the Loan Agreement and the Class B
Certificates, (ii) the fees and disbursements of the Trustee and its counsel,
(iii) the fees and disbursements of the independent public accountants of
Transferor and, to the extent previously agreed, fees and disbursements of
counsel to Transferor, (iv) the fees charged by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Service, a division of The McGraw Hill
Companies, Inc. ("Standard & Poor's" and together with Moody's, the "Rating
Agencies") in connection with the rating of the Class B Certificates and the
Collateral Interest, as applicable, (v) the fees of DTC in connection with the
book-entry registration of the DTC Certificate, (vi) to the extent previously
agreed, the fees and expenses of Stroock & Stroock & Lavan in its roles as
underwriters' counsel and (vii) expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto) to the Underwriters, and will reimburse the Underwriters for any
expenses (including reasonable fees and disbursements of counsel) incurred by
the Underwriters pursuant to Section 5(e) hereof in connection with the
qualification of the Class B Certificates for sale and determination of their
eligibility for investment under the laws of such jurisdictions in the United
States as the Underwriters may designate.
(h) On or before the Closing Date, Transferor shall cause its books and
records (including any computer records) to be marked relating to the
Receivables to be transferred to the Trust, to show the transfer to the Trust of
such Receivables, and from and after the Closing Date Transferor shall not take
any action inconsistent with the transfer to the Trust of such Receivables,
other than as permitted by the Pooling and Servicing Agreement.
(i) For a period of 30 days from the date hereof, none of Transferor or
any of its affiliates or any trust formed by it or any of its affiliates will,
without the prior written consent of the Underwriters, directly or indirectly,
offer, sell or contract to sell or announce the offering of, in a public or
private transaction, any other collateralized securities similar to the Class B
Certificates (other than the Class A Certificates and the Collateral Interest)
representing interests in insurance premium finance loans.
(j) So long as any Class B Certificates are outstanding, Transferor
will cause to be delivered to the Underwriters a reliance letter relating to
each Opinion of Counsel delivered to the Trustee or any Rating Agency by counsel
to Transferor pursuant to the Pooling and Servicing Agreement at the time such
opinion is delivered.
(k) To the extent, if any, that the rating provided with respect to the
Class B Certificates by any Rating Agency is conditional upon the furnishing of
documents or the taking of any other actions by Transferor, Transferor shall
furnish such documents and take any such other actions as may be required.
Section 6. Conditions of the Obligations of the Underwriters. The
obligation of the Underwriters to purchase and pay for the Class B Certificates
will be subject to the accuracy of the representations and warranties on the
part of Transferor herein as of the Execution Time and the Closing Date, to the
accuracy of the statements of the officers of the Originators and Transferor
made pursuant to the provisions hereof, to the performance by the Transferor of
their respective obligations hereunder and to the following additional
conditions precedent:
(a) (i) On the date of this Agreement, the Underwriters and Transferor
shall have received a letter, dated the date of delivery thereof (which, if the
Effective Time is prior to the execution and delivery of this Agreement, shall
be on or prior to the date of this Agreement or, if the Effective Time is
subsequent to the execution and delivery of this Agreement, shall be prior to
the filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to the Effective Time), of KPMG Peat Marwick
("Peat Marwick") confirming that they are independent public accountants within
the meaning of the Securities Act and the Rules and Regulations, substantially
in the form of the draft to which the Underwriters have previously agreed and
otherwise in form and substance satisfactory to the Underwriters and counsel for
the Underwriters, and (ii) on the Closing Date, the Underwriters and Transferor
shall have received a letter, dated as of the Closing Date, from Peat Marwick
updating the letter referred to in clause (i) above, in form and substance
satisfactory to the Underwriters and counsel for the Underwriters.
(b) If the Registration Statement has not become effective prior to the
Execution Time, unless the Underwriters agree in writing to a later time, the
Registration Statement shall have become effective not later than 10:00 a.m. New
York time on the date of this Agreement (or the next day, if this Agreement is
executed after the close of business on the date hereof); if filing of the
Prospectus, or any supplements thereto, is required pursuant to Rule 424(b), the
Prospectus shall have been filed in the manner and within the time period
required by Rule 424(b); and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
any of the Originators or Transferor which, in the judgment of the Underwriters
materially impairs the investment quality of the Class B Certificates; (ii) any
downgrading in the rating of any debt securities of Mellon Bank Corporation or
any of its direct or indirect subsidiaries by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Act), or any public announcement that any such organization has
under surveillance or review its rating of any such debt securities (other than
an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any suspension or
limitation of trading in securities generally on the New York Stock Exchange or
any setting of minimum prices for trading on such exchange, or any suspension of
trading of any securities of Transferor on any exchange or in the
over-the-counter market; (iv) any banking moratorium declared by Federal, New
York or Pennsylvania authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Underwriters, the effect of and such
outbreak, escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the Class
B Certificates.
(d) The Representative shall have received:
(1) The favorable opinion or opinions of internal counsel of
Transferor and/or of Reed Smith Shaw & McClay, counsel to Transferor,
dated the Closing Date and satisfactory in form and substance to the
Representative and its counsel, and in the aggregate substantially to
the effect that:
(i) Transferor has been duly organized as an
association licensed as a national banking association and is
validly existing and in good standing under the laws of the
United States, is duly qualified to do business and is in good
standing under the laws of each jurisdiction other than where
the failure to be so qualified would not have a material
adverse effect on Transferor's business, and has full
corporate power and authority to own its properties, to
conduct its business as described in the Registration
Statement and the Prospectus, to enter into and perform its
obligations under the Specified Agreements, to execute the
Certificates and to consummate the transactions contemplated
hereby and thereby;
(ii) each of the Specified Agreements and the
Certificates have each been duly authorized, executed and
delivered by Transferor;
(iii) neither the execution and delivery of the
Specified Agreements, nor the issuance or delivery of the
Certificates, nor the consummation of any of the transactions
contemplated herein or therein, nor the fulfillment of the
terms of the Certificates or the Specified Agreements, will
conflict with or violate, result in a material breach of or
constitute a default under (A) any Requirements of Law
applicable to Transferor or any statute or regulation
currently applicable to the Trust, (B) any term or provision
of any order known to such counsel to be currently applicable
to Transferor or the Trust of any court, regulatory body,
administrative agency or governmental body having jurisdiction
over Transferor or the Trust, as the case may be, or (C) any
term or provision of any indenture or other agreement or
instrument known to such counsel to which Transferor or the
Trust is a party or by which either of them or any of their
properties are bound;
(iv) except as otherwise disclosed in the Prospectus
(and any supplements thereto) or the Registration Statement,
there is no pending or, to the best knowledge of such counsel,
threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator with
respect to the Trust, the Certificates, the Specified
Agreements or any of the transactions contemplated herein or
therein or with respect to Transferor which, in the case of
any such action, suit or proceeding with respect to Transferor
if adversely determined, would have a material adverse effect
on the Certificates or the Trust or upon the ability of
Transferor to perform its obligations under the Pooling and
Servicing Agreement or the Loan Agreement; and the statements
included in the Registration Statement and the Prospectus (and
any amendments or supplements thereto) describing (A) legal
proceedings relating to Transferor and (B) the insurance
premium finance loan agreements in each case fairly summarize
the matters therein described;
(v) such counsel has no reason to believe that at the
Effective Date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (and
any amendments or supplements thereto as of the Closing Date)
includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading (other than financial and statistical
information contained therein as to which such counsel need
express no opinion) (such opinion may be limited to the
sections of the Prospectus under the headings ["Prospectus
Summary--Transferor," "Prospectus Summary--Servicer,"
"Maturity Assumptions," "Business of the Originators," and
"The Receivables"] and the parallel sections of the
Registration Statement and Exhibit ___ thereto; and
(vi) no approval, authorization, consent, order,
registration, filing, qualification, license or permit of or
with any court or governmental agency or body is required for
the consummation by Transferor or the Trust of the
transactions contemplated in the Specified Agreements, except
such as have been obtained under the Securities Act and such
as may be required under the blue sky laws of any jurisdiction
inside the United States in connection with the purchase and
distribution of the Class B Certificates by the Underwriters
and such filings or other approvals (specified in such
opinion) as have been made or obtained.
In rendering such opinion counsel may rely as to matters of
fact, to the extent deemed proper and as stated therein, on
certificates of responsible officers of the Trust, Transferor and
public officials. References to the Prospectus in this paragraph (d)
include any supplements thereto.
(2) The favorable opinion of Stroock & Stroock & Lavan,
counsel for the Underwriters, dated the Closing Date and to the effect
that:
(i) the Certificates, when executed, authenticated
and delivered as specified in the Pooling and Servicing
Agreement, and delivered against payment of the consideration
specified herein, will be duly and validly issued and
outstanding and entitled to the benefits of the Pooling and
Servicing Agreement;
(ii) each of the Receivables Purchase Agreement and
the Pooling and Servicing Agreement constitutes and the
Certificates, when validly issued and validly authenticated
and delivered in accordance with the Pooling and Servicing
Agreement and sold to the Underwriters as provided herein and
to the Class A Underwriters pursuant to the Class A
Underwriting Agreement, will constitute, the legal, valid and
binding agreement of Transferor, enforceable in accordance
with its terms (subject, as to enforcement or remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally from time
to time in effect and to the application of general principles
of equity);
(iii) the Loan Agreement constitutes the legal, valid
and binding agreement of Transferor, enforceable in accordance
with its terms (subject, as to enforcement or remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally from time
to time in effect and to the application of general principles
of equity);
(iv) the Registration Statement has become effective
under the Securities Act, and, to the best of their knowledge
and information, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or
contemplated under the Securities Act, and the Registration
Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the
requirements of the Securities Act and the Rules and
Regulations. Such counsel has no reason to believe that at the
Effective Date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (and
any supplements thereto as of the Closing Date) includes any
untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading (other than financial and statistical information
contained therein as to which such counsel need express no
opinion);
(v) the Certificates and the Pooling and Servicing
Agreement each conform in all material respects with the
description thereof contained in the Registration Statement
and the Prospectus;
(vi) the Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of
1939, as amended;
(vii) the Trust is not an "investment company" within
the meaning of the Investment Company Act;
(viii) the statements in the Registration Statement
under the heading "Certain Legal Aspects of the
Receivables-Transfer of Receivables", "U.S. Federal Income Tax
Consequences" and "ERISA Considerations" to the extent that
they constitute statements of matters of law or legal
conclusions with respect thereto, have been prepared or
reviewed by such counsel and are correct in all material
respects;
(ix) the Receivables constitute "general intangibles"
as defined in the Uniform Commercial Code in the State of
New York; and
(x) (x) the Certificates will properly be treated as
indebtedness for federal income tax purposes and (y) the Trust
will not be classified as an association or a publicly traded
partnership taxable as a corporation for federal income tax
purposes.
In rendering such opinion, Stroock & Stroock & Lavan may rely on the
opinions of Reed Smith Shaw & McClay and internal counsel to Transferor and
Originators, as to the matters dealt with in such opinions.
(3) The favorable opinion of Reed Smith Shaw & McClay, counsel
to Transferor, dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel, and substantially to
the effect that:
(i) the Receivables constitute "general intangibles" as
defined in the Uniform Commercial Code in effect in the
State of Pennsylvania;
(ii) Uniform Commercial Code financing statements with
respect to the Investor Interest in the Receivables and the
proceeds thereof have been filed in the office of the
Pennsylvania [Secretary of State]. No other filings or other
actions, with respect to the Trustee's interest in the
Receivables transferred and to be transferred by Transferor
to the Trust, are necessary to perfect the interest of the
Trustee in the Receivables, and the proceeds thereof,
against third parties, except that appropriate continuation
statements must be filed at five-year intervals;
(iii) in the event that a court were to conclude that
the assignment of the Receivables, all documents and
instruments relating thereto and all proceeds thereof to the
Trustee pursuant to the Pooling and Servicing Agreement was
not a sale, the Pooling and Servicing Agreement, together with
the filing of the financing statements referred to in
paragraph (v) above, create a first priority perfected
security interest in the Receivables transferred and to be
transferred by Transferor to the Trust, all documents and
instruments relating thereto and all proceeds thereof subject
to no prior Liens (in rendering such opinion counsel may take
such exceptions as are appropriate and reasonably acceptable
under the circumstances); and
(iv) the Certificates will properly be treated as
indebtedness for Pennsylvania state tax purposes.
(4) The favorable opinion or opinions of internal counsel of
each of the Originators and/or of Reed Smith Shaw & McClay, counsel to
Originators, dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel, and in the aggregate
substantially to the effect that:
(i) each of the Originators has been duly organized
and licensed as a corporation and is validly existing and in
good standing under the laws of New York and California,
respectively, is duly qualified to do business and is in good
standing under the laws of each jurisdiction where it conducts
its business other than where the failure to be so qualified
would not have a material adverse effect on Originator's
business, and has full corporate power and authority to own
its properties, to conduct its business as described in the
Registration Statement and the Prospectus, to enter into and
perform its obligations under the Specified Agreements to
which it is a party and to consummate the transactions
contemplated hereby and thereby;
(ii) each of the Specified Agreements to which it is a
party has been duly authorized, executed and delivered by
Transferor;
(iii) neither the execution and delivery of the
Specified Agreements to which it is a party, nor the
consummation of any of the transactions contemplated herein or
therein, nor the fulfillment of the terms of the Specified
Agreements, will conflict with or violate, result in a
material breach of or constitute a default under (A) any
Requirements of Law applicable to either of the Originators or
any statute or regulation currently applicable, (B) any term
or provision of any order known to such counsel to be
currently applicable to either of the Originators of any
court, regulatory body, administrative agency or governmental
body having jurisdiction over either of the Originators, as
the case may be, or (C) any term or provision of any indenture
or other agreement or instrument known to such counsel to
which either of the Originators is a party or by which either
of them or any of their properties are bound;
(iv) except as otherwise disclosed in the Prospectus
(and any supplements thereto) or the Registration Statement,
there is no pending or, to the best knowledge of such counsel,
threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator with
respect to the Specified Agreements to which the Originators
are a party or any of the transactions contemplated herein or
therein or with respect to the Originators which, in the case
of any such action, suit or proceeding with respect to either
of the Originators if adversely determined, would have a
material adverse effect on the Certificates or the Trust or
upon the ability of either of the Originators to perform its
obligations under the Specified Agreements; and the statements
included in the Registration Statement, and the Prospectus
(and any supplements thereto) describing (A) legal proceedings
relating to the Originators and (B) the insurance premium
finance loan agreements, regulation of premium finance
companies and state insurance funds [other regulatory
matters?] in each case fairly summarize the matters therein
described;
(v) such counsel has no reason to believe that at the
Effective Date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (and
any supplements thereto as of the Closing Date) includes any
untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading (other than financial and statistical information
contained therein as to which such counsel need express no
opinion) (such opinion may be limited to the sections of the
Prospectus under the headings "Prospectus Summary -- Trust
Assets," "Business of the Originators," and "the Receivables;
(vi) no approval, authorization, consent, order,
registration, filing, qualification, license or permit of or
with any court or governmental agency or body is required for
the consummation by the Originators or the Trust of the
transactions contemplated in the Specified Agreements to which
the Originators are a party, except such as have been obtained
under the Securities Act and such as may be required under the
blue sky laws of any jurisdiction inside the United States in
connection with the purchase and distribution of the Class B
Certificates by the Underwriters and such filings or other
approvals (specified in such opinion) as have been made or
obtained; and
(vii) such counsel has been advised of the
Originators' standard operating procedures relating to the
Originators' acquisition of a perfected first priority
security interest in the unearned premiums securing the
obligations of the borrowers under insurance premium finance
agreements originated by Originators in the ordinary course of
the Originators' business. Assuming that the Originators'
standard operating procedures are followed with respect to the
perfection of security interests in the unearned premiums
relating to the Receivables (such counsel having no reason to
believe that the Originators has not or will not continue to
follow its standard operating procedures in connection with
the perfection of security interests in unearned premiums),
the Originator has acquired or will acquire a perfected first
priority security interest in the unearned premiums relating
to the Receivables.
In rendering such opinion counsel may rely as to matters of
fact, to the extent deemed proper and as stated therein, on
certificates of responsible officers of the Trust, Transferor and
public officials. References to the Prospectus in this paragraph (d)
include any supplements thereto.
(5) The favorable opinion or opinions of internal counsel of
Back-up Servicer and/or of Withrop & Gage, L.C., counsel to Back-up
Servicer, dated the Closing Date and satisfactory in form and substance
to the Representative and its counsel, and in the aggregate
substantially to the effect that:
(i) Back-up Servicer has been duly organized and
licensed as a corporation and is validly existing and in good
standing under the laws of _____________, is duly qualified to
do business and is in good standing under the laws of each
jurisdiction other than where the failure to be so qualified
would not have a material adverse effect on Back-up Servicer's
business, and has full corporate power and authority to own
its properties, to conduct its business as described in the
Registration Statement and the Prospectus, to enter into and
perform its obligations under the Pooling and Servicing
Agreement, and to consummate the transactions contemplated
hereby and thereby;
(ii) each of the Specified Agreements as to which it is
a party to have been duly authorized, executed and delivered
by Back-up Servicer;
(iii) the execution of the Pooling and Servicing
Agreement will not conflict with or violate, result in a
material breach of or constitute a default under (A) any
Requirements of Law applicable to Back-up Servicer, (B) any
term or provision of any order known to such counsel to be
currently applicable to Back-up Servicer of any court,
regulatory body, administrative agency or governmental body
having jurisdiction over Back-up Servicer, as the case may
be, or (C) any term or provision of any indenture or other
agreement or instrument known to such counsel to which
Back-up Servicer is a party or by which any of Back-up
Servicer's properties are bound;
(iv) assuming the laws of the State of __________ are
the same as the laws of the State of _____________, the
Pooling and Servicing Agreement constitutes the legal, valid
and binding obligation of the Back-up Servicer, enforceable
in accordance with its respective terms, except that (y) the
enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights and
(z) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought;
(6) Reliance letters relating to each opinion rendered to the
Trustee or any Rating Agency by Reed, Smith, Shaw & McClay or any other
counsel to Transferor in connection with the rating of the
Certificates.
(7) The favorable opinion of ____________________, counsel to
the Trustee, dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel to the effect that:
(i) The Trustee has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the United States of America with full power and
authority (corporate and other) to own its properties and
conduct its business, as presently conducted by it, and to
enter into and perform its obligations under the Specified
Agreements to which it is a party and to issue the
Certificates and the Collateral Interest;
(ii) each of the Specified Agreements to which it is a
party has been duly authorized, executed and delivered by
the Trustee;
(iii) assuming the laws of the State of Illinois are
the same as the laws of the State of New York, the Specified
Agreements to which it is a party constitute the legal, valid
and binding obligation of the Trustee, enforceable in
accordance with their respective terms, except that (y) the
enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights and
(z) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought;
(iv) the Certificates have been duly executed,
authenticated and delivered by the Trustee;
(v) neither the execution and delivery by the Trustee
of the Specified Agreements to which it is a party nor the
consummation of any of the transactions by the Trustee
contemplated thereby required the consent or approval of, the
giving of notice to, the registration with or the taking of
any other action with respect to, any governmental authority
or agency under any existing federal or state law governing
the banking or trust powers of the Trustee; and
(vi) the execution and delivery of the Specified
Agreements to which it is a party by the Trustee and the
performance by the Trustee of their respective terms do not
conflict with or result in a violation of (A) any law or
regulation of the United States of America or the State of
Illinois governing trust powers of the Trustee, (B) the
Articles of Association or By-Laws of the Trustee, or (C) to
the best of their knowledge, any indenture, lease, or other
material agreement to which the Trustee is a party or to which
its assets are subject.
(e) The Representative shall have received a certificate dated the
Closing Date of the President, any Vice President, the Treasurer or any
Assistant Treasurer, of Transferor in which such officer shall state that the
representations and warranties of Transferor in this Agreement are true and
correct, and that Transferor has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission, and subsequent to the date of
the most recent financial statements of Transferor delivered to the
Representative hereunder, there has been no material adverse change in the
condition, financial or otherwise, whether or not arising from transactions in
the ordinary course of business, of Transferor except as set forth in or
contemplated by the Registration Statement and the Prospectus.
(f) The Representative shall have received a certificate dated the
Closing Date of the President, any Vice President, the Treasurer or any
Assistant Treasurer, of each of the Originators in which such officer shall
state that the representations and warranties of each of the Originators in
Specified Agreements to which it is a party are true and correct, and that each
of the Originators has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to the Closing
Date.
(g) The Class A Certificates shall be rated ["Aaa"] by Moody's and
["AAA"] by Standard & Poor's, and the Class B Certificates shall be rated at
least ["A2"] by Moody's and ["A"] by Standard & Poor's.
(h) The Representative shall have received evidence satisfactory to it
and its counsel that, on or before the Closing Date, UCC-1 financing statements
have been filed in the office of the Secretary of State of the State of New York
and the office of [the Secretary of State of the State of California] reflecting
the interest of the Transferor in the Receivables and the office of the
[Secretary of State] of Pennsylvania reflecting the interest of the Trust in the
Receivables and the proceeds thereof.
(i) The Representative and Transferor shall have received from counsel
for the Collateral Interest Holder reasonably acceptable to the Representative
and Transferor, the favorable opinion or opinions, dated the Closing Date and
satisfactory in form and substance to the Representative, its counsel,
Transferor and its counsel, and in the aggregate substantially to the effect
that:
(1) The Collateral Interest Holder is a corporation duly
organized and validly existing under the laws of the State of
___________ and has the corporate power and authority under the laws of
the State of ___________ to execute, deliver and perform its
obligations under the Loan Agreement;
(2) the Loan Agreement has been duly and validly authorized,
executed and delivered by the Collateral Interest Holder and
constitutes the legal, valid and legally binding obligation of the
Collateral Interest Holder enforceable against the Collateral Interest
Holder in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
liquidation, moratorium, readjustment of debt or other similar laws
affecting the enforcement of creditors' rights generally, as such laws
may be applied in the event of a bankruptcy, insolvency,
reorganization, liquidation, moratorium, readjustment of debt of, or
the appointment of a receiver with respect to the property of, or a
similar event applicable to the Collateral Interest Holder; and
(3) all consents, approvals, authorizations, licenses, rulings
or orders of or actions by any ___________ or federal governmental
authority and all filings, recordings or publications, if any, required
on the part of the Collateral Interest Holder in connection with the
execution, delivery or performance by the Collateral Interest Holder of
the Loan Agreement have been obtained or made and are in full force and
effect.
(j) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall not have been any
change, or any development involving a prospective change, in or affecting the
business or properties of the Trust any Originator or Transferor the effect of
which, in any case referred to above, is, in the judgment of the Underwriters,
so material and adverse as to make it impractical or inadvisable to proceed with
the offering or the delivery of the Class B Certificates as contemplated by the
Registration Statement and the Prospectus (and any supplements thereto).
(k) Each of the representations and warranties of the Originators,
Back-up Servicer and Transferor contained in the Specified Agreements are true
and correct as of the Closing Date.
(l) Simultaneously with or prior to the Closing Date, $__________
aggregate initial principal amount of the Class A Certificates shall have been
sold to the Class A Underwriters.
Transferor will provide or cause to be provided to the Underwriters
such conformed copies of such opinions, certificates, letters and documents as
the Underwriters may reasonably request.
Section 7. Indemnification and Contribution. (a) Transferor will
indemnify and hold harmless each Underwriter and each Person who controls any
Underwriter within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which the Underwriters or any of
them may become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter and each Person who
controls any Underwriter within the meaning of the Securities Act for any actual
legal or other expenses reasonably incurred by the Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that Transferor will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such documents
in reliance upon and in conformity with written information furnished to
Transferor by any Underwriter specifically for use therein.
(b) Each Underwriter, severally, agrees to indemnify and hold harmless
Transferor against any losses, claims, damages or liabilities to which
Transferor may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the Prospectus or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to Transferor by such Underwriter specifically for use
therein, and will reimburse any actual legal or other expenses reasonably
incurred by Transferor in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action or the assertion by a third party of
a claim, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under subsection (a) or (b) above, notify
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party except and to the extent of any prejudice to
such indemnifying party arising from such failure to provide such notice. In
case any such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by Transferor on the
one hand and the Underwriters on the other from the offering of the Class B
Certificates or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of Transferor on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by Transferor on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Class B Certificates (before
deducting expenses) received by Transferor bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by Transferor or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to the
Class B Certificates purchased by such Underwriter hereunder. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of Transferor under this Section shall be in
addition to any liability that Transferor may otherwise have and shall extend,
upon the same terms and conditions, to each Person, if any, who controls any
Underwriter within the meaning of the Securities Act; and the obligations of any
Underwriter under this Section shall be in addition to any liability that such
Underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each director of Transferor, to each officer of Transferor who
signed the Registration Statement and to each Person, if any, who controls
Transferor within the meaning of the Securities Act.
Section 8. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of Transferor or its officers and of the Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation or statement as to the results thereof, made by or on
behalf of the Underwriters, Transferor or any of their respective
representatives, officers or directors or any controlling Person, and will
survive delivery of and payment for the Class B Certificates. If for any reason
the purchase of the Class B Certificates by the Underwriters is not consummated,
Transferor shall remain responsible for the expenses to be paid or reimbursed by
Transferor pursuant to Section 5(g) hereof and the respective obligations of
Transferor and the Underwriters pursuant to Section 7 hereof shall remain in
effect. If the purchase of the Class B Certificates by the Underwriters is not
consummated for any reason other than solely because of the occurrence of any
event specified in clause (iii), (iv) or (v) of Section 6(c) hereof, Transferor
will reimburse the Underwriters for all actual out-of-pocket expenses (including
fees and disbursements of counsel to the extent previously agreed) reasonably
incurred by them in connection with the offering of the Class B Certificates.
Section 9. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the Class B Certificates agreed to be
purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the amount
of Class B Certificates set forth opposite their names in Schedule I hereto
bears to the aggregate amount of Class B Certificates set forth opposite the
names of all the remaining Underwriters) the Class B Certificates which the
defaulting Underwriter or Underwriters agreed but failed to purchase; provided,
however, that in the event that the aggregate amount of Class B Certificates
which the defaulting Underwriter or Underwriters agreed but failed to purchase
shall exceed 10% of the aggregate principal amount of Class B Certificates set
forth in Schedule I hereto, the remaining Underwriters shall have the right to
purchase all, but shall not be under any obligation to purchase any, of the
Class B Certificates, and if such nondefaulting Underwriters do not purchase all
the Class B Certificates, this Agreement will terminate without liability to any
non-defaulting Underwriter, the Trust or Transferor. In the event of a default
by any Underwriter as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as the Underwriters shall
determine in order that the required changes in the Registration Statement and
the Prospectus (and any supplements thereto) or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to Transferor and any
nondefaulting Underwriter for damages occasioned by its default hereunder.
Section 10. Notices. All communications hereunder will be in writing
and, if sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to them c/o CS First Boston Corporation, 55 East 52nd Street, Park
Avenue Plaza, New York, New York 10055, Attention: Investment Banking Department
Transactions Advisory Group; or if sent to Transferor will be mailed, delivered
or telegraphed and confirmed to it at Mellon Bank, N.A., One Mellon Bank Center,
Pittsburgh, Pennsylvania, 15258, Attention: _______________.
Section 11. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers and directors and controlling Persons referred to in Section 7 hereof,
and no other Person will have any right or obligation hereunder.
Section 12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
Section 13. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to any otherwise applicable principles of conflicts of laws.
Section 14. Miscellaneous. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
Section 15. Representative. The Representative will act for the several
Underwriters in connection with this Agreement and the transactions contemplated
hereby and any action under this Agreement taken by the Representative will be
binding upon all the Underwriters.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts duplicate
hereof, whereupon it will become a binding agreement between Transferor and the
several Underwriters in accordance with its terms.
Very truly yours,
MELLON BANK, N.A.
By: ____________________________
Name: _______________
Title: ________________
The foregoing Underwriting Agreement
is hereby confirmed and accepted,
as of the date first above written:
CS FIRST BOSTON CORPORATION
By: _______________________
Name:
Title:
For itself and the other
Underwriters named in
Schedule I to the foregoing
Underwriting Agreement.
<PAGE>
SCHEDULE I
Underwriter Amount
CS First Boston Corporation.........................................$__________
- -------------------.................................................$----------
Mellon Financial Markets, Inc.......................................$__________
EXHIBIT 3.1
Current
MELLON BANK, N.A.
ARTICLES OF ASSOCIATION
FIRST: The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Mellon Bank, N.A."
SECOND: The Association's main office shall be located at One Mellon Bank
Center, Pittsburgh, Allegheny County, Pennsylvania. The business of the
Association shall be conducted at such office and such other branches and
offices as it may lawfully establish. The Board of Directors shall have the
power to change the location of the main office to any other place within the
limits of Pittsburgh, Allegheny County, Pennsylvania, without the approval of
the shareholders, and shall have the power to establish or change the location
of any branch or branches of the Association to any other location permitted
under applicable law, without the approval of the shareholders subject to
approval by the Office of the Comptroller of the Currency.
THIRD: The Board of Directors of the Association shall consist of persons
who shall be qualified to serve as such, and the exact number of such Directors
shall be fixed from time to time in accordance with law by action of the
shareholders or of the Board of Directors. Except as otherwise provided by law,
any vacancy on the Board of Directors may be filled by action of the Board of
Directors.
FOURTH: The annual meeting of the shareholders of the Association for the
election of Directors and the transaction of all other business that may
properly come before the meeting shall be held on the day specified in the
By-Laws at such place as the Board of Directors may determine. All such meetings
shall be conducted in accordance with such regulations as the By-Laws may
establish or the Board of Directors may prescribe, provided that such
regulations are not inconsistent with the provisions of the banking laws of the
United States or of these Articles.
FIFTH: The capital stock of this Association shall be $175,000,000 divided
into 35,000,000 shares of the par value of $5 each; but said capital stock may
be increased or decreased from time to time in accordance with the provisions of
the banking laws of the United States, and in the case of the increase of the
capital of the Association, and the proposed issue of shares thereof for cash
only, each shareholder shall have the privilege of subscribing for such shares
as he may be entitled to according to the number of shares owned by him before
such issue. No shareholder, however shall as such holder have any such
preemptive or other right or privilege to subscribe for, purchase or receive any
proportionate or other share of any debt obligations which may be converted into
shares of capital stock or any shares which may be issued upon the conversion of
any such debt obligations or any shares of capital stock which may be issued and
sold by this Association pursuant to an Incentive Stock Option Plan approved by
the shareholders on January 23, 1963, as from time to time amended in accordance
with its terms.
SIXTH: The Board of Directors shall have full power to manage and
administer the business and affairs of this Association. All corporate powers of
the Association shall be vested in and may be exercised by the Board of
Directors unless otherwise expressly limited by law. The Board of Directors
shall appoint a Chief Executive Officer, a Chairman and a President of the
Association, and it may appoint, and define the duties and fix the compensation
of, such other officers, employees and agents of the Association as may be
required to transact the Association's business. Except as otherwise provided by
law or these Articles, the Board of Directors may establish such policies and
procedures for the regulation of the Association's business and internal affairs
as it may deem necessary or desirable.
SEVENTH: To the fullest extent that the laws of the Commonwealth of
Pennsylvania, as in effect on January 27, 1987 or as thereafter amended, permit
elimination or limitation of the liability of directors, no Director of the
Association shall be personally liable for monetary damages as such for any
action taken, or any failure to take any action as a Director.
This Article Seventh shall not apply to any administrative proceeding or
action instituted by an appropriate bank regulatory agency which proceeding or
action results in a final order assessing civil money penalties or requiring
affirmative action by the Director in the form of making payments to the
Association.
This Article Seventh shall not apply to any actions filed prior to January
27, 1987, nor to any breach of performance of duty or any failure of performance
of duty by any Director of the Association occurring prior to January 27, 1987.
The provisions of this Article shall be deemed to be a contract with each
Director of the Association who serves as such at any time while this Section is
in effect and each such Director shall be deemed to be doing so in reliance on
the provisions of this Article. Any amendment or repeal of this Article or
adoption of any other provision of the Articles or By-Laws of the Association
which has the effect of increasing Director liability shall operate
prospectively only and shall not affect any action taken, or any failure to act,
prior to the adoption of such amendment, repeal or other provision.
EIGHTH: Indemnification of Directors, Officers and Others.
SECTION I. RIGHT TO INDEMNIFICATION. Except as prohibited by federal or
state law, rule or regulation, every Director and officer of the Association
shall be entitled as of right to be indemnified by the Association against
expenses and any liability paid or incurred by such person in connection with
any actual or threatened claim, action, suit or proceeding, civil, criminal,
administrative, investigative or other, whether brought by or in the right of
the Association or otherwise, in which he or she may be involved, as a party or
otherwise, by reason of such person being or having been a Director or officer
of the Association or by reason of the fact that such person is or was serving
at the request of the Association as a director, officer, employee, fiduciary or
other representative of another corporation, partnership, joint venture, trust,
employee benefit plan or other entity (such claim, action, suit or proceeding
hereinafter being referred to as "Action"); provided, that no such right of
indemnification shall exist with respect to an Action brought by an indemnitee
(as hereinafter defined) against the Association except as provided in the last
sentence of this Section I. Persons who are not directors or officers of the
Association may be similarly indemnified in respect of service to the
Association or to another such entity at the request of the Association to the
extent the Board of Directors at any time denominates any of such persons as
entitled to the benefits of this Article to the extent not prohibited by federal
or state law, rule or regulation. As used in this Article, "indemnitee" shall
include each Director and officer of the Association and each other person
denominated by the Board of Directors as entitled to the benefits of this
Article, "expenses" shall include fees and expenses of counsel selected by any
such indemnitee and "liability" shall include amounts of judgments, excise
taxes, fines, penalties and amounts paid in settlement. An indemnitee shall be
entitled to be indemnified pursuant to this Section I for expenses incurred in
connection with any Action brought by an indemnitee against the Association only
if (i) the Action is a claim for indemnity or expenses under Section III of this
Article or otherwise, (ii) the indemnitee is successful in whole or in part in
the Action for which expenses are claimed or (iii) the indemnification for
expenses is included in a settlement of the Action or is awarded by a court.
SECTION II. RIGHT TO ADVANCEMENT OF EXPENSES. Every indemnitee shall be
entitled as of right to have his or her expenses in any Action (other than an
Action brought by such indemnitee against the Association) paid in advance by
the Association prior to final disposition of such Action, subject to any
obligation which may be imposed by law or by provision in the Articles, By-
Laws, agreement or otherwise to reimburse the Association in certain events.
SECTION III. RIGHT OF INDEMNITEE TO INITIATE ACTION. If a written claim
under Section I or Section II of this Article is not paid in full by the
Association within thirty days after such claim has been received by the
Association, the indemnitee may at any time thereafter initiate an Action
against the Association to recover the unpaid amount of the claim and, if
successful in whole or in part, the indemnitee shall also be entitled to be paid
the expense of prosecuting such Action. It shall be a defense to any Action to
recover a claim under Section I that the indemnitee's conduct was such that
under Pennsylvania law the Association is prohibited from indemnifying the
indemnitee for the amount claimed, but the burden of proving such defense shall
be on the Association. Neither the failure of the Association (including its
Board of Directors, independent legal counsel and its shareholders) to have made
a determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances, nor an actual determination by
the Association (including its Board of Directors, independent legal counsel or
its shareholders) that the indemnitee's conduct was such that indemnification is
prohibited by law, shall be a defense to such Action or create a presumption
that the indemnitee's conduct was such that indemnification is prohibited by
law. The only defense to any such Action to receive payment of expenses in
advance under Section II of this Section shall be failure to make an undertaking
to reimburse if such an undertaking is required by law or by provision in the
Articles, By-Laws, agreement or otherwise.
SECTION IV. INSURANCE AND FUNDING. The Association may purchase and
maintain insurance to protect itself and any person eligible to be indemnified
hereunder against any liability or expense asserted or incurred by such person
in connection with any Action, whether or not the Association would have the
power to indemnify such person against such liability or expense by law or under
the provisions of this Article. The Association may create a trust fund, grant a
security interest, cause a letter of credit to be issued or use other means
(whether or not similar to the foregoing) to ensure the payment of such sums as
may become necessary to effect indemnification as provided herein.
SECTION V. NON-EXCLUSIVITY: NATURE AND EXTENT OF RIGHTS. The rights of
indemnification and advancement of expenses provided for in this Article (i)
shall not be deemed exclusive of any other rights, whether now existing or
hereafter created, to which any indemnitee may be entitled under any agreement
or by- law, charter provision, vote of shareholders or directors or otherwise,
(ii) shall be deemed to create contractual rights in favor of each indemnitee,
(iii) shall continue as to each person who has ceased to have the status
pursuant to which he or she was entitled or was denominated as entitled to
indemnification hereunder and shall inure to the benefit of the heirs and legal
representatives of each indemnitee and (iv) shall be applicable to Actions
commenced after the adoption hereof, whether arising from acts or omissions
occurring before or after the adoption hereof. The rights of indemnification
provided for in this Article may not be amended or repealed so as to limit in
any way the indemnification or the right to advancement of expenses provided for
herein with respect to any acts or omissions occurring prior to the adoption of
any such amendment or repeal.
SECTION VI. EFFECTIVE DATE. This Article Eighth shall apply to every Action
other than an Action filed prior to January 27, 1987, except that it shall not
apply to the extent that Pennsylvania law prohibits its application to any
breach of performance of duty or any failure of performance of duty by an
indemnitee occurring prior to January 27, 1987.
SECTION VII. REGULATORY EXCLUSION. Nothing in this Article shall authorize
the Association to indemnify or to provide insurance which would indemnify any
person against expenses or penalties incurred in an administrative proceeding or
action instituted by an appropriate bank regulatory agency which proceeding or
action results in a final order assessing civil money penalties, and nothing in
this Article shall authorize the Association to indemnify any person against
expenses or payments incurred in such an administrative proceeding or action
which results in a final order requiring affirmative action by such person in
the form of payment to the Association.
NINTH: This Association shall have succession until such time as it is
dissolved by the act of its shareholders owning two-thirds of its stock or until
such time as it is terminated in accordance with the laws of the United States.
TENTH: Special meetings of the shareholders may be called for any purpose
by the Board of Directors, the Chief Executive Officer, the Chairman or the
President, and any such special meeting shall be held at the place, day and time
and upon such notice as the Board of Directors or such person shall determine.
Special meetings of the shareholders shall be called for any purpose upon
written request of shareholders entitled to cast not less than twenty percent of
the votes which all shareholders are entitled to cast at the particular meeting,
and in such case the Secretary shall fix the place, date and time of the meeting
and shall give due notice thereof. Insofar as may be permitted by law, any
action that might be taken at any meeting of the shareholders may be taken
pursuant to waiver of notice thereof and upon the unanimous written consent of
all shareholders of the Association.
ELEVENTH: Except as otherwise provided by law, these Articles of
Association may be amended at any duly convened regular or special meeting of
the shareholders by the affirmative vote of the shareholder owning at least a
majority of the stock of this Association.
As amended, effective June 1, 1996.
<PAGE>
Revised
MELLON BANK, N.A.
ARTICLES OF ASSOCIATION
FIRST: The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Mellon Bank, N.A."
SECOND: The Association's main office shall be located at One Mellon Bank
Center, Pittsburgh, Allegheny County, Pennsylvania. The business of the
Association shall be conducted at such office and such other branches and
offices as it may lawfully establish. The Board of Directors shall have the
power to change the location of the main office to any other place within the
limits of Pittsburgh, Allegheny County, Pennsylvania, without the approval of
the shareholders, and shall have the power to establish or change the location
of any branch or branches of the Association to any other location permitted
under applicable law, without the approval of the shareholders subject to
approval by the Office of the Comptroller of the Currency.
THIRD: The Board of Directors of the Association shall consist of persons
who shall be qualified to serve as such, and the exact number of such Directors
shall be fixed from time to time in accordance with law by action of the
shareholders or of the Board of Directors. Except as otherwise provided by law,
any vacancy on the Board of Directors may be filled by action of the Board of
Directors.
FOURTH: The annual meeting of the shareholders of the Association for the
election of Directors and the transaction of all other business that may
properly come before the meeting shall be held on the day specified in the
By-Laws at such place as the Board of Directors may determine. All such meetings
shall be conducted in accordance with such regulations as the By-Laws may
establish or the Board of Directors may prescribe, provided that such
regulations are not inconsistent with the provisions of the banking laws of the
United States or of these Articles.
FIFTH: The capital stock of this Association shall be $175,000,000 divided
into 35,000,000 shares of the par value of $5 each; but said capital stock may
be increased or decreased from time to time in accordance with the provisions of
the banking laws of the United States, and in the case of the increase of the
capital of the Association, and the proposed issue of shares thereof for cash
only, each shareholder shall have the privilege of subscribing for such shares
as he may be entitled to according to the number of shares owned by him before
such issue. No shareholder, however shall as such holder have any such
preemptive or other right or privilege to subscribe for, purchase or receive any
proportionate or other share of any debt obligations which may be converted into
shares of capital stock or any shares which may be issued upon the conversion of
any such debt obligations or any shares of capital stock which may be issued and
sold by this Association pursuant to an Incentive Stock Option Plan approved by
the shareholders on January 23, 1963, as from time to time amended in accordance
with its terms.
SIXTH: The Board of Directors shall have full power to manage and
administer the business and affairs of this Association. All corporate powers of
the Association shall be vested in and may be exercised by the Board of
Directors unless otherwise expressly limited by law. The Board of Directors
shall appoint a Chief Executive Officer, a Chairman and a President of the
Association, and it may appoint, and define the duties and fix the compensation
of, such other officers, employees and agents of the Association as may be
required to transact the Association's business. Except as otherwise provided by
law or these Articles, the Board of Directors may establish such policies and
procedures for the regulation of the Association's business and internal affairs
as it may deem necessary or desirable.
SEVENTH: To the fullest extent that the laws of the Commonwealth of
Pennsylvania, as in effect on January 27, 1987 or as thereafter amended, permit
elimination or limitation of the liability of directors, no Director of the
Association shall be personally liable for monetary damages as such for any
action taken, or any failure to take any action as a Director.
This Article Seventh shall not apply to any administrative proceeding or
action instituted by an appropriate bank regulatory agency which proceeding or
action results in a final order assessing civil money penalties or requiring
affirmative action by the Director in the form of making payments to the
Association.
This Article Seventh shall not apply to any actions filed prior to January
27, 1987, nor to any breach of performance of duty or any failure of performance
of duty by any Director of the Association occurring prior to January 27, 1987.
The provisions of this Article shall be deemed to be a contract with each
Director of the Association who serves as such at any time while this Section is
in effect and each such Director shall be deemed to be doing so in reliance on
the provisions of this Article. Any amendment or repeal of this Article or
adoption of any other provision of the Articles or By-Laws of the Association
which has the effect of increasing Director liability shall operate
prospectively only and shall not affect any action taken, or any failure to act,
prior to the adoption of such amendment, repeal or other provision.
EIGHTH: Indemnification of Directors, Officers and Others.
SECTION I. RIGHT TO INDEMNIFICATION. Except as prohibited by law, every
Director and officer of the Association shall be entitled as of right to be
indemnified by the Association against expenses and any liability paid or
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal, administrative, investigative or
other, whether brought by or in the right of the Association or otherwise, in
which he or she may be involved, as a party or otherwise, by reason of such
person being or having been a Director or officer of the Association or by
reason of the fact that such person is or was serving at the request of the
Association as a director, officer, employee, fiduciary or other representative
of another corporation, partnership, joint venture, trust, employee benefit plan
or other entity (such claim, action, suit or proceeding hereinafter being
referred to as "Action"); provided, that no such right of indemnification shall
exist with respect to an Action brought by an indemnitee (as hereinafter
defined) against the Association except as provided in the last sentence of this
Section I. Persons who are not directors or officers of the Association may be
similarly indemnified in respect of service to the Association or to another
such entity at the request of the Association to the extent the Board of
Directors at any time denominates any of such persons as entitled to the
benefits of this Article. As used in this Article, "indemnitee" shall include
each Director and officer of the Association and each other person denominated
by the Board of Directors as entitled to the benefits of this Article,
"expenses" shall include fees and expenses of counsel selected by any such
indemnitee and "liability" shall include amounts of judgments, excise taxes,
fines, penalties and amounts paid in settlement. An indemnitee shall be entitled
to be indemnified pursuant to this Section I for expenses incurred in connection
with any Action brought by an indemnitee against the Association only if (i) the
Action is a claim for indemnity or expenses under Section III of this Article or
otherwise, (ii) the indemnitee is successful in whole or in part in the Action
for which expenses are claimed or (iii) the indemnification for expenses is
included in a settlement of the Action or is awarded by a court.
SECTION II. RIGHT TO ADVANCEMENT OF EXPENSES. Every indemnitee shall be
entitled as of right to have his or her expenses in any Action (other than an
Action brought by such indemnitee against the Association) paid in advance by
the Association prior to final disposition of such Action, subject to any
obligation which may be imposed by law or by provision in the Articles, By-Laws,
agreement or otherwise to reimburse the Association in certain events.
SECTION III. RIGHT OF INDEMNITEE TO INITIATE ACTION. If a written claim
under Section I or Section II of this Article is not paid in full by the
Association within thirty days after such claim has been received by the
Association, the indemnitee may at any time thereafter initiate an Action
against the Association to recover the unpaid amount of the claim and, if
successful in whole or in part, the indemnitee shall also be entitled to be paid
the expense of prosecuting such Action. It shall be a defense to any Action to
recover a claim under Section I that the indemnitee's conduct was such that
under Pennsylvania law the Association is prohibited from indemnifying the
indemnitee for the amount claimed, but the burden of proving such defense shall
be on the Association. Neither the failure of the Association (including its
Board of Directors, independent legal counsel and its shareholders) to have made
a determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances, nor an actual determination by
the Association (including its Board of Directors, independent legal counsel or
its shareholders) that the indemnitee's conduct was such that indemnification is
prohibited by law, shall be a defense to such Action or create a presumption
that the indemnitee's conduct was such that indemnification is prohibited by
law. The only defense to any such Action to receive payment of expenses in
advance under Section II of this Section shall be failure to make an undertaking
to reimburse if such an undertaking is required by law or by provision in the
Articles, By- Laws, agreement or otherwise.
SECTION IV. INSURANCE AND FUNDING. The Association may purchase and
maintain insurance to protect itself and any person eligible to be indemnified
hereunder against any liability or expense asserted or incurred by such person
in connection with any Action, whether or not the Association would have the
power to indemnify such person against such liability or expense by law or under
the provisions of this Article. The Association may create a trust fund, grant a
security interest, cause a letter of credit to be issued or use other means
(whether or not similar to the foregoing) to ensure the payment of such sums as
may become necessary to effect indemnification as provided herein.
SECTION V. NON-EXCLUSIVITY: NATURE AND EXTENT OF RIGHTS. The rights of
indemnification and advancement of expenses provided for in this Article (i)
shall not be deemed exclusive of any other rights, whether now existing or
hereafter created, to which any indemnitee may be entitled under any agreement
or by- law, charter provision, vote of shareholders or directors or otherwise,
(ii) shall be deemed to create contractual rights in favor of each indemnitee,
(iii) shall continue as to each person who has ceased to have the status
pursuant to which he or she was entitled or was denominated as entitled to
indemnification hereunder and shall inure to the benefit of the heirs and legal
representatives of each indemnitee and (iv) shall be applicable to Actions
commenced after the adoption hereof, whether arising from acts or omissions
occurring before or after the adoption hereof. The rights of indemnification
provided for in this Article may not be amended or repealed so as to limit in
any way the indemnification or the right to advancement of expenses provided for
herein with respect to any acts or omissions occurring prior to the adoption of
any such amendment or repeal.
SECTION VI. EFFECTIVE DATE. This Article Eighth shall apply to every Action
other than an Action filed prior to January 27, 1987, except that it shall not
apply to the extent that Pennsylvania law prohibits its application to any
breach of performance of duty or any failure of performance of duty by an
indemnitee occurring prior to January 27, 1987.
NINTH: This Association shall have succession until such time as it is
dissolved by the act of its shareholders owning two-thirds of its stock or until
such time as it is terminated in accordance with the laws of the United States.
TENTH: Special meetings of the shareholders may be called for any purpose
by the Board of Directors, the Chief Executive Officer, the Chairman or the
President, and any such special meeting shall be held at the place, day and time
and upon such notice as the Board of Directors or such person shall determine.
Special meetings of the shareholders shall be called for any purpose upon
written request of shareholders entitled to cast not less than twenty percent of
the votes which all shareholders are entitled to cast at the particular meeting,
and in such case the Secretary shall fix the place, date and time of the meeting
and shall give due notice thereof. Insofar as may be permitted by law, any
action that might be taken at any meeting of the shareholders may be taken
pursuant to waiver of notice thereof and upon the unanimous written consent of
all shareholders of the Association.
ELEVENTH: Except as otherwise provided by law, these Articles of
Association may be amended at any duly convened regular or special meeting of
the shareholders by the affirmative vote of the shareholder owning at least a
majority of the stock of this Association.
As amended, effective November 19, 1996
MELLON BANK, N.A.
BY-LAWS
ARTICLE ONE
Meetings of Shareholders
Section 1. ANNUAL MEETINGS. The annual meeting of the shareholders of the
Bank for the election of Directors and the transaction of all other business
that may properly come before the meeting shall be held on the third Tuesday of
April in each year, or if that day is a legal holiday, then on the next business
day following. The annual meeting shall be held at such time and place and upon
such notice as the Board of Directors shall determine.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called for any purpose by the Board of Directors, the Chief Executive Officer,
the Chairman or the President, and any such special meeting shall be held at the
place, day and time and upon such notice as the Board of Directors or such
person shall determine. Special meetings of the shareholders shall be called for
any purpose upon the written request of shareholders entitled to cast not less
than twenty percent of the votes which all shareholders are entitled to cast at
the particular meeting, and in such case the Secretary shall fix the place, date
and time of the meeting and shall give due notice thereof.
Section 3. ORGANIZATION. The Chief Executive Officer or, in the event of
his absence or disability, the Chairman, the President or any other officer of
the Bank designated by the Board of Directors shall preside at all meetings of
the shareholders. All meetings shall be conducted in accordance with such
regulations as the Board of Directors may from time to time prescribe or as the
presiding officer may establish.
Section 4. VOTING. Shareholders may vote at any meeting in person or by
proxies duly authorized in writing. The Board of Directors may fix a record date
for determining those shareholders entitled to vote at any such meeting.
Section 5. QUORUM; SHAREHOLDER ACTION. The presence, in person or by proxy,
of shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast shall constitute a quorum for the transaction
of business at any meeting of shareholders. Unless otherwise provided by law,
any action of the shareholders may be taken by a majority of the votes cast at
any duly convened shareholders' meeting. Any action that may be taken by the
shareholders at a duly convened meeting may also be taken pursuant to waiver of
notice thereof and upon the unanimous written consent of all shareholders of the
Bank; such consent shall set forth the action so taken and shall be filed with
the Secretary.
<PAGE>
ARTICLE TWO
Directors
Section 1. BOARD OF DIRECTORS. The Board of Directors shall manage and
administer the business and affairs of the Bank. Except as expressly limited by
law, all corporate powers of the Bank shall be vested in and may be exercised by
the Board of Directors.
Section 2. NUMBER. The Board of Directors shall consist of such number of
Directors as shall be fixed from time to time by the shareholders or by the
Board of Directors.
Section 3. ELECTION; TERM OF OFFICE. The Board of Directors shall be
elected at each annual meeting of the shareholders. Each Director shall hold
office from the time of his election and his qualification to serve as such and
until the election and qualification of his successor or until such Director's
earlier death, resignation, disqualification or removal.
Section 4. ORGANIZATION MEETING. A meeting of the Board of Directors for
the purpose of organizing the new Board, appointing the officers of the Bank for
the ensuing year and transacting other business shall be held without notice
immediately following the annual election of directors or as soon thereafter as
is practicable at such time and place as the Secretary may designate.
Section 5. REGULAR MEETINGS. Unless the Board otherwise directs, regular
meetings of the Board of Directors shall be held without notice at such times
and places as the Board of Directors shall determine, in its Board Policies
adopted at its Organization Meeting each year.
Section 6. SPECIAL MEETINGS. The Chief Executive Officer, the Chairman, or
the President may call a special meeting of the Board of Directors at any time.
Any such officer or the Secretary shall call a special meeting of the Board upon
the written request of any three members of the Board. A special meeting shall
be held at such time and place as may be designated by the person or persons
calling the meeting. The person or persons calling the meeting shall cause such
notice of the meeting and of its purpose to be given as he may deem appropriate,
and such notice may be given orally or in writing, in person or by telephone,
mail or telegram.
Section 7. QUORUM; BOARD ACTION. A majority of the Directors then in office
shall constitute a quorum for the transaction of business at any meeting. Unless
otherwise provided by law, any action of the Board may be taken upon the
affirmative vote of a majority of the Directors present at a duly convened
meeting or upon the unanimous written consent of all Directors.
Section 8. PARTICIPATION OTHER THAN BY ATTENDANCE. To the full extent
permitted by law, any Director may participate in any regular or special meeting
of the Board of Directors or of any committee of the Board of Directors by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting are able to hear each other.
Section 9. VACANCIES. The Board of Directors may fill any vacancy on the
Board. Any Director so elected shall hold office until the election and
qualification of his successor or until such Director's earlier death,
resignation, disqualification or removal.
Section 10. COMPENSATION. Each Director who does not receive a salary from
the Bank or any affiliate thereof shall be entitled to such compensation as the
Board shall determine for his service upon the Board of Directors and any of its
committees, for his attendance at meetings of the Board and any of its
committees and for his expenses incident thereto. Directors shall also be
entitled to such compensation as the Board shall determine for services rendered
to the Bank in any capacity other than as Directors.
Section 11. RESIGNATION; REMOVAL. Any Director may resign by submitting his
resignation to the Chief Executive Officer, the Chairman, the President or the
Secretary of the Bank. Such resignation shall become effective upon its
submission or at any later time specified. Any Director may be removed from
office by action of the shareholders or the Board taken in accordance with
applicable law.
Section 12. PERSONAL LIABILITY FOR MONETARY DAMAGES.
(a) To the fullest extent that the laws of the Commonwealth of
Pennsylvania, as in effect on January 27, 1987 or as thereafter amended, permit
elimination or limitation of the liability of directors, no Director of the
Association shall be personally liable for monetary damages as such for any
action taken, or any failure to take any action, as a Director.
(b) This Section 12 shall not apply to any administrative
proceeding or action instituted by an appropriate bank regulatory agency which
proceeding or action results in a final order assessing civil money penalties or
requiring affirmative action by the Director in the form of making payments to
the Association.
(c) This Section 12 shall not apply to any actions filed prior
to January 27, 1987, nor to any breach of performance of duty or any failure of
performance of duty by any Director of the Association occurring prior to
January 27, 1987. The provisions of this Section shall be deemed to be a
contract with each Director of the Association who serves as such at any time
while this Section is in effect and each such Director shall be deemed to be
doing so in reliance on the provisions of this Section. Any amendment repeal of
this Section or adoption of any other provision of the By-Laws or the Articles
of the Association which has the effect of increasing Director liability shall
operate prospectively only and shall not affect any action taken, or any failure
to act, prior to the adoption of such amendment, repeal or other provision.
ARTICLE THREE
Committees of the Board
Section 1. APPOINTMENT; POWERS. The Board may appoint one or more standing
or temporary committees consisting of two or more Directors. The Board may
invest such committees with such powers and authority, subject to such
conditions, as it may see fit.
Section 2. EXECUTIVE COMMITTEE. The Board shall appoint from among its
members an Executive Committee which, so far as may be permitted by law and
except as specifically limited by the Board pursuant to Section 1 hereof, shall
have all the powers and may exercise all the authority of the Board during the
intervals between the meetings thereof. All acts done and powers conferred by
the Executive Committee shall be deemed to be, and may be certified as being,
done or conferred under authority of the Board.
Section 3. TERM; VACANCIES; ALTERNATES. All committee members appointed by
the Board shall serve at the pleasure of the Board. The Board may fill any
committee vacancy and may designate one or more eligible Directors as alternate
members of any committee to take the place of any absent or disqualified member
at any meeting. The Chief Executive Officer may appoint a Director who is
eligible to serve on any such committee as a member pro tempore to take the
place of any absent or disqualified member or alternate member.
Section 4. ORGANIZATION. All committees shall determine their own
organization, procedures and times and places of meeting, unless otherwise
directed by the Board and except as otherwise provided in these By-Laws.
ARTICLE FOUR
Officers
Section 1. CHIEF EXECUTIVE OFFICER. The Board of Directors shall appoint
one of its members to be Chief Executive Officer. The Chief Executive Officer
shall preside at all meetings of the shareholders and of the Board of Directors.
He shall be the chief executive officer of the Bank and shall have general
executive powers concerning all the operations and business of the Bank. The
Chief Executive Officer shall have and exercise such further powers and duties
as may be conferred upon, or assigned to, him by the Board of Directors, and he
may delegate to any other officer such executive and other powers and duties as
he deems advisable. In the event of the absence or disability of the Chief
Executive Officer, any other officer of the Bank designated by the Board of
Directors shall preside at all meetings of the shareholders and of the Board of
Directors and shall exercise all other powers and authority of the Chief
Executive Officer.
Section 2. CHAIRMAN. The Board of Directors shall appoint one of its
members to be Chairman. The Chairman shall have general executive powers and he
shall have and exercise such further powers and duties as may be conferred upon,
or assigned to, him by the Board of Directors or the Chief Executive Officer.
Section 3. PRESIDENT. The Board of Directors shall appoint one of its
members to be President. The President shall have general executive powers, and
he shall have and exercise such further powers and duties as may be conferred
upon, or assigned to, him by the Board of Directors or the Chief Executive
Officer.
Section 4. SENIOR OFFICERS. The Board of Directors may appoint, or the
Chief Executive Officer may appoint, subject to confirmation by the Board of
Directors, one or more senior officers of the Bank, any of whom may be
designated as Vice Chairmen or as executive, senior, group or administrative
vice presidents or given any other descriptive titles. Each senior officer shall
have and exercise such powers and duties as may be conferred upon, or assigned
to, him by the Board of Directors or the Chief Executive Officer.
Section 5. SECRETARY; ASSISTANT SECRETARIES. The Board of Directors shall
appoint a Secretary. The Secretary shall act as secretary of all meetings of the
shareholders, of the Board and of the Executive Committee, and he shall keep
minutes of all such meetings. He shall give such notice of the meetings as is
required by law or these By-Laws. He shall be the custodian of the minute book,
stock record and transfer books and all other general corporate records. He
shall be the custodian of the corporate seal and shall have the power to affix
and attest the same, and he may delegate such power to one or more officers,
employees or agents of the Bank. He shall have and exercise such further powers
and duties as may be conferred upon, or assigned to, him by the Board of
Directors or the Chief Executive Officer. The Board or the Chief Executive
Officer may appoint one or more Assistant Secretaries who shall assist the
Secretary in the performance of his duties. At the direction of the Secretary or
in the event of his absence or disability, an Assistant Secretary shall perform
the duties of the Secretary. Each Assistant Secretary shall have and exercise
such further powers and duties as may be conferred upon, or assigned to, him by
the Board, the Chief Executive Officer or the Secretary.
Section 6. OTHER OFFICERS. The Board of Directors, the Chief Executive
Officer or the delegate of either of them may appoint or hire such additional
officers of the Bank, who may be designated as vice presidents, assistant vice
presidents, officers, assistant officers or given any other descriptive titles,
and may hire such additional employees as it or he may deem necessary or
desirable to transact the business of the Bank, and the Board, the Chief
Executive Officer or such delegate may establish the conditions of employment of
any of the persons mentioned above and may fix their compensation and dismiss
them. Such persons may have such descriptive titles as may be appropriate, and
they shall, respectively, have and exercise such powers and duties as pertain to
their several offices or as may be conferred upon, or assigned to, them by the
appropriate appointing authority.
Section 7. TENURE OF OFFICE. The Chief Executive Officer, the Chairman, and
the President shall each hold office for the year for which the Board was
elected and until the appointment and qualification of his successor or until
his earlier death, resignation, disqualification or removal. All other officers
and employees shall hold office at the pleasure of the appropriate appointing
authority.
Section 8. COMPENSATION. The Board of Directors may fix the compensation of
those officers appointed pursuant to Sections 1, 2, 3, and 4 of this Article
Four as the Board may deem appropriate, and it may award additional compensation
to any officer or employee of the Bank for any year or years based upon the
performance of that person during any such period, the success of the operations
of the Bank thereof during any such period or any other reason deemed
appropriate. Unless the Board of Directors shall otherwise direct, the Chief
Executive Officer or his delegate shall fix the compensation of all other
officers or employees of the Bank.
ARTICLE FIVE
Stock, Stock Certificates and Holders of Record
Section 1. STOCK CERTIFICATES. Every holder of fully-paid stock of the Bank
shall be entitled to a certificate or certificates evidencing the number of
shares so held. Such certificates shall be in such form as the Board of
Directors may from time to time prescribe in accordance with law. Such
certificates shall be signed by the Chief Executive Officer, countersigned by
the Secretary or any other officer so authorized by the Board of Directors and
sealed with the seal of the Bank, and such signatures and seal may be facsimile
or otherwise as permitted by law.
Section 2. TRANSFER OF STOCK. Except as otherwise provided by law, transfer
of share certificates and of the shares of stock of the Bank represented thereby
shall be made only on the books of the Bank upon surrender to the Bank or its
agent of the certificate or certificates for such shares properly endorsed by
the shareholder, or by his assignee, agent or legal representative, who shall
furnish proper evidence of assignment, authority or legal succession, or by the
agent of one of the foregoing thereunto duly authorized by an instrument duly
executed and filed with the Bank in accordance with regular commercial practice.
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The holder of any shares
of the Bank shall immediately notify it of any loss, theft or destruction of the
stock certificate representing such shares. New certificates for shares of stock
may be issued to replace such certificates upon satisfactory proof of the loss,
theft or destruction and upon such other terms and conditions as the Board of
Directors, the Chief Executive Officer or any person designated by either of
them may from time to time determine.
Section 4. HOLDERS OF RECORD. The Bank shall be entitled to treat any
person in whose name shares of stock of the Bank stand on its books as the
holder and owner in fact thereof for all purposes, and it shall not be bound to
recognize any equitable or other claims to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise expressly provided by law.
ARTICLE SIX
Signing Authority
Section 1. SIGNING AUTHORITY. The Chief Executive Officer, the Chairman,
the President, any senior officer or any Vice President of the Bank shall have
full power and authority, in the name and on behalf of the Bank, under the seal
of the Bank or otherwise, to execute, acknowledge and deliver any and all
agreements, instruments or other documents relating to property or rights of all
kinds held or owned by the Bank or to the operation of the Bank, all as may be
incidental to the operation of the Bank and subject to such limitations as the
Board of Directors or the Chief Executive Officer may impose. Any such
agreement, instrument or document may also be executed, acknowledged and
delivered in the name and on behalf of the Bank, under seal of the Bank or
otherwise, by such other officers, employees or agents of the Bank as the Board
of Directors, the Chief Executive Officer or the delegate of either of them may
from time to time authorize. In each such case, the authority so conferred shall
be subject to such limitations as the Board of Directors, the Chief Executive
Officer or the delegate may impose. Any officer, employee or agent authorized
hereunder to execute, acknowledge and deliver any such agreement, instrument or
document is also authorized to cause the Secretary, any Assistant Secretary or
any other authorized person to affix the seal of the Bank thereto and to attest
it.
Section 2. TRUST AND INVESTMENT DEPARTMENT SIGNING AUTHORITY. The Chief
Executive Officer, the Chairman, the President, any Vice Chairman, the Officer
in charge of the Trust and Investment Department, any senior officer or Vice
President in such Department shall have full power and authority, in the name
and on behalf of the Bank as trustee, administrator, executor, registrar,
transfer agent, or in any other fiduciary capacity, under seal of the Bank or
otherwise:
(a) To execute, acknowledge and deliver deeds, bonds, mortgages,
agreements, bills of sale, powers of attorney and all other instruments in
writing that may be necessary or proper in the management or in the sale,
leasing or other disposition of any real or personal property held by the Bank
in any fiduciary capacity; and to execute, acknowledge, deliver or accept
agreements, indentures, deeds of trust or mortgages that may be necessary or
proper in the acceptance of trusts, depositaryships, agency, custodian, escrow
or any other fiduciary accounts;
(b) To execute, acknowledge and deliver any instrument in
writing that may be necessary in order to assign, subordinate, release, satisfy
or affect in any other manner of record the whole or part of any judgment or of
any mortgage or other lien (except a corporate mortgage, deed of trust,
indenture or other instrument executed and delivered to the Bank as trustee for
the purpose of securing an issue of corporate obligations) held by the Bank in
any fiduciary capacity;
(c) To execute, acknowledge and deliver all authentications or
certifications of the Bank as trustee under any mortgage, deed of trust,
indenture or agreement securing or providing for bonds, debentures, notes or
other securities and all certificates as registrar or transfer agent, and all
checks as disbursing agent, and all certificates of deposit, interim
certificates and trust receipts or certificates;
(d) To execute, acknowledge and deliver, pursuant to the terms
of any corporate mortgage, deed of trust, indenture or other instrument executed
and delivered to the Bank as trustee for the purpose of securing an issue of
corporate obligations, any instrument in writing that may be necessary to
assign, modify, release or satisfy any such mortgage, deed of trust, indenture
or other instrument or that may be necessary to release all or any part of the
property covered by such mortgage, deed of trust, indenture or other instrument
from the lien thereof;
(e) To appear in any court of record and to enter upon the
record in such court an assignment, subordination, release or satisfaction, in
whole or in part, of any judgment held by or controlled by the Bank in any
fiduciary capacity;
(f) To verify under oath all pleadings and all other instruments
of every nature and description that may be prepared by or on behalf of the Bank
in any fiduciary capacity and of which such verification may be necessary or
proper.
All such powers and authority shall be subject to such
limitations as the Board of Directors or the Chief Executive Officer may impose.
Any such agreement, instrument or other document may also be
executed, acknowledged and delivered in the name and on behalf of the Bank in
any fiduciary capacity, under seal of the Bank or otherwise, by such other
officers, employees or agents of the Bank as the Board of Directors, the Chief
Executive Officer, the Officer in charge of the Trust and Investment Department
or the delegate of any of them may from time to time authorize. In each such
case, the authority so conferred shall be subject to such limitations as the
Board of Directors, the Chief Executive Officer, the Officer in charge of the
Trust and Investment Department or the delegate may impose.
Any officer, employee or agent authorized hereunder to execute,
acknowledge and deliver any such agreement, instrument or document is also
authorized to cause the Secretary, any Assistant Secretary, any Trust Officer or
Assistant Trust Officer or any other authorized person to affix the seal of the
Bank thereto and to attest it.
ARTICLE SEVEN
Trust and Investment Department
Section 1. EXERCISE OF FIDUCIARY POWERS. The administration of all
fiduciary powers of the Bank, except those incident to the conduct of the
banking business, shall be conducted through the Trust and Investment
Department. All fiduciary records of the Trust and Investment Department shall
be kept separate and distinct from other records of the Bank.
Section 2. TRUST AND INVESTMENT COMMITTEE. The Board shall appoint from
among its members a Trust and Investment Committee which, so far as may be
permitted by law and except as specifically limited by the Board pursuant to
Article Three, Section 1 hereof, shall have general responsibility for the
proper exercise of the fiduciary powers of the Bank. The Trust and Investment
Committee may appoint such committees of the Trust and Investment Department as
it may deem necessary or desirable for the proper exercise of the Bank's
fiduciary powers, and it may assign to any such committee or to any officer or
employee of the Trust and Investment Department the administration of such of
the fiduciary powers of the Bank as it may consider proper.
Section 3. MANAGEMENT. The Board of Directors shall appoint an Officer of
the Bank who shall be responsible for the activities of the Trust and Investment
Department, subject to the general supervision of the Board of Directors and the
Chief Executive Officer. The Officer in charge of the Trust and Investment
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust and Investment Department in accordance
with the provisions of law and all applicable regulations.
Section 4. TRUST AND INVESTMENT DEPARTMENT OFFICERS. The Board of
Directors, the Chief Executive Officer or the Officer in charge of the Trust and
Investment Department may appoint such other officers of the Trust and
Investment Department as it or he may deem necessary or desirable for the proper
exercise of the Bank's fiduciary powers. Such officers shall, respectively, have
and exercise such powers and duties as pertain to their several offices or as
may be conferred upon, or assigned to, them by the Board of Directors, the Chief
Executive Officer or the Officer in charge of the Trust and Investment
Department.
Section 5. TRUST SECURITIES AND INVESTMENTS. Any funds or assets held in
the Trust and Investment Department shall be kept separate from the assets of
the Bank and shall be placed in the joint custody or control of not less than
two officers or employees of the Bank who are adequately bonded and are
designated for that purpose by the Trust and Investment Committee of the Board
of Directors or by any officer of the Trust and Investment Department to whom
the Trust and Investment Committee may delegate such power of designation.
ARTICLE EIGHT
General Provisions
Section 1. FISCAL YEAR. The fiscal year of the Bank shall be the calendar
year.
Section 2. RECORDS. The Articles of Association, By-Laws and the
proceedings of all meetings of the shareholders, the Board of Directors, the
Executive Committee, and any other committee of the Board shall be recorded in
appropriate minute books provided for the purpose. The minutes of each meeting
shall be signed by the Secretary or other person acting as secretary of the
meeting.
Section 3. SEAL. The Board of Directors shall from time to time prescribe
the form of a suitable corporate seal.
Section 4. GENDER AND NUMBER. Any reference in these By-Laws to one gender,
whether masculine, feminine or neuter, includes the other two, and the singular
includes the plural and vice versa unless the context indicates otherwise.
Section 5. CORPORATE GOVERNANCE PROCEDURES. To the extent not inconsistent
with applicable Federal banking statutes or regulations, or bank safety and
soundness, the Bank's corporate governance procedures shall be governed by a d
construed in accordance with the laws of the Commonwealth of Pennsylvania.
Section 6. CERTAIN INDEMNIFICATION PAYMENTS. For purposes of the
designation contemplated by 12 CFR ss. 7.2014(b) (or any successor provision),
the laws of the Commonwealth of Pennsylvania sha l govern indemnification
payments and requests for indemnification payments referred to in that paragraph
(or any successor provision).
ARTICLE NINE
By-Laws
Section 1. AMENDMENTS. These By-Laws may be amended, altered and repealed,
and new By-Laws may be adopted, either by action of the shareholders or (except
as otherwise provided by law) by action of the Board of Directors.
Section 2. INSPECTION. A copy of the By-Laws, with all amendments thereto,
shall at all times be kept in a convenient place at the head office of the Bank
and shall be open for inspection to all shareholders during normal business
hours.
As amended, effective November 19, 1996.
===============================================================================
MELLON BANK, N.A.
Transferor
AFCO CREDIT CORPORATION
Servicer
AFCO ACCEPTANCE CORPORATION
Servicer
PREMIUM FINANCING SPECIALISTS, INC.
Back-up Servicer
and
THE FIRST NATIONAL BANK OF CHICAGO
Trustee
on behalf of the Holders
of the Mellon Bank Premium Finance Loan Master Trust
POOLING AND SERVICING AGREEMENT
Dated as of December 1, 1996
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..................................................
SECTION 1.1 Definitions.............................................
SECTION 1.2 Other Interpretive Provisions...........................
ARTICLE II CONVEYANCE OF RECEIVABLES....................................
SECTION 2.1 Conveyance of Receivables...............................
SECTION 2.2 Acceptance by Trustee...................................
SECTION 2.3 Representations and Warranties of Transferor............
SECTION 2.4 Representations and Warranties of Transferor Relating
to this Agreement and the Receivables.................
SECTION 2.5 Covenants of Transferor.................................
SECTION 2.6 Removal of Receivables..................................
ARTICLE III ADMINISTRATION AND SERVICING................................
SECTION 3.1 Acceptance of Appointment and Other
Matters Relating to Servicer...........................
SECTION 3.2 Servicing Compensation..................................
SECTION 3.3 Representations and Warranties of
Servicer..............................................
SECTION 3.4 Reports and Records for Trustee.........................
SECTION 3.5 Annual Servicer's Certificate...........................
SECTION 3.6 Annual Independent Accountants' Servicing
Report................................................
SECTION 3.7 Tax Treatment...........................................
SECTION 3.8 Notices to Transferor...................................
SECTION 3.9 Reports to the Commission...............................
ARTICLE IV RIGHTS OF HOLDERS AND ALLOCATION AND
APPLICATION OF COLLECTIONS...................................
SECTION 4.1 Rights of Holders.......................................
SECTION 4.2 Establishment of Accounts...............................
SECTION 4.3 Collections and Allocations.............................
SECTION 4.4 Shared Principal Collections............................
SECTION 4.5 Excess Finance Charge Collections.......................
ARTICLE V [ARTICLE V IS RESERVED AND SHALL BE
SPECIFIED IN THE SUPPLEMENT WITH RESPECT TO
ANY SERIES.]...................................................
ARTICLE VI THE CERTIFICATES.............................................
SECTION 6.1 The Certificates........................................
SECTION 6.2 Authentication of Certificates..........................
SECTION 6.3 Registration of Transfer and Exchange
of Certificates........................................
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen
Certificates...........................................
SECTION 6.5 Persons Deemed Owners...................................
SECTION 6.6 Appointment of Paying Agent.............................
SECTION 6.7 Access to List of Holders' Names and
Addresses..............................................
SECTION 6.8 Authenticating Agent....................................
SECTION 6.9 New Issuances...........................................
SECTION 6.10 Book-Entry Certificates.................................
SECTION 6.11 Notices to Clearing Agency..............................
SECTION 6.12 Definitive Certificates.................................
SECTION 6.13 Global Certificate, Euro-Certificate
Exchange Date..........................................
SECTION 6.14 Meetings of Holders.....................................
ARTICLE VII OTHER MATTERS RELATING TO TRANSFEROR........................
SECTION 7.1 Liability of Transferor.................................
SECTION 7.2 Merger or Consolidation of, or
Assumption of the Obligations of,
Transferor.............................................
SECTION 7.3 Limitation on Liability.................................
SECTION 7.4 Liabilities.............................................
ARTICLE VIII OTHER MATTERS RELATING TO SERVICER..........................
SECTION 8.1 Liability of Servicer...................................
SECTION 8.2 Merger or Consolidation of, or Assumption
of the Obligations of, Servicer........................
SECTION 8.3 Limitation on Liability of Servicer and
Others.................................................
SECTION 8.4 Servicer Indemnification of the Trust
and Trustee............................................
SECTION 8.5 Servicer Not to Resign..................................
SECTION 8.6 Access to Certain Documentation and
Information Regarding the Receivables..................
SECTION 8.7 Delegation of Duties....................................
SECTION 8.8 Examination of Records..................................
ARTICLE IX TRUST PAY OUT EVENTS.........................................
SECTION 9.1 Trust Pay Out Events....................................
SECTION 9.2 Additional Rights Upon the Occurrence
of Certain Events......................................
ARTICLE X SERVICER DEFAULTS.............................................
SECTION 10.1 Servicer Defaults.......................................
SECTION 10.2 Trustee to Act; Appointment of
Successor..............................................
SECTION 10.3 Notification to Holders.................................
SECTION 10.4 Waiver of Past Defaults.................................
ARTICLE XI TRUSTEE......................................................
SECTION 11.1 Duties of Trustee.......................................
SECTION 11.2 Certain Matter Affecting Trustee........................
SECTION 11.3 Trustee Not Liable for Recitals in
Certificates...........................................
SECTION 11.4 Trustee May Not Own Certificates........................
SECTION 11.5 Servicer to Pay Trustee's Fees and
Expenses...............................................
SECTION 11.6 Eligibility Requirements for Trustee....................
SECTION 11.7 Resignation or Removal of Trustee.......................
SECTION 11.8 Successor Trustee.......................................
SECTION 11.9 Merger or Consolidation of Trustee......................
SECTION 11.10 Appointment of Co-Trustee or Separate
Trustee................................................
SECTION 11.11 Tax Returns.............................................
SECTION 11.12 Trustee May Enforce Claims Without
Possession of Certificates.............................
SECTION 11.13 Suits for Enforcement...................................
SECTION 11.14 Rights of Holders to Direct Trustee.....................
SECTION 11.15 Representations and Warranties of
Trustee................................................
SECTION 11.16 Maintenance of Office or Agency.........................
SECTION 11.17 Obligor Claims..........................................
SECTION 11.18 Liabilities to Obligors.................................
ARTICLE XII TERMINATION..................................................
SECTION 12.1 Termination of Trust.....................................
SECTION 12.2 Optional Purchase........................................
SECTION 12.3 Final Payment with Respect to any
Series..................................................
SECTION 12.4 Termination Rights of Transferor.........................
ARTICLE XIII MISCELLANEOUS PROVISIONS...................................
SECTION 13.1 Amendment................................................
SECTION 13.2 Protection of Right, Title and
Interest to Trust.......................................
SECTION 13.3 Limitation on Rights of Holders..........................
SECTION 13.4 Governing Law............................................
SECTION 13.5 Notices..................................................
SECTION 13.6 Severability of Provisions...............................
SECTION 13.7 Assignment...............................................
SECTION 13.8 Certificates Non-Assessable and Fully
Paid...................................................
SECTION 13.9 Further Assurances.......................................
SECTION 13.10 No Waiver, Cumulative Remedies...........................
SECTION 13.11 Counterparts.............................................
SECTION 13.12 Third-Party Beneficiaries................................
SECTION 13.13 Actions by Holders.......................................
SECTION 13.14 Rule 144A Information....................................
SECTION 13.15 Merger and Integration...................................
SECTION 13.16 Headings.................................................
<PAGE>
EXHIBITS AND SCHEDULES
Schedule I Identified Portfolio
Exhibit A Form of Assignment of Additional Receivables
Exhibit B Form of Monthly Servicer's Certificate
Exhibit C Form of Annual Servicer's Certificate
Exhibit D Form of Annual Opinion of Counsel
Exhibit E Form of Reassignment of Receivables
Exhibit F Form of Reconveyance of Receivables
Exhibit G Form of Notice of Financed Premium
<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of December 1, 1996 by and
among MELLON BANK, N.A., a national banking association, as Transferor, AFCO
CREDIT CORPORATION, a New York corporation, as Servicer, AFCO ACCEPTANCE
CORPORATION, a California corporation, as Servicer, Premium Financing
Specialists, Inc., a _________ corporation, as Back-up Servicer and The First
National Bank of Chicago, a national banking association, as Trustee.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and the Holders:
ARTICLE I DEFINITIONS
SECTION 1.1 Definitions. Whenever used in this Agreement, the following
words and phrases have the meanings identified below:
"Account" means, with respect to each Obligor, each account of such
Obligor that is identified as such by the applicable Originator by a separate
account number.
"Addition Date" means the date on which any Additional Receivables are
added to the Receivables Schedule.
"Additional Account" means an Account, all of the Receivables under
which have been conveyed to the Trust after the Closing Date.
"Additional Receivable" means each Premium Finance Agreement added or
required to be added to the Receivable Schedule after the Initial Closing Date
pursuant to subsection 2.1(g).
"Adjusted Aggregate Investor Interest" means as of any date of
determination, the sum of the "Adjusted Investor Interest" (as defined in the
related Supplement) of each Series then issued and outstanding for which an
Adjusted Investor Interest is specified in the related Supplement plus the sum
of the Investor Interests of all other Series then issued and outstanding.
"AFCO Acceptance" means AFCO Acceptance Corporation, a California
corporation.
"AFCO Credit" means AFCO Credit Corporation, a New York corporation.
"Affiliate" of any Person means any other Person controlling,
controlled by or under common control with such Person.
"Aggregate Investor Interest" means, as of any date of determination,
the sum of the Investor Interests of all Series then issued and outstanding.
"Aggregate Investor Percentage" means, as to Principal Receivables,
Finance Charge Receivables and Receivables in Defaulted Accounts, as the case
may be, as of any date of determination, the sum (not to exceed 100%) of the
relevant Investor Percentages for all Series then issued and outstanding.
"Aggregate Receivables" means, with respect to the Receivables as of
any date of determination, the aggregate amount of payments owed on such
Receivables from such date through the respective scheduled final payment dates
of such Receivables (exclusive of Late Fees and any other administrative
charges) less Net Payables as of such date of determination.
"Aggregate Receivable Balance" means, with respect to any Receivable as
of any date of determination the aggregate amount of payments owed on such
Receivable from such date through the scheduled final payment date of such
Receivable (exclusive of Late Fees and any other administrative charges).
"Agreement" means this Pooling and Servicing Agreement, as amended,
supplemented or otherwise modified from time to time, including by any
Supplement.
"Amortization Period" means, as to any Series or Class, any period
specified in the related Supplement during which principal collections are set
aside to repay the principal investment in that Series or Class (excluding
repayments of a Variable Interest during its revolving period).
"Applicants" is defined in Section 6.7.
"Appointment Day" is defined in subsection 9.2(a).
"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.
"Average Principal Receivables" means, for any period, an amount equal
to (a) the sum of the aggregate amount of Principal Receivables at the end of
each day during such period divided by (b) the number of days in such period.
"Back-up Servicer" means initially, Premium Financing Specialists,
Inc. and their successors and assigns.
"Bearer Certificates" is defined in Section 6.1.
"Bearer Rules" means the provisions of the Internal Revenue Code, in
effect from time to time, governing the treatment of bearer obligations,
including sections 163(f), 871, 881, 1441, 1442 and 4701, and any regulations
thereunder including, to the extent applicable to any Series, Proposed or
Temporary Regulations.
"Beginning of Month Principal Receivables" means, with respect to the
Receivables and any Monthly Period, an amount equal to the Aggregate Receivables
as of the first day of such Monthly Period (or, in the case of the Monthly
Period commencing December 1996, as of December 1, 1996) minus Finance Charge
Receivables as of such date.
"BIF" means the Bank Insurance Fund administered by the FDIC.
"Book-Entry Certificates" means certificates evidencing a beneficial
interest in the Investor Certificates, ownership and transfers of which shall be
made through book entries by a Clearing Agency as described in Section 6.10.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York, New York, or Pittsburgh, Pennsylvania
(or, for any Series, any additional city specified in the related Supplement)
are authorized or obligated by law or executive order to be closed.
"CEDEL" means Cedel Bank, sociJtJ anonyme.
"Certificate" means an Investor Certificate or any Supplemental
Certificate.
"Certificate Owner" means the beneficial owner of a Book-Entry
Certificate, as reflected on the books of the Clearing Agency or of a Person
maintaining an account with the Clearing Agency (directly or as an indirect
participant).
"Certificate Register" is defined in Section 6.3.
"Class" means any class of Investor Certificates of any Series.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency or Foreign Clearing Agency effects book-entry transfers and pledges of
securities deposited with the Clearing Agency or Foreign Clearing Agency.
"Closing Date" means, for any Series, the date of issuance of such
Series of Certificates, as specified in the related Supplement.
"Collection Account" is defined in subsection 4.2(a).
"Collections" means all payments received by Servicer in respect of the
Receivables, including without limitation Recoveries, whether in the form of
cash, checks, wire transfers, ATM transfers or other form of payment in
accordance with the applicable Premium Finance Agreement. If Servicer
establishes any lock-box account for the receipt of payments, a payment shall be
deemed received by Servicer on the date of deposit in such lock-box account.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee at which, at any particular time, its corporate trust business shall
be administered, which office at the date hereof is located at One First
National Plaza, Suite 0126, Chicago, Illinois 60670-0126 Attention: Corporate
Trust Services Division, except if the Place of Payment of any Instrument is New
York City, then for purposes of Section 11.16, such term shall mean the office
or agency of the Trustee in the Borough of Manhattan, the City of New York,
which office at the date hereof is located at First Chicago Trust Company of New
York, 14 Wall Street, Eighth Floor, New York, New York 10005.
"Coupons" is defined in Section 6.1.
"Credit Enhancement" means, as to any Series, the subordination, cash
collateral guaranty or account, collateral interest, letter of credit, surety
bond, insurance policy, spread account, reserve account, cross-support feature
or any other contract or agreement for the benefit of the Holders of such Series
(or Holders of a Class within such Series) as designated in the applicable
Supplement.
"Credit Enhancement Provider" means, as to any Series, any Person
designated as such in the related Supplement.
"Cut Off Date" means December 1, 1996.
"Date of Processing" means, as to any transaction, the date on which
such transaction is first recorded on Servicer's computer master file of
accounts (without regard to the effective date of such recordation).
"Defaulted Account" means each Account as to which the insurance policy
or policies related to the Receivables in such Account has been canceled for 270
days or more or the Receivables arising thereunder have been charged off in
accordance with Servicer's customary and usual procedures. Notwithstanding any
other provision hereof, any Receivables in Defaulted Accounts that are
Receivables in Ineligible Accounts shall be treated as Receivables in Ineligible
Accounts rather than Receivables in Defaulted Accounts.
"Default Amount" means, with respect to any Monthly Period, the excess,
if any, of (i) the amount of Principal Receivables in Defaulted Accounts which
are charged off during such Monthly Period over (ii) Recoveries for such Monthly
Period.
"Definitive Certificates" is defined in Section 6.10.
"Depository" is defined in Section 6.10.
"Depository Agreement" means, as to each Series (subject to the related
Supplement), the agreement among Transferor, Trustee and the applicable Clearing
Agency.
"Determination Date" means, unless otherwise specified in the related
Supplement, the third Business Day prior to each Transfer Date.
"Distribution Account" is defined in subsection 4.2(c).
"Distribution Date" is defined, for each Series, in the related
Supplement.
"Dollars", "$" or "U.S. $" means United States dollars.
"Eligible Account" means as of the Cut Off Date, with respect to
Accounts under which the Initial Receivables arise, and as of the earliest
Addition Date of the Additional Receivables arising under an Additional Account,
with respect to each Additional Account, each Account the Receivables under
which:
(a) are payable in United States dollars:
(b) have been funded by the related Originator in whole or in part;
(c) do not relate to an insurance policy related to Lloyds of London;
(d) do not relate to a Premium Finance Agreement under which the
Obligor is a Governmental Authority; and
(e) are underwritten in accordance with guidelines that are not
materially different from the underwriting guidelines that were used by the
Originators with respect to the Initial Receivables.
"Eligible Receivable" means each Receivable, as of the Cut Off Date and
with respect to each Additional Receivable, as of the date of origination of
such Receivable:
(a) which the related Obligor used all the proceeds of such Receivable
to pay premiums and related items with respect to commercial property or
casualty insurance policies, governed by the law of any State or territory
of the United States or the District of Columbia, under which such Obligor
is the insured;
(b) with respect to which all material consents, licenses, approvals
or authorizations of, or registrations or declarations with, any
Governmental Authority required to be obtained, effected or given in
connection with the creation of such Receivable or the execution, delivery
and performance by the related Originator of the related Premium Finance
Agreement, have been duly obtained, effected or given and are in full force
and effect as of the date of transfer of such Receivable to the Trust;
(c) which, at the time of transfer of such Receivable to the Trust,
the terms of the related Premium Finance Agreement have not been waived or
modified except for waivers or modifications that were made by the
Originators in accordance with the Guidelines;
(d) with respect to which the related Premium Finance Agreement is not
subject to any right of rescission, setoff, counterclaim, defense arising
out of violations of usury laws or any other defenses of any Obligor at the
time of the transfer of such Receivable to the Trust, other than defenses
that may arise after the time of transfer out of applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights in general and general equity principles;
(e) with respect to which, at the time of transfer of such Receivable
to the Trust, the related Originator has not taken any action which would
impair, or failed to take any action necessary to avoid impairing, the
rights of the Trust or the Certificateholders therein;
(f) which is not delinquent for more than 30 days;
(g) which is among the Initial Receivables, that provides the related
Originator with a limited power of attorney allowing it to cancel the
related insurance policy, if cancelable, in accordance with state law upon
non-payment of a loan installment by the related Obligor;
(h) which is an Additional Receivable, that provides the related
Originator with a limited power of attorney allowing it to cancel the
related insurance policy, in accordance with state law upon non-payment of
a loan installment by the related Obligor;
(i) which grants the related Originator a security interest in the
related Unearned Premium and allows such Originator to direct the related
insurance company to pay such Originator any such Unearned Premium
calculated as of the time of cancellation of the related insurance policy,
if cancelable;
(j) with respect to which the related insurance policy has not been
canceled;
(k) with respect to which the stated address of the Obligor in the
related Premium Finance Agreement is in a Permitted State;
(l) which was underwritten in accordance with the related Guidelines;
(m) which was originated in compliance, in all material respects, with
all Requirements of Law applicable to the applicable Originator and
pursuant to loan documents which comply, in all material respects, with all
Requirements of Law applicable to the applicable Originator;
(n) which is the legal, valid and binding payment obligation of the
related Obligor, legally enforceable against such Obligor in accordance
with its terms;
(o) with respect to which the related Obligor is not the subject of a
bankruptcy or insolvency proceeding;
(p) with respect to which the related Premium Finance Agreement
provides for monthly payments by the related Obligor;
(q) which, with respect to Additional Receivables conveyed to the
Trust on or after February 1, 1997 only, the Trust has a first priority
perfected security interest in the Unearned Premium related to such
Additional Receivable and a Notice of Financed Premium has been delivered
to the applicable insurance company or companies;
(r) which is a "general intangible" under the Uniform Commercial Code
in the States of New York and Pennsylvania and is not evidenced by a
promissory note;
(s) which after giving effect to the transfer of such Receivable to
the Trust does not cause an Excess Insurer Concentration Amount to exist;
(t) which after giving effect to the transfer of such Receivable to
the Trust does not cause an Excess Obligor Concentration Amount to exist ;
and
(u) which after giving effect to the transfer of such Receivable to
the Trust does not cause the Investment Grade Insurer Percentage to be less
than the Required Investment Grade Insurer Percentage.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Euroclear Operator" means Morgan Guaranty Trust Company of New York,
Brussels, Belgium office, as operator of the Euroclear System.
"Excess Finance Charge Collections" means, with respect to any
Transfer Date, the aggregate amount for all outstanding Series that the related
Supplements specify are to be treated as "Excess Finance Charge Collections" for
such Transfer Date.
"Excess Insurer Concentration Amount" shall have the meaning set forth
in any Supplement.
"Excess Obligor Concentration Amount" means as of any date of
determination, the amount of Aggregate Receivables related to a single Obligor
(or an affiliated group of Obligors), but only to the extent such amount is in
excess of 5% of the amount of Aggregate Receivables as of such date of
determination.
"Excess Funding Account" is defined in subsection 4.2(b).
"Extended Trust Termination Date" is defined in subsection 12.1(a).
"FDIC" means the Federal Deposit Insurance Corporation.
"Finance Charge Account" is defined in subsection 4.2(b).
"Finance Charge Collections" means, with respect to the Receivables
and any Monthly Period, an amount equal to the sum of (i) the aggregate amount
of interest accrued on such Receivables for such Monthly Period calculated on
the basis of the Rule of 78's Method, plus (ii) late fees and other
administrative charges collected during such Monthly Period, plus (iii) Net
Recoveries received during such Monthly Period.
"Finance Charge Receivables" means, with respect to the Receivables as
of the last day in any Monthly Period, the aggregate amount of unearned interest
on such Receivables as of such date calculated in accordance with the Rule of
78's Method.
"Finance Charge Shortfall" is defined, for any Series, in the related
Supplement.
"Foreign Clearing Agency" means CEDEL and the Euroclear Operator.
"Global Certificate" is defined in Section 6.13.
"Governmental Authority" means the United States of America, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Group" means, as to any Series, the group of Series in which the
related Supplement specifies that such Series shall be included.
"Guidelines" means the Originators' (or, if the Originators are no
longer the servicer, the Back-up Servicer's) policies and procedures relating to
the operation of its insurance premium finance loan business, including policies
and procedures for determining the creditworthiness of borrowers and insurance
carriers, the extension of credit to borrowers and collection of insurance
premium finance loans, as such policies and procedures may be amended from time
to time.
"Holder" means the Person in whose name a Certificate is registered in
the Certificate Register and, if applicable, the holder of any Bearer
Certificate or Coupon, as the case may be, and, as to any Series, such other
Person deemed to be an "Investor Holder" or "Holder" in any related Supplement
except as otherwise provided in such Supplement.
"Identified Portfolio" means the Premium Finance Agreements in which
the stated address of the Obligor is in a Permitted State.
"Ineligible Account" is defined in subsection 3.10(c).
"Initial Closing Date" means December __, 1996.
"Initial Investor Interest" means as to any Series, the amount stated
in the related Supplement.
"Initial Receivables" means the Premium Finance Agreements on the
Receivables Schedule delivered to the Trustee on the Initial Closing Date.
"Insolvency Event" is defined in subsection 9.2(a).
"Insurer Schedule" means a schedule dated as of a Determination Date
which lists (in order) each of the top 25 insurance carriers with respect to the
Receivables as of such Determination Date, each ranked in accordance with the
aggregate amount of the portion of the Aggregate Receivables which relate to the
financing of insurance premiums of such insurance carrier as of such
Determination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Investment Company Act" means the Investment Company Act of 1940.
"Investment Grade Insurer Percentage" shall have the meaning set forth
in any Supplement.
"Investor Account" means each of the Finance Charge Account, the
Excess Funding Account and the Distribution Account.
"Investor Certificate" means any one of the certificates (including
Bearer Certificates, Registered Certificates and Global Certificates) executed
by Transferor and authenticated by Trustee substantially in the form (or forms
in the case of a Series with multiple Classes) attached to the related
Supplement.
"Investor Holder" means the holder of record of an Investor
Certificate.
"Investor Interest" is defined, as to any Series, in the related
Supplement.
"Investor Percentage" is defined, as to any Series, in the related
Supplement.
"Investor Servicing Fee" is defined in Section 3.2.
"Issuance" means either of the procedures described under Section
6.9(b).
"Issuance Date" is defined in subsection 6.9(b).
"Issuance Notice" is defined in subsection 6.9(b).
"Late Fees" means with respect to any Receivable, amounts referred to
as "late fees" (or similar terms) in the related Premium Finance Agreement.
"Licensing Laws" means any statute or regulation which would impose a
requirement that the Originator or any Successor Servicer obtain and maintain a
license in order to engage in the business of insurance premium financing.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, participation or equity interest, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the UCC (other than any such financing statement
filed for informational purposes only) and which upon investigation does not
relate to any Receivable or comparable law of any jurisdiction to evidence any
of the foregoing; provided that any assignment pursuant to Section 7.2 shall not
be deemed to constitute a Lien.
"Net Recoveries" means with respect to any Monthly Period the excess,
if any, of Recoveries for such Monthly Period over the amount of Principal
Receivables in Defaulted Accounts which are charged off during such Monthly
Period.
"Monthly Period" means, unless otherwise defined in any Supplement,
each period from and including the first day of a calendar month to and
including the last day of that calendar month.
"Moody's" means Moody's Investors Service, Inc.
"Notice of Financed Premium" means each notice of financed premium
delivered to the Trustee by an Originator pursuant to the Receivables Purchase
Agreement and in the form of Exhibit G.
"Obligor" means, as to any Receivable, the Person or Persons obligated
to make payments on that Receivable, including any guarantor.
"Officer's Certificate" means a certificate signed by any Vice
President or more senior officer of Transferor or Servicer and delivered to
Trustee
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for or an employee of the Person providing the opinion, and who shall be
reasonably acceptable to Trustee.
"Originator" means either AFCO Credit or AFCO Acceptance.
"Paired Series" means each Series that has been paired with another
Series (one of which Series may be prefunded or partially prefunded) such that a
reduction of the Investor Interest of one Series results in an increase of the
Investor Interest of the other Series.
"Paying Agent" means any paying agent appointed pursuant to Section
6.6 and shall initially be Trustee.
"Pay Out Event" means each Trust Pay Out Event and, as to any Series,
each other "Pay Out Event," if any, described in the Supplement for such Series.
"Permitted Investments" means, unless otherwise provided in the
Supplement with respect to any Series: (a) book-entry securities or negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence (i) obligations of or are fully guaranteed by the United
States of America, (ii) demand deposits, time deposits or certificates of
deposit of any depository institution or trust company incorporated under the
laws of the United States of America or any state thereof or domestic branches
of foreign banks and subject to supervision and examination by Federal or state
banking or depository institution authorities, provided that at the time of the
Trust's investment or contractual commitment to invest therein, the certificates
of deposit or short-term deposits of such depository institution or trust
company shall have a credit rating from Moody's and Standard & Poor's of P-1 and
A-1 +, respectively, (iii) commercial paper having, at the time of the Trust's
investment or contractual commitment to invest therein, a rating from Moody's
and Standard & Poor's of P-1 and A-1 +, respectively, (iv) bankers' acceptances
issued by any depository institution or trust company described in clause (a)
(ii), (v) investments in money market or common trust funds rated AAA-m or
AAA-mg by Standard & Poor's and P-1 by Moody's if such investment will not
require the Trust to register as an "investment company" under the Investment
Company Act, and (vi) repurchase obligations with respect to (A) any security
described in clause (a)(i) 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 (a)(ii); (b) demand deposits in the name of the
Trust or Trustee in any depository institution or trust company described in
clause (a)(ii); and (c) any other investment if (i) after 10 Business Days
notice to each Rating Agency of the purchase of such investment none of the
Rating Agencies have informed the Transferor that such purchase will cause the
then current rating on the Certificates to be downgraded or withdrawn and (ii)
purchase of such investment will not require the Trust to be registered as an
investment company under the Investment Company Act.
"Permitted State" means as of any date of determination any state with
respect to which each of the Originators, Transferor, Servicer, Trustee and the
Trust has either complied with such state's Licensing Laws or is not required to
be licensed under such Licensing Laws, in each case as evidenced by either (i)
an Opinion of Counsel or (ii) written correspondence from the applicable state
authority and a related Permitted State Officer's Certificate, which the Trustee
may conclusively rely on. On the Initial Closing Date the Permitted States shall
include the states listed on Exhibit ___.
"Permitted State Officer's Certificate" means, with respect to the
determination of whether any state is a Permitted State, an Officer's
Certificate of AFCO Credit certifying that the applicable written correspondence
from a state authority is the written correspondence referred to in clause (ii)
of the definition of "Permitted State" with respect to the state in question.
"Person" means any legal person, including any individual,
corporation, limited liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental entity or
other entity of similar nature.
"PFS" means Premium Financing Specialists, Inc.
"Premium Finance Agreement" shall mean a written agreement by which an
insured or prospective insured promises to pay to either AFCO Credit or AFCO
Acceptance, as the case may be, an amount advanced or to be advanced thereunder
to an insurance company (or to an insurance broker or agent for payment to the
insurance company) in payment of premiums on an insurance contract together with
any finance charges and any other incidental fees and charges.
"Principal Collections" means, with respect to the Receivables and any
Monthly Period, all Collections not treated as Finance Charge Collections.
"Principal Receivables" means, with respect to the Receivables as of
any date of determination, an amount equal to the product of (x) the Aggregate
Receivables as of such date of determination and (y) a fraction, the numerator
of which is the Beginning of Month Principal Receivables and the denominator of
which is the amount of Month Aggregate Receivables as of the first day of the
current Monthly Period.
"Principal Sharing Series" means a Series that, pursuant to the
related Supplement, is entitled to receive Shared Principal Collections.
"Principal Shortfalls" is defined, as to any Series, in the related
Supplement.
"Principal Terms" is defined in subsection 6.9(c).
"Qualified Institution" is defined in subsection 4.2(a).
"Rating Agency" means, as to each Series, the rating agency or
agencies, if any, specified in the related Supplement.
"Rating Agency Condition" means, as to any event or condition, receipt
by Transferor from each Rating Agency of written confirmation that such event or
condition will not result in a downgrade or withdrawal of its then current
rating of any outstanding Series.
"Reassignment" is defined in subsection 2.6(b)(ii).
"Reassignment Date" is defined in subsection 2.4(e).
"Receivable" means each Premium Finance Agreement that is listed or is
required to be listed on the Receivables Schedule pursuant to subsection 2.1(g).
"Receivables Schedule" means a computer file or microfiche list
containing a true and complete list of the Premium Finance Agreements required
to be listed thereon pursuant to subsection 2.1(g), each identified by account
number and setting forth the principal balance of each such Premium Finance, as
of (a) the Cut Off Date (for the Premium Finance Agreements listed on the
Receivables Schedule delivered on the Initial Closing Date) or (b) the related
Addition Date (for any Premium Finance Agreements added to the Receivables
Schedule on such Addition Date).
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement dated as of the date hereof, by and among AFCO Credit, AFCO Acceptance
and Transferor.
"Record Date" means, with respect to any Distribution Date, the last
Business Day of the preceding Monthly Period.
"Recoveries" means all amounts, including the proceeds of Unearned
Premiums received by Servicer with respect to Defaulted Account, less related
expenses of outside collection agencies.
"Registered Certificates" is defined in Section 6.1.
"Removal Date" is defined in subsection 2.6(a).
"Removal Notice Date" is defined in subsection 2.6(a).
"Removed Accounts" is defined in subsection 2.6(a).
"Required Investment Grade Insurer Percentage" shall have the meaning
set forth in any Supplement.
"Requirements of Law" for any Person means the certificate of
incorporation or articles of association and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including usury laws, the Federal Truth in
Lending Act and Regulation Z and Regulation B of the Board of Governors of the
Federal Reserve System).
"Responsible Officer" means any officer within the Corporate Trust
Office (or any successor group of Trustee), including any Vice President, any
Assistant Secretary or any other officer of Trustee customarily performing
functions similar to those performed by any person who at the time shall be an
above-designated officer and any particular officer to whom any corporate trust
mailer is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Rule of 78's Method" means the method under which a portion of a
payment allocated to earned interest and the portion allocable to principal is
determined according to the sum of the months digits or any equivalent method
commonly referred to as the "Rule of 78's."
"SAIF" means the Savings Association Insurance Fund administered by
the FDIC.
"Securities Act" means the Securities Act of 1933.
"Series" means any series of Investor Certificates issued pursuant to
a Supplement.
"Series Account" means any account established pursuant to a
Supplement for the benefit of the related Series.
"Series Servicing Fee Percentage" is defined, as to any Series, in the
related Supplement.
"Series Termination Date" is defined, as to any Series, in the related
Supplement.
"Servicer" means (a) initially AFCO Credit and AFCO Acceptance and (b)
after any Person is appointed as Successor Servicer, such Person as herein
provided to service the Receivables.
"Servicer Default" is defined in Section 10.1.
"Servicer Ineligible Account" is defined in Section 3.10(c).
"Servicing Fee" is defined in Section 3.2
"Servicing Officer" means any officer of Servicer involved in, or
responsible for, the administration and servicing of the Receivables whose name
appears on a list of servicing officers furnished to Trustee by Servicer, as
such list may be amended from time to time.
"Shared Principal Collections" means, with respect to any Transfer
Date, the aggregate amount for all outstanding Series that the related
Supplements specify are to be treated as "Shared Principal Collections" for such
Transfer Date.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc.
"Successor Servicer" is defined in subsection 10.2(a).
"Supplement" means, as to any Series or Supplement Certificate, a
supplement to this Agreement executed in conjunction with any issuance of that
Series or Supplement Certificate.
"Supplemental Certificate" is defined in subsection 6.3(b).
"Tax Opinion" means, as to any action, an Opinion of Counsel to the
effect that, for Federal income tax purposes, (a) such action will not adversely
affect the tax characterization as debt of Investor Certificates of any
outstanding Series or Class with respect to which an Opinion of Counsel was
delivered at the time of their issuance that such Investor Certificates would be
characterized as debt, (b) such actions will not cause the Trust to be
classified, for Federal income tax purposes, as an association (or publicly
traded partnership) taxable as a corporation and (c) such action will not cause
or constitute an event in which gain or loss would be recognized by any Investor
Certificateholder.
"Termination Notice" is defined in Section 10.1.
"Transfer Agent and Registrar" is defined in Section 6.3 and shall
initially be Trustee's Corporate Trust Office.
"Transfer Date" means, unless otherwise specified in the related
Supplement, with respect to any Series, the Business Day immediately prior to
each Distribution Date.
"Transferor" means Mellon Bank, N.A., a national banking association.
"Transferor Ineligible Account" is defined in Section 2.4(d)(iii).
"Transferor Interest" shall equal on any date of determination an
amount equal to (a) the amount of Principal Receivables as of such date of
determination, less (b) the Adjusted Aggregate Investor Amount on such date of
determination, less (c) the outstanding amount of all Supplemental Certificates
(and any purchased interest sold pursuant to subsection 6.9(d)) as of such date
of determination, plus (d) the amount on deposit in the Excess Funding Account
on such date of determination.
"Transferor Percentage" means, on any date of determination, when used
with respect to Principal Receivables, Finance Charge Receivables and Defaulted
Accounts, a percentage equal to 100% minus the Aggregate Investor Percentage
with respect to such categories of Receivables.
"Transferor Servicing Fee" is defined in Section 3.2.
"Trust" means the trust created by this Agreement, which shall be
known as the Mellon Bank Premium Finance Loan Master Trust, and the corpus of
which is the Trust Assets.
"Trust Assets" means (i) the Receivables conveyed to the Trust from
time to time; (ii) all monies due or to become due with respect to such
Receivables, including all monies received from insurance companies and state
insurance guaranty funds representing returns of Unearned Premiums, the proceeds
from any guarantees issued by insurance agents with respect to the Receivables
and other charges due on such Receivables; (iii) such amounts as may be from
time to time deposited into the Collection Account, the Finance Charge Account,
the Excess Funding Account, the Distribution Account and any Series Account;
(iv) any Enhancement issued with respect to any Series; (v) all of Transferor's
rights under Receivables Purchase Agreement and (vi) the proceeds of all of the
foregoing.
"Trust Extension" is defined in subsection 12.1(a).
"Trust Pay Out Event" is defined in Section 9.1.
"Trust Termination Date" means the earliest to occur of (a) unless a
Trust Extension shall have occurred, the First Business Day after the
Distribution Date with respect to any Series following the date on which funds
shall have been deposited in the Distribution Account or the applicable Series
Account for the payment of Investor Holders of each Series then issued and
outstanding sufficient to pay in full such Certificates (b), if a Trust
Extension shall have occurred, the Extended Trust Termination Date (c) and
________.
"Trustee" means The First National Bank of Chicago, and its successors
and any corporation resulting from or surviving any consolidation or merger to
which it or its successors may be a party and any successor trustee appointed as
herein provided.
"UCC" means the Uniform Commercial Code as in effect in any specified
jurisdiction.
"Undivided Interest" means the undivided interest in the Trust
evidenced by an Investor Certificate.
"Unearned Premium" shall mean, with respect to any Receivable, the
portion, if any, of any insurance premium financed under the related Premium
Finance Agreement that is considered unearned and is required under applicable
law and/or the terms of the related insurance policy to be returned by the
insurance company directly, or indirectly through an insurance broker or agent,
to an Originator upon issuance to the related Obligor of a notice of
cancellation of the related insurance policy, if such insurance policy is
cancelable.
"Variable Interest" means either of (a) any Investor Certificate that
is designated as a variable funding certificate in the related Supplement and
(b) any purchased interest sold as permitted by subsection 6.9(d).
"Vice President" when used with respect to the Trustee, means any Vice
President, whether or not designated by a number or a word or words added before
or after the title "Vice President."
SECTION 1.2 Other Interpretive Provisions. With respect to any Series,
all terms used and not defined herein are used as defined in the related
Supplement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document delivered pursuant hereto unless
otherwise defined therein. For purposes of this Agreement and all such
certificates and other documents, unless the context otherwise requires: (a)
accounting terms not otherwise defined in this Agreement, and accounting terms
partly defined in this Agreement to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles; (b) terms defined in Article 9 of the UCC as in effect in the
Commonwealth of Pennsylvania and not otherwise defined in this Agreement are
used as defined in that Article; (c) any reference to each Rating Agency shall
only apply to any specific rating agency if such rating agency is then rating
any outstanding Series; (d) references to any amount as on deposit or
outstanding on any particular date means such amount at the close of business on
such day; (e) the words "hereof," "herein" and "hereunder" and words of similar
import refer to this Agreement (or the certificate or other document in which
they are used) as a whole and not to any particular provision of this Agreement
(or such certificate or document); (f) references to any Section, Schedule or
Exhibit are references to Sections, Schedules and Exhibits in or to this
Agreement (or the certificate or other document in which the reference is made),
and references to any paragraph, subsection, clause or other subdivision within
any Section or definition refer to such paragraph, subsection, clause or other
subdivision of such Section or definition; (g) the term "including" means
"including without limitation"; (h) references to any law or regulation refer to
that law or regulation as amended from time to time and include any successor
law or regulation; (i) references to any Person include that Person's successors
and assigns; and (j) headings are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof. The
agreements, representations and warranties of AFCO Credit and AFCO Acceptance
and Mellon Bank, N.A. in this Agreement, in their respective capacities as
Servicer and Transferor, shall be deemed to be its agreements, representations
and warranties only so long as it remains a party to this Agreement in such
capacity. The monthly Servicer certificate shall be in substantially the form of
Exhibit B, with such changes as Servicer may determine to be necessary or
desirable; provided that no such change shall serve to exclude information
required by this Agreement or any Supplement. Servicer shall, upon mailing such
determination, deliver to Trustee and each Rating Agency an Officer's
Certificate to which shall be annexed the form of the related Exhibit, as so
changed. Upon the delivery of such Officer's Certificate to Trustee, the related
Exhibit, as so changed, shall for all purposes of this Agreement constitute such
Exhibit. Trustee may conclusively rely upon such Officer's Certificate in
determining whether the related Exhibit, as changed, conforms to the
requirements of this Agreement.
SECTION 1.3 Daily Allocation of Finance Charge Collections.
(a) On each Business Day in each Monthly Period, the amount of
Collections treated as Collections on Finance Charge Receivables ("Daily Finance
Charge Collections") shall be an amount equal to the Finance Charge Collections
in the immediately preceding Monthly Period divided by the number of Business
Days in such Monthly Period.
(b) Notwithstanding the foregoing, the Servicer may adopt a different
method of determining the amount of Finance Charge Collections which in the good
faith judgment of the Servicer is designed to more accurately reflect the
amounts constituting Finance Charge Collections.
SECTION 1.4 Daily Allocation of Principal Collections. For each
Business Day in each Monthly Period, the amount of Collections treated as
Collections on Principal Receivables ("Daily Principal Collections") shall equal
the amount of Collections received by the Servicer on such day less the amount
of Daily Finance Charge Collections for such day.
SECTION 1.5 Servicer Obligation to True-Up. (a) On the Determination
Date following each Monthly Period, the Servicer shall be obligated to true-up
the amount that should have been recorded as Collections in respect of Principal
Receivables and Finance Charge Receivables in accordance with the definitions of
Principal Collections and Finance Charge Collections, respectively.
(b) Notwithstanding the foregoing, the Servicer may adopt a different
method of estimating the amount of Collections allocable to the Accounts which
in the good faith judgment of the Servicer is designed to more accurately
reflect the actual amounts being collected in respect thereof. The Servicer
shall provide to each Rating Agency and to the Trustee written notice each time
the Servicer adopts a different method of estimating such amounts.
Sections 1.3, 1.4 and 1.5 shall only apply if Servicer is required to
make daily deposits of Collections into the Collection Account pursuant to
Section 4.3.
ARTICLE II CONVEYANCE OF RECEIVABLES
SECTION 2.1 Conveyance of Receivables. (a) Transferor hereby
transfers, assigns and otherwise conveys to Trustee, on behalf of the Trust, for
the benefit of the Holders, without recourse, all of its right, title and
interest in and to (i) the Initial Receivables, including the power of attorney
included therein, (ii) the Transferor's security interest in the related
Unearned Premiums (iii) all monies due or to become due with respect to such
Receivables on or after the Cut Off Date, including all monies received from
insurance companies and state insurance guaranty funds representing returns of
Unearned Premiums, the proceeds from any guarantees issued by insurance agents
in respect of the Receivables and other charges due on such Receivables, (iv)
the Receivables Purchase Agreement and, (v) all proceeds of all of the foregoing
(the property described in clauses (i) - (v) above being, the "Conveyed
Property").
(b) Transferor hereby transfers, assigns, and otherwise conveys to the
Trustee, on behalf of the Trust, for the benefit of the Holders, without
recourse, as of the related Addition Date, all of its right title and interest
in and to (i) the Additional Receivables, including the power of attorney
included therein, (ii) the Transferor's security interest in the related
Unearned Premiums, (iii) all monies due or to become due with respect to such
Additional Receivables on or after the related Addition Date, including all
monies received from insurance companies and state insurance guaranty funds
representing returns of Unearned Premiums, the proceeds of any guarantees issued
by insurance agents in respect of the Additional Receivables and other charges
due on such Additional Receivables, (iv) and all of the proceeds of the
foregoing (the property described in clauses (i) -(iv) above being, the
"Additional Property").
(c) In connection with any transfer, assignment and conveyance
pursuant Section 2.1(a) or Section 2.1(b), Transferor agrees to record and file,
at its own expense, a financing statement (including any continuation statements
with respect to such financing statement when applicable) with respect to the
Conveyed Property and the Additional Property meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect the assignment of the Conveyed Property and the Additional Property
to the Trust, and to deliver a file-stamped copy of such financing statement or
continuation statement or other evidence of such filing to Trustee on or prior
to the date of issuance of the Certificates (and in the case of any continuation
statements filed pursuant to this Section 2.1, as soon as practicable after
receipt thereof by Transferor). The foregoing transfer, assignment and
conveyance to the Trust shall be made to Trustee, on behalf of the Trust, and
each reference in this Agreement to such transfer, assignment and conveyance
shall be construed accordingly.
(d) In connection with any transfer pursuant to Section 2.1,
Transferor agrees, at its own expense, (i) on or prior to the Initial Closing
Date or the applicable Addition Date, as applicable to cause each of the
Originators pursuant to the Receivables Purchase Agreement to indicate in its
computer files that the related Receivables or the Additional Receivables, as
applicable have been transferred to Transferor pursuant to the Receivables
Purchase Agreement and then to Trustee, on behalf of the Trust, pursuant to this
Agreement for the benefit of the Holders by identifying such Receivables or the
Additional Receivables, as applicable as those that may be accessed on the
applicable Originator's computer files through use of one or more of the
Database Codes set forth on Schedule I.
(e) The parties intend that if, and to the extent that, any transfer
pursuant to this Section 2.1 is not deemed to be a sale, Transferor shall be
deemed hereunder to have granted to Trustee, on behalf of the Trust, for the
benefit of the Holders, a first priority perfected security interest in all of
Transferor's right, title and interest in, to and under the Conveyed Property
and that this Agreement shall constitute a security agreement under applicable
law.
(f) Transferor covenants and agrees that with respect to any
Additional Receivables conveyed to the Trust it shall:
(i) represent and warrant that, as of the day any Additional
Receivable is conveyed to the Trust, such conveyance constitutes
either (x) a valid transfer and assignment to Trustee, on behalf of
the Trust, of all right, title and interest of Transferor in and to
the Additional Receivables, and all monies due or to become due with
respect to such Receivables including all monies received from
insurance companies and state insurance guaranty funds representing
returns of Unearned Premiums and other charges due on such Receivables
and all proceeds thereto, all of which will be held by Trustee on
behalf of the Trust, free and clear of any Lien of any Person claiming
through or under Transferor or any of its Affiliates, except for (i)
Liens permitted under subsection 2.5(b), (ii) the Transferor Interest
and (iii) Transferor's right to receive interest accruing on, and
investment earnings in respect of, the Finance Charge Account and the
Excess Funding Account, or any Series Account as provided in this
Agreement and any related Supplement or (y) a grant of a security
interest (as defined in the UCC as in effect in the Commonwealth of
Pennsylvania), in such property to the Trust, which is enforceable
with respect to the Additional Receivables, including monies received
from insurance companies and state insurance guaranty funds
representing returns of Unearned Premiums and other charges due on the
related Receivables and all proceeds thereto upon the conveyance of
such Additional Receivables to the Trust. If such conveyance
constitutes the grant of a security interest to the Trust in such
property, upon the filing of a financing statement as described in
Section 2.1 with respect to such Additional Receivables and the
proceeds (as defined in the UCC as in effect in the Commonwealth of
Pennsylvania), thereof, the Trust shall have a first priority
perfected security interest in such property, except for Liens
permitted under subsection 2.5(b);
(ii) not transfer on any day any Receivable to the Trust which
would cause as of such day, after giving effect to such transfer (i)
an increase in any Excess Obligor Concentration Amount (as calculated
on the Determination Date immediately preceding such day); and (ii) an
increase in any Excess Insurer Concentration Amount (as calculated on
the Determination Date immediately preceding such day); or (iii) the
Investment Grade Insurer Percentage (calculated on the Determination
Date immediately preceding such day) to be decreased, if on such day
the Investment Grade Insurer Percentage is less that the Required
Investment Grade Insurer Percentage; and
(iii) Transferor shall deliver to Trustee an Officer's
Certificate confirming the items set forth in clauses (i) and (ii).
(g) On the date any Premium Finance Agreements are conveyed to the
Transferor pursuant to the Receivables Purchase Agreement, the Transferor shall,
prior to or simultaneously with conveying such Premium Finance Agreements to the
Trust, add or cause to be added such Premium Finance Agreements to the
Receivables Schedule.
Pursuant to the request of Transferor, Trustee shall cause
Certificates in authorized denominations evidencing the entire interest in the
Trust to be duly authenticated and delivered to or upon the order of Transferor
pursuant to Section 6.2.
SECTION 2.2 Acceptance by Trustee. (a) Trustee hereby acknowledges its
acceptance, on behalf of the Trust, of all right, title and interest previously
held by Transferor in and to the Conveyed Property, and declares that it shall
maintain such right, title and interest, upon the Trust herein set forth, for
the benefit of all Holders. Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Agreement, Transferor
delivered to Trustee the Receivables Schedule referred to in subsection 2.1(d).
(b) Trustee agrees not to disclose to any Person any of the account
numbers or other information contained in the computer files or microfiche lists
delivered to Trustee by the Originators or the Transferor pursuant to Sections
2.1, and 2.6 except as is required in connection with the performance of its
duties hereunder or in enforcing the rights of the Holders or to a Successor
Servicer appointed pursuant to Section 10.2, as mandated pursuant to any
Requirement of Law applicable to Trustee or as requested by any Person in
connection with financing statements filed with the Trust. Trustee agrees to
take such measures as shall be reasonably requested by Transferor to protect and
maintain the security and confidentiality of such information, and, in
connection therewith, shall allow Transferor to inspect Trustee's security and
confidentiality arrangements from time to time during normal business hours. In
the event that Trustee is required by law to disclose any such information,
Trustee shall provide Transferor with prompt written notice, unless such notice
is prohibited by law, of any such request or requirement so that Transferor may
request a protective order or other appropriate remedy. Trustee shall make best
efforts to provide Transferor with written notice no later than five days prior
to any disclosure pursuant to this subsection 2.2(b).
(c) Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
SECTION 2.3 Representations and Warranties of Transferor. Transferor
hereby represents and warrants to the Trust as of the Initial Closing Date:
(a) Organization and Good Standing. Transferor is a national banking
association duly organized and validly existing in good standing under the laws
of the United States and has full corporate power, authority and legal right to
own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement and to execute and deliver to
Trustee the Certificates pursuant hereto.
(b) Due Qualification. Transferor is duly qualified to do business and
is in good standing (or is exempt from such requirement) in any state required
in order to conduct its business, and has obtained all necessary licenses and
approvals with respect to Transferor required under Federal and Pennsylvania law
(including any necessary licenses required under the Licensing Laws of each
Permitted State).
(c) Transferor`s Deposit Accounts. As of the Initial Closing Date,
deposits in Transferor's deposit accounts were insured to the limits provided by
law by BIF.
The representations and warranties set forth in this Section 2.3 shall
survive the transfer and assignment of the respective Receivables to the Trust
and any termination of the rights and obligations of Servicer pursuant to
Section 10.1. Transferor hereby represents and warrants to the Trust, with
respect to any Series of Certificates, as of its Closing Date, unless otherwise
stated in the related Supplement, that the representations and warranties of
Transferor set forth in this Section 2.3 are true and correct as of such date
(and for purposes of such representations and warranties, (x) "Certificates"
means the Certificates issued on the related Closing Date and (y) references to
the Initial Closing Date shall be deemed to refer to that Closing Date). Upon
discovery by Transferor, Servicer or Trustee of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others.
SECTION 2.4 Representations and Warranties of Transferor Relating to
this Agreement, the Receivables Purchase Agreement and the Receivables.
(a) Binding Obligation; Valid Transfer and Assignment. Transferor
hereby represents and warrants to the Trust that, as of the Initial Closing
Date:
(i) The execution and delivery of this Agreement and the
Receivables Purchase Agreement by Transferor and the consummation of
the transactions provided for in this Agreement and the Receivables
Purchase Agreement have been duly authorized by Transferor by all
necessary corporate action on its part, and this Agreement and the
Receivables Purchase Agreement will remain, from the time of its
execution, an official record of Transferor.
(ii) This Agreement, the Certificates and the Receivables
Purchase Agreement constitute legal, valid and binding obligations of
Transferor, enforceable against Transferor in accordance with their
terms, except (A) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and the rights of creditors of national
banking associations, and (B) as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or
in equity).
(iii) No Conflict. The execution and delivery of this Agreement,
the Certificates and the Receivables Purchase Agreement, the
performance of the transactions contemplated by this Agreement, the
Certificates and the Receivables Purchase Agreement and the
fulfillment of the terms hereof and thereof will not conflict with,
result in any breach of any of the material terms and provisions of,
or constitute (with or without notice or lapse of time or both) a
material default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which Transferor is a party or by
which it or any of its properties are bound.
(iv) No Violation. The execution and delivery of this Agreement,
the Certificates and the Receivables Purchase Agreement, the
performance of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof and thereof will not conflict with or
violate any Requirements of Law applicable to Transferor.
(v) This Agreement constitutes either (A) a valid transfer,
assignment and conveyance to Trustee, on behalf of the Trust, for the
benefit of the Holders, of all right, title and interest of Transferor
in and to the Conveyed Property all of which will be held by Trustee
on behalf of the Trust, free and clear of any Lien of any Person
claiming through or under Transferor or any of its Affiliates, except
for (i) Liens permitted under subsection 2.5(b), (ii) the Transferor
Interest and (iii) Transferor's right to receive interest accruing on,
and investment earnings in respect of, the Finance Charge Account and
the Excess Funding Account, or any Series Account as provided in this
Agreement and any related Supplement or (B) a grant of an enforceable
security interest (as defined in the UCC as in effect in the
Commonwealth of Pennsylvania) in the Conveyed Property. If this
Agreement constitutes the grant of a security interest to the Trust in
the Conveyed Property, upon the filing of the financing statement
described in Section 2.1, the Trust shall have a first priority
perfected security interest in such property, except for Liens
permitted under subsection 2.5(b). Neither Transferor nor any Person
claiming through or under Transferor shall have any claim to or
interest in the Excess Funding Account, the Finance Charge Account,
the Distribution Account or any Series Account, except for
Transferor's rights to receive interest accruing on, and investment
earnings in respect of, the Finance Charge Account and Excess Funding
Account as provided in this Agreement (or, if applicable, any Series
Account as provided in any Supplement) and, if this Agreement
constitutes the grant of a security interest in such property, except
for the interest of Transferor in such property as a debtor for
purposes of the UCC as in effect in the Commonwealth of Pennsylvania.
(vi) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of Transferor, threatened against
Transferor before any court, regulatory body, administrative agency,
or other tribunal or governmental instrumentality (i) asserting the
invalidity of this Agreement, the Certificates or the Receivables
Purchase Agreement, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
contemplated by this Agreement, the Certificates or the Receivables
Purchase Agreement, (iii) seeking any determination or ruling that, in
the reasonable judgment of Transferor, would materially and adversely
affect the performance by Transferor of its obligations under this
Agreement, the Certificates or the Receivables Purchase Agreement,
(iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement or
the Certificates or (v) seeking to affect adversely the income tax
attributes of the Trust.
(vii) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental
body or official required in connection with the execution and
delivery of this Agreement, the Certificates and the Receivables
Purchase Agreement, the performance of the transactions contemplated
by this Agreement, the Certificates and the Receivables Purchase
Agreement and the fulfillment of the terms hereof, have been obtained.
(b) Eligibility of Receivables. Transferor hereby represents and
warrants to the Trust as of the Initial Closing Date with respect to the Initial
Receivables, as of each Addition Date:
(i) Each Receivable is an Eligible Receivable.
(ii) Each Additional Receivable conveyed to the Trust is an
Eligible Receivable, and the representations and warranties set forth
in subsection 2.4(a) are true and correct on the day such Additional
Receivable is conveyed to the Trust.
(iii) Each Receivable then existing has been conveyed to the
Trust free and clear of any Lien of any Person claiming through or
under Transferor or any of its Affiliates (other than Liens permitted
under subsection 2.5(b)) and in compliance, in all material respects,
with all Requirements of Law applicable to Transferor.
(iv) The related Receivables Schedule is, as of any date, an
accurate and complete listing in all material respects of all the
Receivables conveyed to the Trust as of such date and the information
contained therein with respect to the identity of each Receivable is
true and correct in all material respects as of the date such
Receivables are conveyed to the Trust. As of the Cut Off Date, the
Aggregate Receivables in all the Accounts was $_____________, of which
$_____________ were Principal Receivables.
(c) Notice of Breach. The representations and warranties set forth in
this Section 2.4 shall survive the transfer and assignment of the respective
Receivables to the Trust. Upon discovery by Transferor, Servicer or Trustee of a
breach of any of the representations and warranties set forth in this Section
2.4, the party discovering such breach shall give prompt written notice to the
other parties mentioned above. Transferor agrees to cooperate with Servicer and
Trustee in attempting to cure any such breach.
(d) Transfer of Receivables in Ineligible Accounts.
(i) Automatic Removal. In the event of a breach with respect to a
Receivable of any representations and warranties set forth in
subsection 2.4(b) (iii), and any of the following two conditions is
met: (A) as a result of such breach such Receivable is charged off as
uncollectible or the Trust's rights in, to or under such Receivable or
its proceeds are impaired or the proceeds of such Receivable are not
available for any reason to the Trust free and clear of any Lien or
(B) the Lien upon the subject Receivable (1) arises in favor of the
United States of America or any State or any agency or instrumentality
thereof and involves taxes or liens arising under Title IV of ERISA or
(2) has been consented to by Transferor; then, upon the earlier to
occur of the discovery of such breach or event by Transferor or
Servicer or receipt by Transferor of written notice of such breach
given by Trustee, each Receivable arising under the Account under
which such Receivable arises shall be automatically removed from the
Trust on the terms are conditions set forth in subsection 2.4(d)(iii).
(ii) Removal After Cure Period. In the event of a breach of (i)
any of the representations and warranties set forth in subsection
2.4(b)(i), 2.4(b)(ii), 2.4(b)(iv) and 2.1(f) (i) as a result of any
such breach the related Account becomes a Defaulted Account or the
Trust's rights in, to or under the Receivable or its proceeds are
impaired or the proceeds of such Receivable are not available for any
reason to the Trust free and clear of any Lien, then, upon the
expiration of 60 days (or such longer period as may be agreed to by
Trustee in its sole discretion, but in no event later than 120 days)
from the earlier to occur of the discovery of any such event by either
Transferor or Servicer, or receipt by Transferor of written notice of
any such event given by Trustee or (ii) the covenants or agreements
contained in subsection 2.1(f)(ii), then upon the expiration of 15
days from the earlier to occur of the discovery of any such event by
either Transferor or Servicer, or receipt by Transferor of written
notice of any such event given by Trustee, each Receivable arising
under the Account under which such Receivable arises shall be removed
from the Trust on the terms and conditions set forth in subsection
2.4(d)(iii); provided that no such removal shall be required to be
made if, on any day within such applicable period, such
representations and warranties with respect to such Receivable shall
then be true and correct in all material respects as if such
Receivable had been created on such day.
(iii) Procedures for Removal. When the provisions of subsection
2.4(d)(i) or 2.4(d)(ii) require removal of Receivables arising under
an Account, Transferor shall accept reassignment of each Receivable
arising under such Account (a "Transferor Ineligible Account") by
directing Servicer to deduct the Aggregate Receivable Balance of each
Receivable arising under an Ineligible Account from the Aggregate
Receivables in the Trust (to the extent previously included therein)
as of such date. On and after the date of such removal, the principal
portion of each Receivable arising under an Ineligible Account shall
be deducted from the aggregate amount of Principal Receivables used in
the calculation of any Investor Percentage, the Transferor Percentage
or the Transferor Interest. If the exclusion of a Receivable arising
under an Ineligible Account from the calculation of the Transferor
Interest would cause the Transferor Interest to be reduced below zero
or would otherwise not be permitted by law, Transferor shall promptly,
and in no event later than 10 Business Days after such event, make a
deposit in the Collection Account (for allocation as Principal
Collections received on the day of deposit) in immediately available
funds prior to the next succeeding Transfer Date in an amount equal to
the amount by which the Transferor Interest would be reduced below
zero. Upon the removal of any Transferor Ineligible Receivable (and
the mailing of any deposit required above), the Trust shall
automatically and without further action be deemed to transfer, assign
and otherwise convey to Transferor, without recourse, representation
or warranty, all the right, title and interest of the Trust in and to
such each Receivable arising under such Ineligible Account, all monies
due or to become due with respect to each Receivable arising under
such Ineligible Account and all proceeds of each Receivable arising
under such Ineligible Account and Recoveries relating to such
Transferor Ineligible Receivable. Each reassigned Receivable shall be
treated by the Trust as collected in full as of the date on which it
was transferred. Trustee shall execute such documents and instruments
of transfer or assignment and take other actions as shall reasonably
be requested by Transferor to evidence the conveyance of such
Receivable arising under such Ineligible Account pursuant to this
subsection 2.4(d)(iii). The obligation of Transferor set forth in this
subsection 2.4(d)(iii), shall constitute the sole remedy respecting
any breach of the representations and warranties set forth in the
above-referenced subsections with respect to such Receivable available
to the Holders or Trustee on behalf of the Holders.
(iv) Proceeds Held by Servicer. For the purposes of subsection
2.4(d)(i) above, proceeds of a Receivable shall not be deemed to be
impaired hereunder solely because such proceeds are held by Servicer
(if Servicer is an Originator).
(e) Reassignment of Trust Portfolio. If any of the representations and
warranties set forth in subsection 2.4(a) is not true and correct in any
material respect when made and such breach has a material adverse effect upon
the interest of the Holders in the Receivables, then either Trustee or the
Holders of Investor Certificates evidencing Undivided Interests aggregating more
than 50% of the Aggregate Investor Interest, by notice then given in writing to
Transferor (and to Trustee and Servicer, if given by the Investor Holders), may
direct Transferor to accept reassignment of all Principal Receivables within 60
days of such notice (or within such longer period as may be specified in such
notice), and Transferor shall accept reassignment of such Principal Receivables
on a Distribution Date specified by Transferor (such Distribution Date, the
"Reassignment Date") occurring within such applicable period on the terms and
conditions set forth below; provided that no such reassignment shall be required
to be made if, at any time during such applicable period, the representations
and warranties contained in subsection 2.4(a) shall then be true and correct in
all material respects. Transferor shall deposit on the Transfer Date (in New
York Clearing House, next day funds) preceding the Reassignment Date an amount
equal to the reassignment deposit amount for such Receivables in the
Distribution Account or Series Account, as provided in the related Supplement,
for distribution to the Investor Holders pursuant to Article XII. The
reassignment deposit amount with respect to each Series for such reassignment,
unless otherwise stated in the related Supplement, shall be equal to (i) the
Investor Interest of such Series at the end of the day on the last day of the
Monthly Period preceding the Reassignment Date, less the amount, if any,
previously allocated for payment of principal to such Holders on the related
Distribution Date in the Monthly Period in which the Reassignment Date occurs,
plus (ii) an amount equal to all interest accrued but unpaid on the Investor
Certificates of such Series at the applicable interest rate through such last
day, less the amount if any, previously allocated for payment of interest to the
Holders of such Series on the related Distribution Date in the Monthly Period in
which the Reassignment Date occurs. Payment of the reassignment deposit amount
with respect to each Series, and all other amounts in the Distribution Account
or the applicable Series Account in respect of the preceding Monthly Period,
shall be considered a prepayment in full of the Receivables represented by the
Investor Certificates. On the Distribution Date following the Transfer Date on
which such amount has been deposited in full into the Distribution Account or
the applicable Series Account, the Receivables and all monies due or to become
due with respect to such Receivables and all proceeds of the Receivables and
Recoveries relating to such Receivables shall be released to Transferor after
payment of all amounts otherwise due hereunder on or prior to such dates and
Trustee shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, representation or warranty, as shall be prepared by
and as are reasonably requested by Transferor to vest in Transferor, or its
designee or assignee, all right, title and interest of the Trust in and to the
Receivables, all monies due or to become due with respect to such Receivables
and all proceeds of the Receivables and Recoveries and relating to such
Receivables. If Trustee or the Investor Holders give notice directing Transferor
to accept reassignment as provided above, the obligation of Transferor to accept
reassignment of the Receivables and pay the reassignment deposit amount pursuant
to this subsection 2.4(e) shall constitute the sole remedy respecting a breach
of the representations and warranties contained in clause (ii) or (viii) of
subsection 2.4(a) available to the Investor Holders or Trustee on behalf of the
Investor Holders.
SECTION 2.5 Covenants of Transferor. Transferor hereby covenants that:
(a) Receivables to be General Intangibles. Transferor will take no
action to cause any Receivable to be anything other than a general intangible as
defined under the UCC of the Commonwealth of Pennsylvania.
(b) Security Interests. Except for the conveyances hereunder,
Transferor shall not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Receivable,
whether now existing or hereafter created, or any interest therein; Transferor
shall immediately notify Trustee of the existence of any Lien on any Receivable;
and Transferor shall defend the right, title and interest of the Trust in, to
and under the Receivables, whether now existing or hereafter created, against
all claims of third parties claiming through or under Transferor; provided that
nothing in this subsection 2.5(b) shall prevent or be deemed to prohibit
Transferor from suffering to exist upon any of the Receivables any Liens for
municipal or other local taxes if such taxes shall not at the time be due and
payable or if Transferor shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto.
(c) Receivable Allocations.
(i) If Transferor is unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of this
Agreement (including by reason of the application of the provisions of
Section 9.2 or an order by any Federal governmental agency having
regulatory authority over Transferor or any court of competent
jurisdiction that Transferor not transfer any additional Principal
Receivables to the Trust) then, in any such event: (A) Transferor
agrees to allocate and pay to the Trust, after the date of such
inability, all Principal Collections, and all amounts which would have
constituted Principal Collections but for Transferor's inability to
transfer such Receivables (up to an aggregate amount equal to the
amount of Principal Receivables in the Trust on such date); (B)
Transferor agrees to have such amounts applied as Collections in
accordance with Article IV; and (C) for only so long as all Collections
and all amounts which would have constituted Collections are allocated
and applied in accordance with clauses (A) and (B), Principal
Receivables (and all amounts which would have constituted Principal
Receivables but for Transferor's inability to transfer Receivables to
the Trust) that are written off as uncollectible in accordance with
this Agreement shall continue to be allocated in accordance with
Article IV, and all amounts that would have constituted Principal
Receivables but for Transferor's inability to transfer Receivables to
the Trust shall be deemed to be Principal Receivables for the purpose
of calculating (i) the applicable Investor Percentage with respect to
any Series and (ii) the Aggregate Investor Percentage thereunder. The
parties hereto agree that Finance Charge Receivables, whenever created,
accrued in respect of Principal Receivables that have been conveyed to
the Trust, or that would have been conveyed to the Trust but for the
above described inability to transfer such Receivables, shall continue
to be a part of the Trust notwithstanding any cessation of the transfer
of additional Principal Receivables to the Trust and Collections with
respect thereto shall continue to be allocated and paid in accordance
with Article IV.
(ii) If Transferor accepts reassignment of an Ineligible
Receivable pursuant to subsection 2.4(d), then, in any such event,
Transferor agrees to account for payments received with respect to such
Ineligible Receivable separately from its accounting for Collections on
Principal Receivables retained by the Trust. If payments received from
or on behalf of an Obligor are not specifically applicable either to an
Ineligible Receivable of such Obligor reassigned to Transferor or to
the Receivables of such Obligor retained in the Trust, then Transferor
agrees to allocate payments proportionately based on the total amount
of Principal Receivables of such Obligor retained in the Trust and the
total amount owing by such Obligor on any Ineligible Receivables
reassigned to Transferor, and the portion allocable to any Principal
Receivables retained in the Trust shall be treated as Collections and
deposited in accordance with the provisions of Article IV.
(d) Conveyance of Receivables. Transferor shall not convey, assign,
exchange or otherwise transfer the Receivables to any Person prior to the
termination of this Agreement pursuant to Article XII, except as provided in
Section 2.1; provided that Transferor shall not be prohibited hereby from
conveying, assigning, exchanging or otherwise transferring the Receivables in
connection with a transaction complying with the provisions of Section 7.2.
(e) On each Determination Date Transferor shall deliver to each Rating
Agency an Insurer Schedule, dated as of such Determination Date.
SECTION 2.6 Removal of Accounts. (a) Subject to the conditions set
forth below, Transferor may, but shall not be obligated to, designate Accounts
for deletion and removal ("Removed Accounts") from the Trust; provided that
Transferor shall not make more than one such designation in any Monthly Period.
On or before the fifth Business Day (the "Removal Notice Date") prior to the
date on which the designated Removed Accounts will be reassigned by Trustee to
Transferor (the "Removal Date"), Transferor shall give Trustee and Servicer
written notice that the Removed Accounts are to be reassigned to Transferor.
(b) Transferor shall be permitted to designate and require
reassignment to it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions:
(i) the removal of any Receivables of any Removed Accounts on
any Removal Date shall not, in the reasonable belief of Transferor, (a)
cause a Pay Out Event to occur; provided that for the purposes of this
subsection 2.6(b)(i), the Receivables of each Removed Accounts shall be
considered to have been removed as of the Removal Date, (b) cause
Transferor Interest as a percentage of the aggregate amount of
Principal Receivables to be less than the Minimum Transferor Interest
on such Removal Date, (c) cause the aggregate amount of Principal
Receivables to be less than the Minimum Aggregate Principal
Receivables, or (d) result in the failure to make any payment specified
in the related Supplement with respect to any Series;
(ii) on or prior to the Removal Date, Transferor shall have
delivered to Trustee for execution a written assignment substantially
in the form of Exhibit F (the "Reassignment") and, within five Business
Days thereafter, Transferor shall have delivered to Trustee a computer
file or microfiche list containing a true and complete list of all
Removed Accounts identified by account number and the aggregate amount
of the Receivables in such Removed Accounts as of the Removal Date,
which computer file or microfiche list shall as of the Removal Date
modify and amend and be made a part of this Agreement;
(iii) Transferor shall represent and warrant that no selection
procedures believed by Transferor to be materially adverse to the
interests of the Holders were utilized in selecting the Removed
Accounts to be removed from the Trust;
(iv) on or before the tenth Business Day prior to the Removal
Date, each Rating Agency shall have received notice of such proposed
removal of the Removed Accounts, and none of the Rating Agencies shall
have informed the Transferor that the then current rating or the
Certificate will be withdrawn or downgraded as a result of such
removal;
(v) on any Removal Notice Date, the amount of the Principal
Receivables of the Removed Accounts to be reassigned to Transferor on
the related Removal Date shall not equal or exceed 5% of the aggregate
amount of the Principal Receivables on such Removal Date; provided,
that if any Series has been paid in full, the Principal Receivables in
such Removed Accounts may approximate the Initial Investor Interest of
such Series; and
(vi) Transferor shall have delivered to Trustee an Officer's
Certificate confirming the items set forth in clauses (i) through (v).
Upon satisfaction of the above conditions, Trustee shall execute and
deliver the Reassignment to Transferor, and the Receivables in such Removed
Accounts shall no longer constitute a part of the Trust.
ARTICLE III ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment as Servicer and Back-up
Servicer.
(a) The Transferor hereby appoints AFCO Credit and AFCO Acceptance to
act as Servicer under this Agreement and AFCO Credit and AFCO Acceptance hereby
agree to such appointment. The Transferor hereby appoints PFS to act as Back-up
Servicer under this Agreement and to act as Successor Servicer under this
Agreement upon removal of the Servicer pursuant to Section 10.2 and PFS hereby
agrees to such appointment. Back-up Servicer hereby agrees to, upon its
appointment as Successor Servicer, perform all of the duties of the Servicer
under this Agreement. The Investor Holders and Credit Enhancement Provider of
each Series, by their acceptance of the related Certificates and the issuance of
the Credit Enhancement, consent to AFCO Credit and AFCO Acceptance acting as
Servicer and PFS acting as Back-up Servicer.
(b) Servicer shall service and administer the Receivables and shall
collect payments due under the Receivables in accordance with its customary and
usual servicing procedures for servicing insurance premium finance receivables
comparable to the Receivables and in accordance with the Guidelines and shall
have full power and authority, acting alone or through any party properly
designated by it hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable. Without
limiting the generality of the foregoing and subject to Section 10.1, Servicer
is hereby authorized and empowered (i) to make withdrawals from the Collection
Account as set forth in this Agreement, (ii) unless such power and authority is
revoked by Trustee on account of the occurrence of a Servicer Default pursuant
to Section 10.1, to instruct Trustee to make withdrawals and payments, from the
Finance Charge Account, the Excess Funding Account and any Series Account, in
accordance with such instructions as set forth in this Agreement, (iii) unless
such power and authority is revoked by Trustee on account of the occurrence of a
Servicer Default pursuant to Section 10.1, to instruct Trustee in writing, as
set forth in this Agreement, (iv) to execute and deliver, on behalf of the Trust
for the benefit of the Holders, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable law and regulations, to commence enforcement
proceedings with respect to such Receivables and (v) as long as the Originators
are Servicer, to make any filing, reports, notices, applications, registrations
with, and to seek any consents or authorizations from the Securities and
Exchange Commission and any state securities authority on behalf of the Trust as
may be necessary or advisable to comply with any Federal or state securities or
reporting requirements. In the event the Originators are no longer Servicer, the
Back-up Servicer shall supply to Transferor all necessary information for the
preparation of the documents referred to in clause (v) and the Transferor shall
make such filings, reports, notices, applications, registrations with, and seek
any such consents or authorizations from the Securities and Exchange Commission
and any state securities authority on behalf of the Trust as may be necessary or
advisable and comply with any such Federal or state securities or reporting
requirements. Trustee agrees that it shall promptly follow the instructions of
Servicer to withdraw funds from the Excess Funding Account, the Finance Charge
Account or any Series Account and to take any action required under any Credit
Enhancement at such time as required under this Agreement. Trustee shall execute
at Servicer's written request such documents prepared by Transferor and
acceptable to Trustee as may be necessary or appropriate to enable Servicer to
carry out its servicing and administrative duties hereunder.
(c) If Transferor is unable for any reason to transfer Receivables to
the Trust in accordance with the provisions of this Agreement (including by
reason of the application of the provisions of Section 9.2 or the order of any
Federal governmental agency having regulatory authority over Transferor or any
court of competent jurisdiction that Transferor not transfer any additional
Principal Receivables to the Trust) then, in any such event, (A) Servicer agrees
to allocate, after such date, all Collections with respect to Principal
Receivables, and all amounts which would have constituted Collections with
respect to Principal Receivables but for Transferor's inability to transfer such
Receivables (up to an aggregate amount equal to the aggregate amount of
Principal Receivables in the Trust as of such date) in accordance with
subsection 2.5(c); (B) Servicer agrees to apply such amounts as Collections in
accordance with Article IV, and (C) for only so long as all Collections and all
amounts which would have constituted Collections are allocated and applied in
accordance with clauses (A) and (B) above, Principal Receivables and all amounts
which would have constituted Principal Receivables but for Transferor's
inability to transfer Receivables to the Trust that are written off as
uncollectible in accordance with this Agreement shall continue to be allocated
in accordance with Article IV and all amounts which would have constituted
Principal Receivables but for Transferor's inability to transfer Receivables to
the Trust shall be deemed to be Principal Receivables for the purpose of
calculating the applicable Investor Percentage thereunder. The parties hereto
agree that Finance Charge Receivables, whenever created, accrued in respect of
Principal Receivables which have been conveyed to the Trust, or which would have
been conveyed to the Trust but for the above described inability to transfer
such Receivables, shall continue to be a part of the Trust notwithstanding any
cessation of the transfer of additional Principal Receivables to the Trust and
Collections with respect thereto shall continue to be allocated and paid in
accordance with Article IV.
(d) If Transferor accepts reassignment of an Ineligible Receivable
pursuant to subsection 2.4(d) then, in any such event, Servicer agrees to
account for payments received with respect to such Ineligible Receivable
separately from its accounting for Collections on Principal Receivables retained
by the Trust. If payments received from or on behalf of an Obligor are not
specifically applicable either to an Ineligible Receivable of such Obligor
reassigned to Transferor or to Receivables of such Obligor retained in the
Trust, then Servicer agrees to allocate payments proportionately based on the
total amount of Principal Receivables of such Obligor retained in the Trust and
the total amount owing by such Obligor on any Ineligible Receivables purchased
by Transferor, and the portion allocable to any Principal Receivables retained
in the Trust shall be treated as Collections and deposited in accordance with
the provisions of Article IV.
(e) Servicer shall not be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Receivables from
the procedures, offices, employees and accounts used by Servicer in connection
with servicing other premium finance loans.
(f) Servicer shall maintain fidelity bond coverage insuring against
losses through wrongdoing of its officers and employees who are involved in the
servicing of premium finance loans covering such actions and in such amounts as
Servicer believes to be reasonable from time to time.
The relationship of the Servicer (and of any Successor Servicer other
than the Trustee) to the Trustee under this Agreement is intended by the parties
to be that of independent contractor and not that of a joint venture, partner or
agent of the Trustee, including any act of the Servicer performed in the name of
the Trustee.
SECTION 3.2 Servicing Compensation and Back-up Servicing Compensation.
As compensation for its servicing activities hereunder and reimbursement for its
expenses as set forth in the immediately following paragraph, Servicer shall be
entitled to receive a servicing fee (the "Servicing Fee") prior to the
termination of the Trust pursuant to Section 12.1. The Servicing Fee shall be
payable, with respect to each Series, at the times and in the amounts set forth
in the related Supplement. The Servicing Fee shall be allocated between the
Investor Certificates (the "Investor Servicing Fee") and Transferor (the
"Transferor Servicing Fee").
As compensation for its agreement to act as a back-up servicer under
this Agreement, Back-up Servicer shall be entitled to receive a back-up
servicing fee prior to the earlier of (x) the termination of the Trust pursuant
to Section 12.1 and (y) the first date on which the Back-up Servicer is
Servicer. The Back-up Servicing Fee shall be payable by the Transferor.
So long as the Servicer is one of the Originators, Servicer's expenses
include the amounts due to Trustee pursuant to Section 11.5 and the reasonable
fees and disbursements of independent public accountants and all other expenses
incurred by Servicer in connection with its activities hereunder; provided that
Servicer shall not be liable for any liabilities, costs or expenses of the
Trust, the Investor Holders or the Certificate Owners arising under any tax law,
including any Federal, state or local income or franchise taxes or any other tax
imposed on or measured by income (or any interest or penalties with respect
thereto or arising from a failure to comply therewith). Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Monthly Servicing Fee. In the event that
Servicer is not one of the Originators, the Transferor will assume the
obligation to pay the fees, expenses and disbursements of the accountants and
Trustee referred to in the second preceding sentence.
SECTION 3.3 Representations and Warranties of Servicer. Each of AFCO
Credit and AFCO Acceptance, as initial Servicer, hereby makes, and any Successor
Servicer by its appointment hereunder shall make the following representations
and warranties on which Trustee has relied in accepting the Receivables in trust
and in authenticating the Certificates issued on the Initial Closing Date:
(a) Organization and Good Standing. Such Servicer or Successor
Servicer, as applicable, is duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has full corporate
power, authority and legal right to own its properties and conduct its premium
finance loan business as such properties are presently owned and as such
business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement.
(b) Due Qualification. Such Servicer or Successor Servicer, as
applicable, is qualified to do business as a foreign corporation in good
standing in any state where the conduct of its business (including the servicing
of the Receivables as required by this Agreement) would require such
qualification and has obtained all licenses and approvals (including any
licenses or approvals under the Licensing Laws of a Permitted State) necessary
in order to service the Receivables as required under Federal, state or local
law. If after the Initial Closing Date either such Servicer or Successor
Servicer, as applicable, shall be required by any Requirement of Law (including
any Licensing Law of a Permitted State) to so qualify or register or obtain such
license or approval, then it shall do so as soon as possible.
(c) Due Authorization. The execution, delivery and performance of this
Agreement have been duly authorized by such Servicer or Successor Servicer, as
applicable, by all necessary corporate action on the part of such Servicer or
Successor Servicer, as applicable, and this Agreement will remain, from the time
of its execution, an official record of each of such Servicer or Successor
Servicer, as applicable.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of such Servicer or Successor Servicer, as applicable,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereinafter in effect, affecting the enforcement of
creditors' rights in general and the rights of creditors of national banking
associations and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
(e) No Violation. The execution and delivery of this Agreement by such
Servicer or Successor Servicer, as applicable, and the performance of the
transactions contemplated by this Agreement and the fulfillment of the terms
hereof applicable to such Servicer or Successor Servicer, as applicable, will
not conflict with, violate, result in any breach of any of the material terms
and provisions of, or constitute (with or without notice or lapse of time or
both) a default under, any Requirement of Law applicable to such Servicer or
Successor Servicer, as applicable, or any indenture, contract, agreement,
mortgage, deed of trust or other instrument to which such Servicer or Successor
Servicer, as applicable, is a party or by which it is bound.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of such Servicer or Successor Servicer, as applicable,
threatened against such Servicer or Successor Servicer, as applicable, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this Agreement,
seeking any determination or ruling that, in the reasonable judgment of
Servicer, would materially and adversely affect the performance by such Servicer
or Successor Servicer, as applicable, of their obligations under this Agreement,
or seeking any determination or ruling that would materially and adversely
affect the validity or enforceability of this Agreement.
(g) Compliance with Requirements of Law. Such Servicer or Successor
Servicer, as applicable, shall duly satisfy all obligations on its part to be
fulfilled under or in connection with each Receivable and the related Account,
will maintain in effect all qualifications required under Requirements of Law in
order to service properly each Receivable and the related Account and will
comply in all material respects with all other Requirements of Law in connection
with servicing each Receivable and the related Account the failure to comply
with which would have a material adverse effect on the Holders or any Credit
Enhancement Provider.
SECTION 3.4 Reports and Records for Trustee. (a) Daily Reports. On
each Business Day, Servicer, with prior notice, shall prepare and make available
at the office of Servicer for inspection by Trustee a record setting forth (i)
the aggregate amount of Collections processed by Servicer on the preceding
Business Day and (ii) the aggregate amount of Receivables as of the close of
business on the preceding Business Day; provided that Servicer shall be required
to so report the information provided in clause (i) only at such times as
Servicer is required to make deposits, payments and withdrawals on a daily
basis, rather than on each Transfer Date, as permitted in Section 4.3(a).
(b) Monthly Servicer's Certificate. Unless otherwise stated in the
related Supplement with respect to any Series, on each Determination Date
Servicer shall forward, as provided in Section 13.5, to Trustee, the Paying
Agent, any Credit Enhancement Provider and each Rating Agency, a certificate of
a Servicing Officer in the form of Exhibit B (which includes the Schedule
thereto specified as such in each Supplement) as to such matters as are set
forth in Exhibit B.
SECTION 3.5 Annual Servicer's Certificate. On or before March 31 of
each calendar year, beginning with March 31, 1997, Servicer will deliver, as
provided in Section 13.5, to Trustee, any Credit Enhancement Provider and each
Rating Agency, an Officer's Certificate substantially in the form of Exhibit C
stating that (a) a review of the activities of Servicer during the twelve-month
period ending on December 31 of the immediately prior calendar year, or for the
initial period, from the Closing Date until December 31, 1996, and of its
performance under this Agreement was made under the supervision of the officer
signing such certificate and (b) to the best of such officer's knowledge, based
on such review, Servicer has fully performed all its obligations under this
Agreement throughout such period, or, if there has been a default in the
performance of any such obligation, specifying each such default known to such
officer and the nature and status thereof. In the event that Back-up Servicer
becomes Servicer, the Officer's Certificate that such Successor Servicer
delivers to the Trustee pursuant to this Section 3.5, which relates to the year
in which Back-up Servicer became Servicer, will only relate to the portion of
the year that Back-up Servicer acted as Servicer. A copy of such certificate may
be obtained by any Investor Holder by a request in writing to Trustee addressed
to the Corporate Trust Office.
SECTION 3.6 Annual Independent Accountants' Servicing Report. (a) On
or before March 31 of each calendar year, beginning with March 31, 1997,
Servicer shall cause a firm of nationally recognized independent certified
public accountants (who may also render other services to Servicer or
Transferor) to furnish, as provided in Section 13.5, a report to Trustee, any
Credit Enhancement Provider and each Rating Agency, to the effect that such firm
has examined certain documents and records relating to the servicing of
Receivables under this Agreement, compared the information contained in
Servicer's certificates delivered pursuant to this Agreement during the period
covered by such report with such documents and records and that, on the basis of
such examination, such firm is of the opinion (assuming the accuracy of any
reports generated by Servicer's third party agents) that such servicing was
conducted in compliance with this Agreement during the period covered by such
report (which shall be the prior calendar year, or the portion thereof falling
after the Initial Closing Date), except for such exceptions, errors or
irregularities as such firm shall believe to be immaterial to the financial
statements of the Servicer and such other exceptions, errors or irregularities
as shall be set forth in such reports. Unless otherwise provided with respect to
any Series in the related Supplement, a copy of such report may be obtained by
any Investor Holder by a request in writing to Trustee addressed to the
Corporate Trust Office.
(b) On or before March 31 of each calendar year, beginning with March
31, 1997, Servicer shall cause a firm of nationally recognized independent
certified public accountants (who may also render other services to Servicer or
Transferor) to furnish, as provided in Section 13.5, a report, prepared using
generally accepted auditing standards, to Trustee and each Rating Agency to the
effect that they have compared the mathematical calculations of each amount set
forth in the monthly certificates forwarded by Servicer pursuant to subsection
3.4(b) during the period covered by such report (which shall be the prior
calendar year, or the portion thereof falling after the Initial Closing Date),
with Servicer's computer reports which were the source of such amounts and that
on the basis of such comparison, such firm is of the opinion that such amounts
are in agreement, except for such exceptions as it believes to be immaterial to
the financial statements of the Servicer and such other exceptions as shall be
set forth in such report. A copy of such report may be obtained by any Investor
Holder by a request in writing to Trustee addressed to the Corporate Trust
Office.
SECTION 3.7 Tax Treatment. Transferor has structured this Agreement
and the Investor Certificates with the intention that the Investor Certificates
will qualify under applicable Federal, state, local and foreign tax law as
indebtedness. Transferor, Servicer, each Investor Holder, and each Certificate
Owner, agree to treat and to take no action inconsistent with the treatment of
the Investor Certificates (or beneficial interest therein) as indebtedness for
purposes of Federal, state, local and foreign income or franchise taxes and any
other tax imposed on or measured by income. Each Investor Holder, by acceptance
of its Certificate and each Certificate Owner, by acquisition of a beneficial
interest in a Certificate, agree to be bound by the provisions of this Section
3.7. Nothing contained in the foregoing or elsewhere in this Agreement shall,
however, be deemed to prohibit Transferor to make any election that may in the
future be available to it under the Internal Revenue Code to have the Trust or
any Series treated as a "financial asset securitization investment trust" (or
similar entity), so long as prior to the effectiveness of that election
Transferor delivers to Trustee an Opinion of Counsel to the effect that the
election (a) will not cause the Trust to be classified, for Federal income tax
purposes, as an association (or publicly traded partnership) taxable as a
corporation and (b) will not cause or constitute an event in which gain or loss
would be recognized by any Investor Holder.
SECTION 3.8 Notices to Transferor. Servicer or any Successor Servicer
pursuant to Section 10.2 shall deliver or make available to Transferor each
certificate and report required to be prepared, forwarded or delivered
thereafter pursuant to Sections 3.4, 3.5 and 3.6.
SECTION 3.9 Reports to the Commission. Servicer shall, on behalf of
the Trust, cause to be filed with the Securities and Exchange Commission any
periodic reports required to be filed under the provisions of the Securities
Exchange Act of 1934 and the rules and regulations of the Securities and
Exchange Commission thereunder. Transferor shall, at the expense of Servicer,
cooperate in any reasonable request of Servicer in connection with such filings.
SECTION 3.10 Covenants of Servicer. (a)(i) The Servicer shall
maintain, with respect to each Receivable originated on or before February 1,
1997, each Originator's first priority perfected security interest in the
Unearned Premiums securing such Receivables and with respect to each Receivable
originated after February 1, 1997, the Trust's first priority perfected security
interest in the Unearned Premiums securing such Receivables, (ii) Servicer shall
not impair the rights of the Certificateholders in any Receivable, (iii)
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable insurance premium finance loans that it services and (iv)
Servicer will not voluntarily increase or decrease the number or amount of any
scheduled payment, or the principal balance of a Receivable or the annual
percentage rate of a Receivable, or extend, rewrite or otherwise modify the
payment terms; provided, however, Servicer may (i) extend the term of any
Receivable, but not past the maturity date of the related insurance policies and
(ii) change the installment due date in the related Premium Finance Agreement
one time during the term of a Receivable, provided that such a change does not
result in extending the maturity of such Receivable for more than 30 days or
past the maturity date of the related insurance policies.
(b) Removal After Cure Period. In the event of a breach of any of the
covenants set forth in (i) subsections 3.10(a)(ii), (iii) and (iv) and as a
result of such breach the related Account becomes a Defaulted Account or the
Trust's rights in, to or under such Receivable in such Account or its proceeds
are impaired or the proceeds of such Receivable in such Account are not
available for any reason to the Trust free and clear of any Lien, then, upon the
expiration of 60 days (or such longer period as may be agreed to by the Trustee
in its sole discretion, but in no event later than 120 days) from the earlier to
occur of the discovery of any such event by either Transferor or Servicer, or
receipt by Servicer of written notice of any such event given by Trustee or (ii)
subsection 3.10(a)(i), then, upon the expiration of 15 days from the earlier to
occur of the discovery of any such event by either Transferor or Servicer, or
receipt by Servicer of written notice of any such event given by Trustee, then
each Receivable arising under the Account under which such Receivable arises
shall be removed from the Trust on the terms and conditions set forth in Section
3.10(c).
(c) Procedures for Removal. When the provisions of subsection 3.10(b)
require removal of a Receivable, Servicer shall accept assignment of Receivables
arising under an Account (a "Servicer Ineligible Account" and together with any
Transferor Ineligible Accounts, "Ineligible Account") by depositing into the
Collection Account on the applicable Determination Date an amount equal to the
principal portion of each Receivable arising under such Servicer Ineligible
Account and deducting such amount from the Principal Receivables in the Trust
(to the extent previously included therein). Deposits of any amounts into the
Collection Account pursuant to this subsection 3.10(c) shall be treated for all
purposes of this Agreement as Principal Collections. Upon the removal of
Receivables arising under such Servicer Ineligible Account (and the mailing of
any deposit required above), the Trust shall automatically and without further
action be deemed to transfer, assign, and otherwise convey to Servicer, without
recourse, representation or warranty, all the right, title and interest of the
Trust in and to each Receivable arising under such Servicer Ineligible Account,
all monies due or to become due with respect to each Receivable arising under
such Servicer Ineligible Account and all proceeds of such Servicer Ineligible
Receivable and Recoveries relating to such Servicer Ineligible Receivable. Such
reassigned Receivables shall be treated by the Trust as collected in full as of
the date on which it was transferred. Trustee shall execute such documents and
instruments of transfer or assignment and take other actions as shall reasonably
be requested by Servicer to evidence the conveyance of each Receivable arising
under such Servicer Ineligible Account pursuant to this subsection 3.10(c). The
obligation of Servicer set forth in this subsection 3.10(c), shall constitute
the sole remedy respecting any breach set forth in the above-referenced
subsections with respect to such Receivable available to the Holders or Trustee
on behalf of the Holders.
SECTION 3.11 Representations and Warranties of Back-up Servicer. PFS,
as initial Back-up Servicer, hereby makes, and any successor Back-up Servicer by
its appointment hereunder shall make the following representations and
warranties on which Trustee has relied in accepting the Receivables in trust and
in authenticating the Certificates issued on the Initial Closing Date:
(a) Organization and Good Standing. The Back-up Servicer is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has full corporate power, authority and legal right to own
its properties and conduct its premium finance loan business as such properties
are presently owned and as such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement.
(b) Due Qualification. The Back-up Servicer is qualified to do
business as a foreign corporation in good standing in any state where the
conduct of its business (including the servicing of insurance premium finance
contracts in the Permitted States) would require such qualification and has
obtained all licenses and approvals (including any licensing or approvals under
the Licensing Laws of a Permitted State) necessary in order to service the
Receivables as required under Federal, state or local law. If the Back-up
Servicer shall be required by any Requirement of Law (including any Licensing
Law of a Permitted State) to so qualify or register or obtain such license or
approval, then it shall do so as soon as possible.
(c) Due Authorization. The execution, delivery and performance of this
Agreement has been duly authorized by Back-up Servicer by all necessary
corporate action on the part of Back-up Servicer and this Agreement will remain,
from the time of its execution, an official record of Back-up Servicer.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of Back-up Servicer, enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereinafter
in effect, affecting the enforcement of creditors' rights in general and the
rights of creditors of national banking associations and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(e) No Violation. The execution and delivery of this Agreement by
Back-up Servicer, and the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof applicable to Back-up
Servicer, will not conflict with, violate, result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or lapse
of time or both) a default under, any Requirement of Law applicable to Back-up
Servicer, or any indenture, contract, agreement, mortgage, deed of trust or
other instrument to which Back-up Servicer, is a party or by which it is bound.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of Back-up Servicer, threatened against Back-up
Servicer, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, seeking any determination or ruling that, in the reasonable judgment
of Back-up Servicer, would materially and adversely affect the performance by
Back-up Servicer, of its obligations under this Agreement, or seeking any
determination or ruling that would materially and adversely affect the validity
or enforceability of this Agreement.
ARTICLE IV RIGHTS OF HOLDERS AND ALLOCATION AND
APPLICATION OF COLLECTIONS
SECTION 4.1 Rights of Holders. Each Series of Investor Certificates
shall represent Undivided Interests in the Trust, including the benefits of any
Credit Enhancement issued with respect to such Series and the right to receive
the Collections and other amounts at the times and in the amounts specified in
this Article IV to be deposited in the Investor Accounts and any other Series
Account (if so specified in the related Supplement) or to be paid to the
Investor Holders of such Series. The aggregate interest represented by such
Certificates in the Principal Receivables at any time shall not exceed an amount
equal to the Investor Interest at such time. Transferor shall own the remaining
undivided interest in the Trust, including the right to receive the Collections
and other amounts at the times and in the amounts specified in this Article IV
to be paid on account of the Transferor Interest. Transferor' s aggregate
interest in the Principal Receivables at any time shall not exceed the
Transferor Interest at such time and Transferor shall not have any interest in
the Investor Accounts, except as provided in this Agreement, or the benefits of
any Credit Enhancement issued with respect to any Series.
SECTION 4.2 Establishment of Accounts. (a) The Collection Account.
Servicer, for the benefit of the Holders, shall establish and maintain in the
name of Trustee, on behalf of the Trust, a non-interest bearing segregated
account (the "Collection Account") bearing a designation clearly indicating that
the funds deposited therein are held in trust for the benefit of the Holders, or
shall cause such Collection Account to be established and maintained, with an
office branch of (i) a depository institution or trust company (which may
include Trustee, Servicer or an Affiliate of Servicer) organized under the laws
of the United States of America or any one of the states thereof or the District
of Columbia and with deposit insurance provided by BIF or SAIF; provided that at
all times the certificates of deposit, short-term deposits or commercial paper
or the long-term unsecured debt obligations (other than such obligation whose
rating is based on collateral or on the credit of a Person other than such
institution or trust company) of such depository institution or trust company
shall have a credit rating from Moody's and Standard & Poor's of at least P-1
and A-1, respectively, in the case of the certificates of deposit, short-term
deposits or commercial paper, or a rating from Moody's of at least Aa3 and from
Standard & Poor's of at least AA- in the case of the long-term unsecured debt
obligations, or (ii) a depository institution, which may include Trustee, which
is acceptable to each Rating Agency (any of the foregoing being a "Qualified
Institution"); provided further that upon the insolvency of Servicer, the
Collection Account shall not be permitted to be maintained with Servicer.
Pursuant to authority granted to it pursuant to subsection 3.1(b), Servicer
shall have the revocable power to withdraw funds from the Collection Account for
the purposes of carrying out its duties hereunder.
(b) The Finance Charge and Excess Funding Accounts. Trustee, for the
benefit of the Investor Holders, shall establish and maintain with Trustee in
the name of the Trust two segregated trust accounts (the "Finance Charge
Account" and the "Excess Funding Account," respectively) bearing a designation
clearly indicating that the funds therein are held for the benefit of the
Investor Holders, or shall cause such Finance Charge Account or Excess Funding
Account to be established and maintained with an office or branch of a Qualified
Institution. Trustee shall possess all right, title and interest in all funds on
deposit from time to time in the Finance Charge Account and the Excess Funding
Account and in all proceeds thereof. The Finance Charge Account and the Excess
Funding Account shall be under the sole dominion and control of Trustee for the
benefit of the Investor Holders. Pursuant to authority granted to it hereunder,
Servicer shall have the revocable power to instruct Trustee to withdraw funds
from the Finance Charge Account and to withdraw or instruct the Person
maintaining the Excess Funding Account to withdraw, as the case may be, funds
from the Excess Funding Account, in each case for the purpose of carrying out
Servicer's duties hereunder. Trustee at all times shall maintain accurate
records reflecting each transaction in the Finance Charge Account and, if
maintained with Trustee, the Excess Funding Account, and that funds held therein
shall at all times be held in trust for the benefit of the Investor Holders.
(c) The Distribution Account. Trustee, for the benefit of the Investor
Holders, shall cause to be established and maintained in the name of the Trust,
a non-interest bearing segregated demand deposit trust account (the
"Distribution Account") bearing a designation clearly indicating that the funds
deposited therein are held in trust for the benefit of the Investor Holders, or
shall cause such Distribution Account to be established and maintained with an
office or branch of a Qualified Institution (other than Transferor). Trustee
shall possess all right, title and interest in all funds on deposit from time to
time in the Distribution Account and in all proceeds thereof. The Distribution
Account shall be under the sole dominion and control of Trustee for the benefit
of the Investor Holders.
(d) Series Accounts. If so provided in the related Supplement,
Trustee, for the benefit of the Investor Holders, shall cause to be established
and maintained in the name of the Trust, one or more Series Accounts. Each such
Series Account shall bear a designation clearly indicating that the funds
deposited therein are held for the benefit of the Investor Holders of such
Series. Each such Series Account will be a trust account, if so provided in the
related Supplement and will have the other features and be applied as set forth
in the related Supplement.
(e) Administration of the Finance Charge and Excess Funding Accounts.
Funds on deposit in the Excess Funding Account and the Finance Charge Account
shall at all times be invested by Trustee at the written direction of Servicer
in Permitted Investments. Any such investment shall mature and such funds shall
be available for withdrawal on or prior to the Transfer Date related to the
Monthly Period in which such funds are processed for collection, or if so
specified in the related Supplement, immediately preceding a Distribution Date.
Trustee shall maintain for the benefit of the Investor Holders possession of the
negotiable instruments or securities evidencing the Permitted Investments
described in clause (a) of the definition thereof from the time of purchase
thereof until the time of sale or maturity; provided, that no such investment
shall be disposed of prior to its maturity date. At the end of each month, all
interest and earnings (net of losses and investment expenses) on funds on
deposit in the Excess Funding Account, the Finance Charge Account and, unless
otherwise specified in the related Supplement, each Series Account shall be
deposited by Trustee in a separate deposit account with a Qualified Institution
in the name of Servicer, or a Person designated in writing by Servicer, which
shall not constitute a part of the Trust, or shall otherwise be turned over by
Trustee to Servicer not less frequently than monthly. Subject to the
restrictions set forth above, Servicer, or a Person designated in writing by
Servicer, of which Trustee shall have received written notification thereof,
shall have the authority to instruct Trustee with respect to the investment of
funds on deposit in the Excess Funding Account and the Finance Charge Account.
For purposes of determining the availability of funds or the balances in the
Finance Charge Account and the Excess Funding Account for any reason under this
Agreement, all investment earnings on such funds shall be deemed not to be
available or on deposit.
SECTION 4.3 Collections and Allocations. (a) Collections. Except as
provided below, Servicer shall deposit all Collections in the Collection Account
as promptly as possible after the Date of Processing of such Collections, but in
no event later than the second Business Day following such Date of Processing.
Servicer shall allocate such amounts to each Series of Investor
Certificates and to the Holder of the Transferor Interest in accordance with
this Article IV and shall withdraw the required amounts from the Collection
Account or pay such amounts to the Holder of the Transferor Interest in
accordance with this Article IV, in both cases as modified by any Supplement.
Servicer shall make such deposits or payments on the date indicated therein by
wire transfer or as otherwise provided in the Supplement for any Series of
Certificates with respect to such Series.
Notwithstanding anything in this Agreement to the contrary, for so
long as, and only so long as, the Originators shall remain Servicer hereunder,
and (a) (i) Servicer provides to Trustee a letter of credit or other credit
enhancement covering collection risk of Servicer acceptable to the Rating
Agencies, and (ii) Transferor shall not have received a notice from any Rating
Agency that reliance on such a letter of credit or other credit enhancement
would result in the lowering of such Rating Agency's then-existing rating of the
Investor Certificates, or (b) the certificate of deposit or unsecured short-term
debt obligations of Transferor are rated P-1 by Moody's (or, if neither such
certificates of deposit nor such obligations of Transferor are rated by Moody's,
and so long as Moody's has not notified Servicer that reliance upon Mellon Bank
Corporation's ratings for this purpose would result in a lowering of Moody's
then-existing rating of the Investor Certificates, then the counterparty risk or
long-term unsecured debt of Mellon Bank Corporation are rated at least A2 by
Moody's), at least A-1 by Standard & Poor's and insured by BIF or SAIF, Servicer
need not deposit Collections into the Collection Account, the Excess Funding
Account, the Finance Charge Account or any Series Account, as provided in any
Supplement, or make payments to Transferor, on or before the second Business Day
following the Date of Processing of such Receivables as provided in this Article
IV, but may make such deposits, payments and withdrawals on each Transfer Date
or as specified in the related Supplement in an amount equal to the net amount
of such deposits, payments and withdrawals which would have been made but for
the provisions of this paragraph.
Notwithstanding anything else in this Agreement to the contrary, with
respect to any Monthly Period, whether Servicer is required to make quarterly,
monthly or daily deposits into the Collection Account, the Finance Charge
Account, the Excess Funding Account or any Series Account, as provided in any
Supplement, (i) Servicer will only be required to deposit Collections into the
Collection Account, the Finance Charge Account, the Excess Funding Account or
any Series Account up to the required amount to be deposited into any such
deposit account or, without duplication, distributed on or prior to the related
Distribution Date to Investor Holders or to any Credit Enhancement Provider
pursuant to the terms of any Supplement or agreement relating to such Credit
Enhancement, and (ii) if at any time prior to such Distribution Date the amount
of Collections deposited in the Collection Account exceeds the amount required
to be deposited pursuant to clause (i), Servicer may withdraw the excess from
the Collection Account.
(b) Allocations for Transferor Interest. Throughout the existence of
the Trust, unless otherwise stated in any Supplement, Servicer shall allocate to
Transferor an amount equal to the product of (A) the applicable Transferor
Percentage and (B) the aggregate amount of Collections allocated to Principal
Receivables and Finance Charge Receivables in respect of each Monthly Period.
Notwithstanding anything in this Agreement to the contrary, unless otherwise
stated in any Supplement, Servicer need not deposit this amount or any other
amounts so allocated to Transferor pursuant to any Supplement into the
Collection Account and shall pay, or be deemed to pay, such amounts as collected
to Transferor.
SECTION 4.4 Shared Principal Collections. On each Distribution Date,
(a) Servicer shall allocate Shared Principal Collections to each Principal
Sharing Series, pro rata, in proportion to the Principal Shortfalls, if any,
with respect to each such Series, and any remainder may, at the option of
Transferor, be applied as principal with respect to any Variable Interest and
(b) Servicer shall withdraw from the Collection Account or applicable Series
Account and pay to Transferor an amount equal to the excess, if any, of (x) the
aggregate amount for all outstanding Series of Collections of Principal
Receivables which the related Supplements or this Agreement specify are to be
treated as "Shared Principal Collections" for such Distribution Date over (y)
the aggregate amount for all outstanding Principal Sharing Series which the
related Supplements specify are "Principal Shortfalls" for such Distribution
Date; provided that, to the extent that, on any Distribution Date the Transferor
Interest (determined after giving effect to any transfer of Principal
Receivables to the Trust on such date) is less than or equal to zero, Servicer
shall not distribute such Shared Principal Collections to Transferor, but shall
deposit such funds in the Excess Funding Account.
SECTION 4.5 Excess Finance Charge Collections. On each Distribution
Date, (a) for each Group, Servicer shall apply the aggregate amount for all
outstanding Series in such Group of the amounts which the related Supplements
specify are to be treated as "Excess Finance Charge Collections" for such
Distribution Date to each Series in such Group, pro rata, in proportion to the
Finance Charge Shortfalls, if any, with respect to each such Series, and (b)
Servicer shall withdraw (or shall instruct Trustee to withdraw) from the
Collection Account and pay to Transferor an amount equal to the excess, if any,
of (x) the aggregate amount for all outstanding Series in a Group of the amounts
which the related Supplements specify are to be treated as "Excess Finance
Charge Collections" for such Distribution Date over (y) the aggregate amount for
all outstanding Series in such Group which the related Supplements specify are
"Finance Charge Shortfalls," for such Distribution Date; provided that the
sharing of Excess Finance Charge Collections among Series in a Group will
continue only until such time, if any, at which Transferor shall deliver to
Trustee an Officer's Certificate to the effect that, in the reasonable belief of
Transferor, the continued sharing of Excess Finance Charge Collections among
Series in any Group would have adverse regulatory implications with respect to
Transferor. Following the delivery by Transferor of such an Officer's
Certificate to Trustee, there will not be any further sharing of Excess Finance
Charge Collections among Series in any Group.
[THE REMAINDER OF ARTICLE IV IS RESERVED AND
SHALL BE SPECIFIED IN ANY SUPPLEMENT WITH
RESPECT TO ANY SERIES.]
ARTICLE V [ARTICLE V IS RESERVED AND SHALL BE SPECIFIED
IN THE SUPPLEMENT WITH RESPECT TO ANY SERIES.]
ARTICLE VI THE CERTIFICATES
SECTION 6.1 The Certificates. Subject to Sections 6.10 and 6.13, the
Investor Certificates of each Series and any Class thereof may be issued in
bearer form (the "Bearer Certificates") with attached interest coupons and a
special coupon (collectively, the "Coupons") or in fully registered form (the
"Registered Certificates"), and shall be substantially in the form of the
exhibits with respect thereto attached to the related Supplement. The Investor
Certificates shall, upon issue pursuant hereto or to Section 6.9 or Section
6.10, be executed and delivered by Transferor to Trustee for authentication and
redelivery as provided in Sections 2.1 and 6.2. Any Investor Certificate shall
be issuable in a minimum denomination of $1,000 Undivided Interest and integral
multiples thereof, unless otherwise specified in any Supplement. Each
Certificate shall be executed by manual or facsimile signature on behalf of
Transferor by its President or any Vice President. Certificates bearing the
manual or facsimile signature of the individual who was, at the time when such
signature was affixed, authorized to sign on behalf of Transferor or Trustee
shall not be rendered invalid, notwithstanding that such individual has ceased
to be so authorized prior to the authentication and delivery of such
Certificates or does not hold such office at the date of such Certificates. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein, executed by or on
behalf of Trustee by the manual signature of a duly authorized signatory, and
such certificate upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication
except Bearer Certificates which shall be dated the applicable Issuance Date as
provided in the related Supplement.
SECTION 6.2 Authentication of Certificates. On the Initial Closing
Date, Trustee shall authenticate and deliver the initial Series of Investor
Certificates, upon the written order of Transferor, to the underwriters for the
sale of the Book-Entry Certificates evidenced by such Investor Certificates, and
against payment to Transferor of the Initial Investor Interest (net of any
purchase or underwriting discount). Upon the receipt of such payment and the
issuance of the Investor Certificates, such Investor Certificates shall be fully
paid and nonassessable. Upon an Issuance as provided in Section 6.9 and the
satisfaction of certain other conditions specified therein, Trustee shall
authenticate and deliver the Investor Certificates of additional Series (with
the designation provided in the related Supplement), upon the order of
Transferor, to the Persons designated in such Supplement. Upon the order of
Transferor, the Certificates of any Series shall be duly authenticated by or on
behalf of Trustee, in authorized denominations. If specified in the related
Supplement for any Series, Trustee shall authenticate and deliver outside the
United States the Global Certificate that is issued upon original issuance
thereof, upon the written order of Transferor, to the Depository against payment
of the purchase price therefor. If specified in the related Supplement for any
Series, Trustee shall authenticate Book-Entry Certificates that are issued upon
original issuance thereof, upon the written order of Transferor, to a Clearing
Agency or its nominee as provided in Section 6.10 against payment of the
purchase price thereof.
SECTION 6.3 Registration of Transfer and Exchange of Certificates. (a)
Trustee shall cause to be kept at the office or agency to be maintained by a
transfer agent and registrar (the "Transfer Agent and Registrar"), in accordance
with the provisions of Section 11.16, a register (the "Certificate Register") in
which, subject to such reasonable regulations as it may prescribe, the Transfer
Agent and Registrar shall provide for the registration of the Investor
Certificates of each Series (unless otherwise provided in the related
Supplement) and of transfers and exchanges of the Investor Certificates as
herein provided. Trustee is the initial Transfer Agent and Registrar. If any
Investor Certificate is issued as a Global Certificate, Trustee may, or if and
so long as any Series of Investor Certificates are listed on the Luxembourg
Stock Exchange and such exchange shall so require, Trustee shall appoint a
co-transfer agent and co-registrar in Luxembourg or another European city. Any
reference in this Agreement to the Transfer Agent and Registrar shall include
any co-transfer agent and co-registrar unless the context otherwise requires.
Trustee shall be permitted to resign as Transfer Agent and Registrar upon 30
days' written notice to Servicer. In the event that Trustee shall no longer be
the Transfer Agent and Registrar, Trustee shall appoint a successor Transfer
Agent and Registrar.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Transfer Agent and Registrar, Transferor shall execute,
subject to the provisions of subsection 6.3(c), and Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Certificates in authorized denominations of like aggregate Undivided
Interests; provided, that the provisions of this paragraph shall not apply to
Bearer Certificates.
At the option of an Investor Holder, Investor Certificates may be
exchanged for other Investor Certificates of the same Series in authorized
denominations of like aggregate Undivided Interests, upon surrender of the
Investor Certificates to be exchanged at any such office or agency. At the
option of any Holder of Registered Certificates, Registered Certificates may be
exchanged for other Registered Certificates of the same Series in authorized
denominations of like aggregate Undivided Interests in the Trust, upon surrender
of the Registered Certificates to be exchanged at any office or agency of the
Transfer Agent and Registrar maintained for such purpose. At the option of a
Holder of a Bearer Certificate, subject to applicable laws and regulations
(including the Bearer Rules), Bearer Certificates may be exchanged for other
Bearer Certificates or Registered Certificates of the same Series in authorized
denominations of like aggregate Undivided Interests in the Trust, in the manner
specified in the Supplement for such Series, upon surrender of the Bearer
Certificates to be exchanged at an office or agency of the Transfer Agent and
Registrar located outside the United States. Each Bearer Certificate surrendered
pursuant to this Section 6.3 shall have attached thereto (or be accompanied by)
all unmatured Coupons, provided that any Bearer Certificate so surrendered after
the close of business on the Record Date preceding the relevant Distribution
Date after the related Series Termination Date need not have attached the
Coupons relating to such Distribution Date.
Whenever any Investor Certificates of any Series are so surrendered
for exchange, Transferor shall execute, and Trustee shall authenticate and
(unless the Transfer Agent and Registrar is different than Trustee, in which
case the Transfer Agent and Registrar shall) deliver, the Investor Certificates
of such Series which the Holder making the exchange is entitled to receive.
Every Investor Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in a form
satisfactory to Trustee and the Transfer Agent and Registrar duly executed by
the Holder thereof or his attorney-in-fact duly authorized in writing.
The preceding provisions of this Section 6.3 notwithstanding, Trustee
or the Transfer Agent and Registrar, as the case may be, shall not be required
to register the transfer of or exchange any Investor Certificate of any Series
for a period of 15 days preceding the due date for any payment with respect to
the Investor Certificates of such Series.
Unless otherwise provided in the related Supplement, no service charge
shall be made for any registration of transfer or exchange of Certificates, but
the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
All Investor Certificates (together with any Coupons attached to
Bearer Certificates) surrendered for registration of transfer and exchange shall
be canceled by the Transfer Agent and Registrar and disposed of in a manner
satisfactory to Trustee. Trustee shall cancel and destroy the Global
Certificates upon its exchange in full for Definitive Certificates and shall
deliver a certificate of destruction to Transferor. Such certificate shall also
state that a certificate or certificates of each Foreign Clearing Agency to the
effect referred to in Section 6.13 was received with respect to each portion of
the Global Certificate exchanged for Definitive Certificates.
Transferor shall execute and deliver to Trustee or the Transfer Agent
and Registrar, as applicable, Bearer Certificates and Registered Certificates in
such amounts and at such times as are necessary to enable Trustee to fulfill its
responsibilities under this Agreement and the Certificates.
(b) Except as provided in Section 6.9 or 7.2 or this subsection
6.3(b), Transferor shall not transfer the Transferor Interest or any interest
therein. Transferor may from time to time transfer a portion of the Transferor
Interest by causing the issuance of one or more Certificates (each a
"Supplemental Certificate"), the terms of which shall be defined in a Supplement
(which Supplement shall be subject to Section 13.1(a) to the extent that it
amends any of the terms of this Agreement), to be delivered to or upon the order
of Transferor (or the Holder of a Supplemental Certificate, in the case of the
transfer or exchange thereof, as provided below), upon satisfaction of the
following conditions:
(i) the Transferor Interest shall not be less than the Minimum
Transferor Interest, in each case as of the date of, and after giving
effect to, such exchange;
(ii) the Rating Agency Condition shall have been satisfied
with respect to such exchange (or transfer or exchange as provided
below); and
(iii) Transferor shall have delivered to Trustee and each
Rating Agency a Tax Opinion, dated the date of such exchange (or
transfer or exchange as provided below), with respect thereto.
Any Supplemental Certificate may be transferred or exchanged only upon
satisfaction of the conditions set forth in clauses (ii) and (iii).
(c) Unless otherwise provided in the related Supplement, registration
of transfer of Registered Certificates containing a legend relating to the
restrictions on transfer of such Registered Certificates (which legend shall be
set forth in the Supplement relating to such Investor Certificates) shall be
effected only if the conditions set forth in such related Supplement are
satisfied.
Whenever a Registered Certificate containing the legend set forth in
the related Supplement is presented to the Transfer Agent and Registrar for
registration of transfer, the Transfer Agent and Registrar shall promptly seek
instructions from Servicer (or Transferor, if the Back-up Servicer is Servicer)
regarding such transfer. The Transfer Agent, Registrar and Trustee shall be
entitled to receive written instructions signed by a Servicing Officer (or an
officer of Transferor, if the Back-up Servicer is Servicer) prior to registering
any such transfer or authenticating new Registered Certificates, as the case may
be. Servicer shall indemnify the Transfer Agent and Registrar and Trustee and
hold each of them harmless against any loss, liability or expense incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by them in reliance on any such written
instructions furnished pursuant to this subsection 6.3(c).
(d) The Transfer Agent and Registrar will maintain at its expense in
the Borough of Manhattan, the City of New York (and subject to this Section 6.3,
if specified in the related Supplement for any Series, any other city designated
in such Supplement) an office or offices or any agency or agencies where
Investor Certificates of such Series may be surrendered for registration of
transfer or exchange.
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate (together, in the case of Bearer Certificates, with
all unmatured Coupons, if any, appertaining thereto) is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Transfer Agent and Registrar and
Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to Trustee that such Certificate
has been acquired by a bona fide purchaser, Transferor shall execute and Trustee
shall authenticate and (unless the Transfer Agent and Registrar is different
from Trustee, in which case the Transfer Agent and Registrar shall) deliver (in
compliance with applicable law), in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and aggregate Undivided Interest. In connection with the issuance of any
new Certificate under this Section 6.4, Trustee or the Transfer Agent and
Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of Trustee and the Transfer Agent and
Registrar) connected therewith. Any duplicate Certificate issued pursuant to
this Section 6.4 shall constitute complete and indefeasible 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 6.5 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, Trustee, the Paying Agent, the
Transfer Agent and Registrar and any agent of any of them may treat the Person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Article V (as described in
any Supplement) and for all other purposes whatsoever, and neither Trustee, the
Paying Agent, the Transfer Agent and Registrar nor any agent of any of them
shall be affected by any notice to the contrary; provided that in determining
whether the holders of Investor Certificates evidencing the requisite Undivided
Interests have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Investor Certificates owned by Transferor, Servicer
or any Affiliate thereof shall be disregarded and deemed not to be outstanding,
except that, in determining whether Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Investor Certificates which a Responsible Officer knows to be so owned
shall be so disregarded. Investor Certificates so owned that have been pledged
in good faith shall not be disregarded as outstanding, if the pledgee
establishes to the satisfaction of Trustee the pledgee's right so to act with
respect to such Investor Certificates and that the pledgee is not Transferor,
Servicer or an Affiliate thereof.
In the case of a Bearer Certificate, Trustee, the Paying Agent, the
Transfer Agent and Registrar and any agent of any of them may treat the bearer
of a Bearer Certificate or Coupon as the owner of such Bearer Certificate or
Coupon for the purpose of receiving distributions pursuant to Article IV and
Article XII and for all other purposes whatsoever, and neither Trustee, the
Paying Agent, the Transfer Agent and Registrar nor any agent of any of them
shall be affected by any notice to the contrary.
SECTION 6.6 Appointment of Paying Agent. (a) The Paying Agent shall
make distributions to Investor Holders from the appropriate account or accounts
maintained for the benefit of Holders as specified in this Agreement or the
related Supplement for any Series pursuant to Articles IV and V. Any Paying
Agent shall have the revocable power to withdraw funds from such appropriate
account or accounts for the purpose of making distributions referred to above.
Trustee (or Servicer (or Transferor, if Back-up Servicer is Servicer) if Trustee
is the Paying Agent) may revoke such power and remove the Paying Agent, if
Trustee (or Servicer (or Transferor, if Back-up Servicer is Servicer) if Trustee
is the Paying Agent) determines in its sole discretion that the Paying Agent
shall have failed to perform its obligations under this Agreement in any
material respect or for other good cause. Trustee (or Servicer (or Transferor,
if Back-up Servicer is Servicer) if Trustee is the Paying Agent) shall notify
each Rating Agency of the removal of any Paying Agent. The Paying Agent, unless
the Supplement with respect to any Series states otherwise, shall initially be
Trustee. If any form of Investor Certificate is issued as a Global Certificate,
or if and so long as any Series of Investor Certificates are listed on the
Luxembourg Stock Exchange and such exchange shall so require, Trustee shall
appoint a co-paying agent in Luxembourg or another European city. Trustee shall
be permitted to resign as Paying Agent upon 30 days' written notice to Servicer.
In the event that Trustee shall no longer be the Paying Agent, Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company). The provisions of Sections 11.1, 11.2 and 11.3 shall apply to Trustee
also in its role as Paying Agent, for so long as Trustee shall act as Paying
Agent. Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
If specified in the related Supplement for any Series, so long as the
Investor Certificates of such Series are outstanding, Transferor shall maintain
a co-paying agent in New York City (for Registered Certificates only) or any
other city designated in such Supplement which, if and so long as any Series of
Investor Certificates is listed on the Luxembourg Stock Exchange or other stock
exchange and such exchange so requires, shall be in Luxembourg or the location
required by such other stock exchange.
(b) Trustee shall cause the Paying Agent (other than itself) to
execute and deliver to Trustee an instrument in which such Paying Agent shall
agree with Trustee that such Paying Agent will hold all sums, if any, held by it
for payment to the Holders in trust for the benefit of the Holders entitled
thereto until such sums shall be paid to such Holders and shall agree, and if
Trustee is the Paying Agent it hereby agrees, that it shall comply with all
requirements of the Internal Revenue Code regarding the withholding by Trustee
of payments in respect of Federal income taxes due from Certificate Owners.
SECTION 6.7 Access to List of Holders' Names and Addresses. Trustee
shall furnish or cause to be furnished by the Transfer Agent and Registrar to
Servicer or the Paying Agent, within five Business Days after receipt by Trustee
of a request therefor from Servicer or the Paying Agent, respectively, in
writing, a list in such form as Servicer or the Paying Agent may reasonably
require, of the names and addresses of the Investor Holders as of the most
recent Record Date for payment of distributions to Investor Holders. Unless
otherwise provided in the related Supplement, Holders of the Investor
Certificates evidencing Undivided Interests aggregating not less than 10% of the
Investor Interest of the Investor Certificates of any Series (the "Applicants")
may apply in writing to Trustee, and if such application states that the
Applicants desire to communicate with other Investor Holders of any Series with
respect to their rights under this Agreement or under the Investor Certificates
and is accompanied by a copy of the communication which such Applicants propose
to transmit, then Trustee, after having been adequately indemnified by such
Applicants for its costs and expenses, shall afford or shall cause the Transfer
Agent and Registrar to afford such Applicants access during normal business
hours to the most recent list of Holders held by Trustee and shall give Servicer
notice that such request has been made, within five Business Days after the
receipt of such application. Such list shall be as of a date no more than 45
days prior to the date of receipt of such Applicants' request. Every Holder, by
receiving and holding a Certificate, agrees with Trustee that neither Trustee,
the Transfer Agent and Registrar, nor any of their respective agents shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders hereunder, regardless of the source from
which such information was obtained.
SECTION 6.8 Authenticating Agent. (a) Trustee may appoint one or more
authenticating agents with respect to the Certificates which shall be authorized
to act on behalf of Trustee in authenticating the Certificates in connection
with the issuance, delivery, registration of transfer, exchange or repayment of
the Certificates. Whenever reference is made in this Agreement to the
authentication of Certificates by Trustee or Trustee's certificate of
authentication, such reference shall be deemed to include authentication on
behalf of Trustee by an authenticating agent and a certificate of authentication
executed on behalf of Trustee by an authenticating agent. Each authenticating
agent must be acceptable to Transferor.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of Trustee or
such authenticating agent.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to Trustee and to Transferor. Trustee may at any time
terminate the agency of an authenticating agent by giving notice of termination
to such authenticating agent and to Transferor. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time an authenticating
agent shall cease to be acceptable to Trustee or Transferor, Trustee promptly
may appoint a successor authenticating agent. Any successor authenticating agent
upon acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an authenticating agent. No successor authenticating agent
shall be appointed unless acceptable to Trustee and Transferor.
(d) Trustee agrees to pay each authenticating agent from time to time
reasonable compensation for its services under this Section 6.8, and Trustee
shall be entitled to be reimbursed and Servicer shall reimburse Trustee for such
reasonable payments actually made, subject to the provisions of Section 11.5.
(e) The provisions of Sections 11.1, 11.2 and 11.3 shall be applicable
to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.8, the
Certificates may have endorsed thereon, in lieu of Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
"This is one of the certificates described in the Pooling
and Servicing Agreement.
------------------------------------
as Authenticating Agent for Trustee,
By:_________________________________
Authorized Officer."
SECTION 6.9 New Issuances. (a) Upon request by Transferor from time to
time, Trustee shall issue to Transferor under Section 6.1, for execution and
redelivery to Trustee for authentication under Section 6.2, one or more new
Series of Investor Certificates. Any such Series shall be substantially in the
form specified in the related Supplement and shall bear, upon its face, the
designation for such Series to which it belongs, as selected by Transferor.
Except as specified in any Supplement for a related Series, all Investor
Certificates of any Series shall rank pari passu and be equally and ratably
entitled as provided herein to the benefits hereof (except that the Credit
Enhancement provided for any Series shall not be available for any other Series)
without preference, priority or distinction on account of the actual time or
times of authentication and delivery, all in accordance with the terms and
provisions of this Agreement and the related Supplement.
(b) Transferor may require Trustee to issue to Transferor under
Section 6.1, for execution and redelivery to Trustee for authentication under
Section 6.2, one or more newly issued Series of Investor Certificates or in
connection with a Paired Series, interests in such Series, in exchange for a
reduction in the Transferor Interest (any such transaction, an "Issuance").
Transferor may initiate an Issuance by notifying Trustee, in writing at least
three days in advance (an "Issuance Notice") of the date upon which the Issuance
is to occur (an "Issuance Date"). Any Issuance Notice shall state the
designation of any Series (and Class thereof, if applicable) to be issued on the
Issuance Date and, with respect to each such Series, its Initial Investor
Interest (or the method for calculating such Initial Investor Interest), the
applicable interest rate (or the method for allocating interest payments or
other cash flows to such Series), if any, and the Credit Enhancement Provider,
if any, with respect to such Series. On the Issuance Date, Trustee shall
authenticate and deliver any such Series of Investor Certificates only upon
delivery to it of the following: (1) a Supplement satisfying the criteria set
forth in subsection 6.9(c) executed by Transferor and specifying the Principal
Terms of such Series, (2) the applicable Credit Enhancement, if any, (3) the
agreement, if any, pursuant to which the Credit Enhancement Provider agrees to
provide the Credit Enhancement, if any, (4) a Tax Opinion, (5) evidence that the
Rating Agency Condition has been satisfied with respect to the Issuance, and (6)
an Officer's Certificate signed by a Vice President (or any more senior officer)
of Transferor, that on the Issuance Date after giving effect to such Issuance,
the Transferor Interest would be at least equal to the Minimum Transferor
Interest. Upon satisfaction of such conditions, Trustee shall issue as provided
above, such Series of Investor Certificates, dated the Issuance. There is no
limit to the number of Issuances that may be performed under this Agreement.
(c) In conjunction with an Issuance, the parties hereto shall execute
a Supplement, which shall specify the relevant terms with respect to any newly
issued Series of Investor Certificates, which may include: (i) its name or
designation, (ii) an Initial Investor Interest or the method of calculating the
Initial Investor Interest, (iii) the method of determining any adjusted Investor
Interest, if applicable, (iv) the applicable interest rate (or formula for its
determination), (v) the Closing Date, (vi) each rating agency rating such
Series, (vii) the name of the Clearing Agency, if any, (viii) the rights of
Transferor that have been transferred to the Holders of such Series pursuant to
such Issuance (including any rights to allocations of Collections of Finance
Charge Receivables and Principal Receivables), (ix) the interest payment date or
dates and the date or dates from which interest shall accrue, (x) the periods
during which or dates on which principal will be paid or accrued, (xi) the
method of allocating Collections with respect to Principal Receivables for such
Series and, if applicable, with respect to other Series and the method by which
the principal amount of Investor Certificates of such Series shall amortize or
accrete and the method for allocating Collections with respect to Finance Charge
Receivables and Receivables in Defaulted Accounts, (xii) any other Collections
with respect to Receivables or other amounts available to be paid with respect
to such Series, (xiii) the names of any accounts to be used by such Series and
the terms governing the operation of any such account and use of moneys therein,
(xiv) the Series Servicing Fee and the Series Servicing Fee Percentage, (xv) the
Minimum Transferor Interest and, the Series Termination Date, (xvi) the terms of
any Credit Enhancement with respect to such Series, and the Credit Enhancement
Provider, if applicable, (xvii) the base rate applicable to such Series, (xviii)
the terms on which the Certificates of such Series may be repurchased or
remarketed to other investors, (xix) any deposit into any account provided for
such Series, (xx) the number of Classes of such Series, and if more than one
Class, the rights and priorities of each such Class, (xxi) the priority of any
Series with respect to any other Series, (xxii) the rights, if any, of
Transferor that have been transferred to the holders of such Series, (xxiii) the
Minimum Aggregate Principal Receivables, (xxiv) whether such Series will be part
of a Group, (xxv) whether such Series will or may be a Paired Series and the
Series with which it will be paired, if applicable and (xxvi) any other relevant
terms of such Series (including whether or not such Series will be pledged as
collateral for an issuance of any other securities, including commercial paper)
(all such terms, the "Principal Terms" of such Series). The terms of such
Supplement may modify or amend the terms of this Agreement solely as applied to
such new Series.
(d) Upon satisfaction of the above conditions, Transferor may also
cause Trustee to enter into one or more agreements pursuant to which Trustee
shall sell purchased interests in the Receivables and other Trust Assets to one
or more purchasers. Such agreement(s) shall specify terms similar to Principal
Terms for any such purchased interests and may grant the purchaser(s) of such
interests, or an agent or other representative of such purchaser(s), notice and
consultation rights with respect to any rights or actions of Trustee.
SECTION 6.10 Book-Entry Certificates. Unless otherwise provided in any
related Supplement, the Investor Certificates, upon original issuance, shall be
issued in the form of typewritten Certificates representing the Book-Entry
Certificates, to be delivered to the depository specified in such Supplement
(the "Depository") for the Clearing Agency or Foreign Clearing Agency for such
Series. The Investor Certificates of each Series shall, unless otherwise
provided in the related Supplement, initially be registered on the Certificate
Register in the name of the nominee of the Clearing Agency or Foreign Clearing
Agency. No Certificate Owner will receive a definitive certificate representing
such Certificate Owner's interest in the related Series of Investor
Certificates, except as provided in Section 6.12. Unless and until definitive,
fully registered Investor Certificates of any Series ("Definitive Certificates")
have been issued to Certificate Owners pursuant to Section 6.12:
(i) the provisions of this Section 6.10 shall be in full force
and effect with respect to each such Series;
(ii) Transferor, Servicer, the Paying Agent, the Transfer Agent
and Registrar and Trustee may deal with the Clearing Agency and the
Clearing Agency Participants for all purposes (including the making of
distributions on the Investor Certificates of each such Series) as the
authorized representatives of the Certificate Owners;
(iii) to the extent that the provisions of this Section 6.10
conflict with any other provisions of this Agreement, the provisions
of this Section 6.10 shall control with respect to each such Series;
and
(iv) the rights of Certificate Owners of each such Series shall
be exercised only through the Clearing Agency or Foreign Clearing
Agency and the applicable Clearing Agency Participants and shall be
limited to those established by law and agreements between such
Certificate Owners and the Clearing Agency or Foreign Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the Depository
Agreement applicable to a Series, unless and until Definitive
Certificates of such Series are issued pursuant to Section 6.12, the
initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit distributions of
principal and interest on the Investor Certificates to such Clearing
Agency Participants.
SECTION 6.11 Notices to Clearing Agency. Whenever notice or other
communication to the Holders is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Owners pursuant to
Section 6.12, Trustee shall give all such notices and communications specified
herein to be given to Holders of the Investor Certificates to the Clearing
Agency or Foreign Clearing Agency for distribution to Holders of Investor
Certificates.
SECTION 6.12 Definitive Certificates. If (i) (A) Transferor advises
Trustee in writing that the Clearing Agency or Foreign Clearing Agency is no
longer willing or able to discharge properly its responsibilities under the
applicable Depository Agreement, and (B) Trustee or Transferor is unable to
locate a qualified successor, (ii) Transferor, at its option, advises Trustee in
writing that it elects to terminate the book-entry system through the Clearing
Agency or Foreign Clearing Agency with respect to any Series of Certificates or
(iii) after the occurrence of a Servicer Default, Certificate Owners of a Series
representing beneficial interests aggregating not less than 50% of the Investor
Interest of such Series advise Trustee and the applicable Clearing Agency or
Foreign Clearing Agency through the applicable Clearing Agency Participants in
writing that the continuation of a book-entry system through the applicable
Clearing Agency or Foreign Clearing Agency is no longer in the best interests of
the Certificate Owners, Trustee shall notify all Certificate Owners of such
Series, through the applicable Clearing Agency Participants, of the occurrence
of any such event and of the availability of Definitive Certificates to
Certificate Owners of such series requesting the same. Upon surrender to Trustee
of the Investor Certificates of such Series by the applicable Clearing Agency or
Foreign Clearing Agency, accompanied by registration instructions from the
applicable Clearing Agency or Foreign Clearing Agency for registration, Trustee
shall issue the Definitive Certificates of such Series. Neither Transferor nor
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates of such Series all references
herein to obligations imposed upon or to be performed by the applicable Clearing
Agency or Foreign Clearing Agency shall be deemed to be imposed upon and
performed by Trustee, to the extent applicable with respect to such Definitive
Certificates, and Trustee shall recognize the Holders of the Definitive
Certificates of such series as Holders of such Series hereunder.
SECTION 6.13 Global Certificate; Euro-Certificate Exchange Date. If
specified in the related Supplement for any Series, the Investor Certificates
may be initially issued in the form of a single Temporary Global Certificate
(the "Global Certificate") in bearer form, without interest coupons, in the
denomination of the Initial Investor Interest and substantially in the form
attached to the related Supplement. Unless otherwise specified in the related
Supplement, the provisions of this Section 6.13 shall apply to such Global
Certificate. The Global Certificate will be authenticated by Trustee upon the
same conditions, in substantially the same manner and with the same effect as
the Definitive Certificates. The Global Certificate may be exchanged in the
manner described in the related Supplement for Registered or Bearer Certificates
in definitive form.
SECTION 6.14 Meetings of Holders. To the extent provided by the
Supplement for any Series issued in whole or in part in Bearer Certificates,
Servicer or Trustee may at any time call a meeting of the Holders of such
Series, to be held at such time and at such place as Servicer or Trustee, as the
case may be, shall determine, for the purpose of approving a modification of or
amendment to, or obtaining a waiver of, any covenant or condition set forth in
this Agreement with respect to such Series or in the Certificates of such
Series, subject to Section 13.1.
ARTICLE VII MATTERS RELATING TO TRANSFEROR
SECTION 7.1 Liability of Transferor. Transferor shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by Transferor.
SECTION 7.2 Merger or Consolidation of, or Assumption of the
Obligations of, Transferor. (a) Transferor shall not consolidate with or merge
into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(i) the Person formed by such consolidation or into which
Transferor is merged or the Person which acquires by conveyance or
transfer the properties and assets of Transferor substantially as an
entirety shall be, if Transferor is not the surviving entity,
organized and existing under the laws of the United States of America
or any State or the District of Columbia, and shall be a national
banking association, state banking corporation or other entity which
is not subject to the bankruptcy laws of the United States of America
and shall expressly assume, by an agreement supplemental hereto,
executed and delivered to Trustee, in form satisfactory to Trustee,
the performance of every covenant and obligation of Transferor, as
applicable hereunder and shall benefit from all the rights granted to
Transferor, as applicable hereunder. To the extent that any right,
covenant or obligation of Transferor, as applicable hereunder, is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity. In
furtherance hereof, in applying this Section 7.2 to a successor
entity, Section 9.2 shall be applied by reference to events of
involuntary liquidation, receivership or conservatorship applicable to
such successor entity as shall be set forth in the officer's
certificate described in subsection 7.2(a)(ii);
(ii) Transferor shall have delivered to Trustee an Officer's
Certificate signed by a Vice President (or any more senior officer) of
Transferor stating that such consolidation, merger, conveyance or
transfer and such supplemental agreement comply with this Section 7.2
and that all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel that
such supplemental agreement is legal, valid and binding; and
(iii) Transferor shall have delivered notice to each Rating
Agency of such consolidation, merger, conveyance or transfer.
(b) The obligations of Transferor hereunder shall not be assignable
nor shall any Person succeed to the obligations of Transferor hereunder except
as described in subsection (a).
SECTION 7.3 Limitation on Liability. The directors, officers,
employees or agents of Transferor shall not be under any liability to the Trust,
Trustee, the Holders, any Credit Enhancement Provider or any other Person
hereunder or pursuant to any document delivered hereunder, it being expressly
understood that all such liability is expressly waived and released as a
condition of, and as consideration for, the execution of this Agreement and any
Supplement and the issuance of the Certificates; provided that this provision
shall not protect the officers, directors, employees, or agents of Transferor
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. Except as
provided in Section 7.4, Transferor shall not be under any liability to the
Trust, Trustee, the Holders, any Credit Enhancement Provider or any other Person
for any action taken or for refraining from the taking of any action in its
capacity as Transferor pursuant to this Agreement whether arising from express
or implied duties under this Agreement; provided, however, that this provision
shall not protect Transferor against any liability which would otherwise be
imposed by reason of any breach of representation or covenant, willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. Transferor and
any director, officer, employee or agent may rely in good faith on any document
of any kind prima facie properly executed and submitted by any Person respecting
any matters arising hereunder.
SECTION 7.4 Liabilities. Notwithstanding any other provision herein,
including Section 7.3, Transferor shall indemnify and hold harmless any injured
party from and against any reasonable loss, liability, expense, damage or injury
arising out of or based upon the arrangement created by this Agreement or any
Supplement, as though this Agreement or such Supplement created a partnership
under the Delaware Uniform Partnership Law in which Transferor was a general
partner; provided that Transferor shall not indemnify the Trust, the Investor
Holders or the Certificate Owners as to any losses, claims or damages incurred
by any of them in their capacities as investors, including losses incurred as a
result of Defaulted Accounts or Receivables which are written off as
uncollectible; and provided, further, that Transferor shall not indemnify the
Trust, the Investor Holders or the Certificate Holders for any liabilities,
costs or expenses of the Trust, the Investor Holders or the Certificate Owners
arising under any tax law, including any Federal, state, local or foreign
income, withholding or franchise taxes or any other tax imposed on or measured
by income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith) required to be paid by the Trust, the Investor
Holders or the Certificate Owners in connection herewith to any taxing
authority. Any such indemnification shall not be payable from the assets of the
Trust. The provisions of this indemnity shall run directly to and be enforceable
by an injured party subject to the limitations hereof.
ARTICLE VIII OTHER MATTERS RELATING TO SERVICER
SECTION 8.1 Liability of Servicer. Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by Servicer in such capacity herein.
SECTION 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Servicer shall not consolidate with or merge into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(i) the Person formed by such consolidation or into which
Servicer is merged or the Person which acquires by conveyance or
transfer the properties and assets of Servicer substantially as an
entirety shall be a Person organized and existing under the laws of
the United States of America or any State or the District of Columbia,
and, if Servicer is not the surviving entity, shall expressly assume,
by an agreement supplemental hereto, executed and delivered to Trustee
in form satisfactory to Trustee, the performance of every covenant and
obligation of Servicer hereunder (to the extent that any right,
covenant or obligation of Servicer, as applicable hereunder, is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity);
(ii) Servicer shall have delivered to Trustee an Officer's
Certificate that such consolidation, merger, conveyance or transfer
and such supplemental agreement comply with this Section 8.2 and that
all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel that
such supplemental agreement is legal, valid and binding with respect
to Servicer; and
(iii) Servicer shall have delivered notice to the Rating
Agency of such consolidation, merger, conveyance or transfer.
SECTION 8.3 Limitation on Liability of Servicer and Others. The
directors, officers, employees or agents of Servicer shall not be under any
liability to the Trust, Trustee, the Holders, any Credit Enhancement provider or
any other Person hereunder or pursuant to any document delivered hereunder, it
being expressly understood that all such liability is expressly waived and
released as a condition of, and as consideration for, the execution of this
Agreement and any Supplement and the issuance of the Certificates; provided that
this provision shall not protect the directors, officers, employees and agents
of Servicer against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations and duties hereunder. Except
as provided in Section 8.4 with respect to the Trust and Trustee, its officers,
directors, employees and agents, Servicer shall not be under any liability to
the Trust, Trustee, its officers, directors, employees and agents, the Holders,
any Credit Enhancement Provider or any other Person for any action taken or for
refraining from the taking of any action in its capacity as Servicer pursuant to
this Agreement or any Supplement; provided that this provision shall not protect
Servicer against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of its reckless disregard of its obligations and duties hereunder
or under any Supplement. 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 hereunder. Servicer shall not be under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its duties
to service the Receivables in accordance with this Agreement which in its
reasonable opinion may involve it in any expense or liability.
SECTION 8.4 Servicer Indemnification of the Trust and Trustee.
Servicer shall indemnify and hold harmless the Trust and Trustee, its officers,
directors, employees and agents, from and against any reasonable loss,
liability, expense, damage or injury suffered or sustained by reason of any acts
or omissions or alleged acts or omissions of Servicer with respect to activities
of the Trust or Trustee pursuant to this Agreement or any Supplement, including,
but not limited to any judgment, award, settlement, reasonable attorneys' fees
and other costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim; provided that (a) Servicer
shall not indemnify Trustee if such acts, omissions or alleged acts or omissions
constitute or are caused by fraud, negligence, or willful misconduct by Trustee,
(b) Servicer shall not indemnify the Trust, the Investor Holders or the
Certificate Owners for any liabilities, costs or expenses of the Trust with
respect to any action taken by Trustee at the request of the Investor Holders,
(c) Servicer shall not indemnify the Trust, the Investor Holders or the
Certificate Owners as to any losses, claims or damages incurred by any of them
in their capacities as investors, including losses incurred as a result of
Defaulted Accounts or Receivables which are written off as uncollectible and (d)
that Servicer shall not indemnify the Trust, the Investor Holders or the
Certificate Owners for any liabilities, costs or expenses of the Trust, the
Investor Holders or the Certificate Owners arising under any tax law, including
any Federal, state, local or foreign income or franchise taxes or any other tax
imposed on or measured by income (or any interest or penalties with respect
thereto or arising from a failure to comply therewith) required to be paid by
the Trust, the Investor Holders or the Certificate Owners in connection herewith
to any taxing authority. Any such indemnification shall not be payable from the
assets of the Trust. The provisions of this indemnity shall run directly to and
be enforceable by an injured party subject to the limitations hereof.
SECTION 8.5 Servicer Not to Resign. Servicer shall not resign from the
obligations and duties hereby imposed on it except upon determination that (i)
the performance of its duties hereunder is no longer permissible under
applicable law and (ii) there is no reasonable action which Servicer could take
to make the performance of its duties hereunder permissible under applicable
law. Any such determination permitting the resignation of Servicer shall be
evidenced as to clause (i) by an Opinion of Counsel to such effect delivered to
Trustee. No such resignation shall become effective until Trustee or a Successor
Servicer shall have assumed the responsibilities and obligations of Servicer in
accordance with Section 10.2. If Trustee is unable within 120 days of the date
of such determination to appoint a Successor Servicer, Trustee shall serve as
Successor Servicer hereunder until such time as Trustee shall appoint a
Successor Servicer and such Successor Servicer shall have assumed the
responsibilities and obligations of Servicer in accordance with Section 10.2.
SECTION 8.6 Access to Certain Documentation and Information Regarding
the Receivables. Servicer shall provide Trustee access to the documentation
regarding the Accounts and the Receivables when Trustee is required in
connection with the enforcement of the rights of the Investor Holders, or by
applicable law, to review such documentation, such access being afforded without
charge but only upon reasonable request, during normal business hours, subject
to Servicer's normal security and confidentiality procedures and at offices
designated by Servicer. Nothing in this Section 8.6 shall derogate from the
obligation of Transferor, Trustee or Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the failure of
Servicer to provide access as provided in this Section 8.6 as a result of such
obligations shall not constitute a breach of this Section 8.6.
SECTION 8.7 Delegation of Duties. In the ordinary course of business,
Servicer may at any time delegate any duties hereunder to any Person who agrees
to conduct such duties in accordance with the Guidelines. Any such delegations
shall not relieve Servicer of its liability and responsibility with respect to
such duties, and shall not constitute a resignation within the meaning of
Section 8.5 hereof. If any such delegation is to a party other than an Affiliate
of Transferor notification thereof shall be given to each Rating Agency.
SECTION 8.8 Examination of Records. Servicer shall clearly and
unambiguously identify each Eligible Receivable arising under each Eligible
Account (including any Additional Receivables) conveyed to the Trust pursuant to
Section 2.1(b) in its computer or other records to reflect that the Receivables
arising in such Account have been conveyed to the Trust pursuant to this
Agreement. Servicer shall, prior to the sale or transfer to a third party of any
receivable held in its custody, examine its computer and other records to
determine that such receivable is not a Receivable.
SECTION 8.9 Merger or Consolidation of, or Assumption of the
Obligations of, Back-up Servicer. Back-up Servicer shall not consolidate with or
merge into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(i) the Person formed by such consolidation or into which
Back-up Servicer is merged or the Person which acquires by conveyance
or transfer the properties and assets of Back-up Servicer
substantially as an entirety shall be a Person organized and existing
under the laws of the United States of America or any State or the
District of Columbia, and, if Back-up Servicer is not the surviving
entity, shall expressly assume, by an agreement supplemental hereto,
executed and delivered to Trustee in form satisfactory to Trustee, the
performance of every covenant and obligation of Back-up Servicer
hereunder (to the extent that any right, covenant or obligation of
Back-up Servicer, as applicable hereunder, is inapplicable to the
successor entity, such successor entity shall be subject to such
covenant or obligation, or benefit from such right, as would apply, to
the extent practicable, to such successor entity);
(ii) Back-up Servicer shall have delivered to Trustee an
Officer's Certificate that such consolidation, merger, conveyance or
transfer and such supplemental agreement comply with this Section 8.9
and that all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel that
such supplemental agreement is legal, valid and binding with respect
to Back-up Servicer; and
(iii) Back-up Servicer shall have delivered notice to the
Rating Agency of such consolidation, merger, conveyance or transfer.
SECTION 8.10 Back-up Servicer Not to Resign. The Back-up Servicer
shall not resign from its obligations and duties under this Agreement, except
upon the assumption of such duties and obligations by a successor Back-up
Servicer and the Rating Agency Condition having been satisfied with respect to
the appointment of such successor Back-up Servicer.
ARTICLE IX TRUST PAY OUT EVENTS
SECTION 9.1 Trust Pay Out Events. Each of the following events (each,
a "Trust Pay Out Event") shall constitute a Pay Out Event with respect to all
Series of Certificates, immediately upon the occurrence of such event, and
without any notice or other action on the part of Trustee or the Investor
Holders:
(a) Transferor or any Originator shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or relating to
all or substantially all of its property, or a decree or order of a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against Transferor or any Originator; or Transferor or any
Originator 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; or Transferor or any
Originator shall become unable for any reason to transfer Receivables to the
Trust in accordance with the provisions of this Agreement or to the Transferor
in accordance with the provisions of the Receivables Purchase Agreement,
respectively; or
(b) the Trust shall become an "investment company" within the meaning
of the Investment Company Act;
(c) if (i) 90 days after the Back-up Servicer is legally unable to act
as Back-up Servicer or has otherwise been released from its obligations under
this Agreement no successor Back-up Servicer has been appointed or (ii) the
Back-up Servicer is Servicer and has been given a Termination Notice pursuant to
Section 10.1 and a successor Back-up Servicer has not been appointed within 90
days; or
(d) the Servicer or any Successor Servicer is not in compliance with
the Licensing Laws of any state in which the stated address contained in any of
the Receivables is located for a period of __ days.
SECTION 9.2 Additional Rights Upon the Occurrence of Certain Events.
(a) If Transferor shall consent to the appointment of a conservator or receiver
or liquidator for the winding-up or liquidation of its affairs, or a decree or
order of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator or receiver or liquidator for the
winding-up or liquidation of its affairs shall have been entered against
Transferor (an "Insolvency Event"), Transferor shall on the day of such
Insolvency Event (the "Appointment Day") immediately cease to transfer Principal
Receivables to the Trust and shall promptly give notice to Trustee of such
Insolvency Event. Notwithstanding any cessation of the transfer to the Trust of
additional Principal Receivables, Finance Charge Receivables, whenever created,
accrued in respect of Principal Receivables which have been transferred to the
Trust shall continue to be a part of the Trust, and Collections with respect
thereto shall continue to be allocated and paid in accordance with Article IV.
Within 15 days of the Appointment Day, Trustee shall (i) publish a notice in an
Authorized Newspaper that an Insolvency Event has occurred and that Trustee
intends to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and (ii) send written notice to the Investor
Holders describing the provisions of this Section 9.2 and requesting
instructions from such Holders. Unless within 90 days from the day notice
pursuant to clause (i) is first published, Trustee shall have received written
instructions of Holders of Investor Certificates evidencing more than 50% of the
Investor Interest of each Series issued and outstanding (or, if any such Series
has two or more Classes, each Class) to the effect that such Holders disapprove
of the liquidation of the Receivables and wish to continue having Principal
Receivables transferred to the Trust as before such Insolvency Event, Trustee
shall sell, dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids. Trustee may obtain a prior determination for
any such conservator, receiver or liquidator that the terms and manner of any
proposed sale, disposition or liquidation are commercially reasonable. The
provisions of Sections 9.1 and 9.2 shall not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to subsection (a) shall be treated as Collections on the
Receivables and shall be allocated and deposited in accordance with the
provisions of Article IV; provided, that Trustee shall determine conclusively in
its sole discretion the amount of such proceeds which are allocable to Finance
Charge Receivables and the amount of such proceeds which are allocable to
Principal Receivables. Unless Trustee receives written instructions from
Investor Holders as provided in subsection (a), on the day following the last
Distribution Date in the Monthly Period during which such proceeds are
distributed to the Investor Holders of each Series, the Trust shall terminate.
(c) Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this Article IX with respect to competitive bids.
ARTICLE X SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by Servicer to make any payment, transfer or deposit
or to give instructions or notice to Trustee pursuant to Article IV or to
instruct Trustee to make any required drawing, withdrawal, or payment under any
Credit Enhancement on or before the date occurring ten Business Days after the
date such payment, transfer, deposit withdrawal or drawing or such instruction
or notice is required to be made or given, as the case may be, under the terms
of this Agreement;
(b) failure on the part of Servicer duly to observe or perform in any
respect any other covenants or agreements of Servicer set forth in this
Agreement, which has a material adverse effect on the Investor Holders of any
Series and which continues unremedied for a period of 60 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to Servicer by Trustee, or to Servicer and Trustee by the
Holders of Investor Certificates evidencing Undivided Interests aggregating not
less than 25% of the Investor Interest of any Series adversely affected thereby
and continue to materially adversely affect such Investor Holders for such
period; or Servicer shall delegate its duties under this Agreement, except as
permitted by Section 8.7;
(c) any representation, warranty or certification made by Servicer in
this Agreement or in any certificate delivered pursuant to this Agreement shall
prove to have been incorrect when made, which has a material adverse effect on
the Investor Holders of any Series and which continues to be incorrect in any
material respect 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
Servicer by Trustee, or to Servicer and Trustee by the Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 25% of the
Investor Interest of any Series adversely affected thereby and continues to
materially adversely affect such Investor Holders for such period; or
(d) Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to Servicer or of
or relating to all or substantially all of its property, or a decree or order of
a court or agency or supervisory authority having jurisdiction in the premises
for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidating of its affairs, shall
have been entered against Servicer, and such decree or order shall have remained
in force undischarged or unstayed for a period of 60 days; or Servicer shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or reorganization
statute, make any assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations;
then, so long as such Servicer Default shall not have been remedied,
either Trustee, or the Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Aggregate Investor Interest, by
notice then given in writing to Servicer (and to Trustee if given by the
Investor Holders) (a "Termination Notice"), may terminate all of the rights and
obligations of Servicer as Servicer under this Agreement.
After receipt by Servicer of such Termination Notice, and on the date
that a Successor Servicer shall have been appointed by Trustee pursuant to
Section 10.2, all authority and power of Servicer under this Agreement shall
pass to and be vested in a Successor Servicer; and Trustee is hereby authorized
and empowered (upon the failure of Servicer to cooperate) to execute and
deliver, on behalf of Servicer, as attorney-in-fact or otherwise, all documents
and other instruments upon the failure of Servicer to execute or deliver such
documents or instruments, and to do and accomplish all other acts or things
necessary or appropriate to effect the purpose of such transfer of servicing
rights and obligations. Servicer agrees to cooperate with Trustee and such
Successor Servicer in effecting the termination of the responsibilities and
rights of Servicer to conduct servicing hereunder including the transfer to such
Successor Servicer of all authority of Servicer to service the Receivables
provided for under this Agreement, including all authority over all Collections
which shall on the date of transfer be held by Servicer for deposit, or which
have been deposited by Servicer, in the Collection Account, the Finance Charge
Account, the Excess Funding Account, and any Series Account, or which shall
thereafter be received with respect to the Receivables, and in assisting the
Successor Servicer and in enforcing all rights to Unearned Premiums applicable
to the Trust. Servicer shall promptly transfer its electronic records or
electronic copies thereof relating to the Receivables to the Successor Servicer
in such electronic form as the Successor Servicer may reasonably request and
shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of the
Receivables in the manner and at such times as the Successor Servicer shall
reasonably request. To the extent that compliance with this Section 10.1 shall
require Servicer to disclose to the Successor Servicer information of any kind
which Servicer reasonably deems to be confidential, the Successor Servicer shall
be required to enter into such customary licensing and confidentiality
agreements as Servicer shall deem necessary to protect its interests. Servicer
shall, on the date of any servicing transfer, transfer all of its rights and
obligations under the Credit Enhancement with respect to any Series to the
Successor Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in subsection 10.1(a) for a period of 30 Business Days or under
subsection 10.1(b) or (c) for a period of 60 Business Days, shall not constitute
a Servicer Default if such delay or failure could not be prevented by the
exercise of reasonable diligence by Servicer and such delay or failure was
caused by an act of God or the public enemy, acts of declared or undeclared war,
public disorder, rebellion, riot or sabotage, epidemics, landslides, lightning,
fire, hurricanes, tornadoes, earthquakes, nuclear disasters or meltdowns,
floods, power outages or similar causes. The preceding sentence shall not
relieve Servicer from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of this Agreement and Servicer shall
provide Trustee, any Credit Enhancement Provider, Transferor and the Holders of
Investor Certificates with an Officer's Certificate giving prompt notice of such
failure or delay by it, together with a description of the cause of such failure
or delay and its efforts so to perform its obligations.
SECTION 10.2 Trustee to Act, Appointment of Successor. (a) On and
after the receipt by Servicer of a Termination Notice pursuant to Section 10.1,
Servicer shall continue to perform all servicing functions under this Agreement
until the date specified in the Termination Notice or otherwise specified by
Trustee in writing or, if no such date is specified in such Termination Notice,
or otherwise specified by Trustee, until a date mutually agreed upon by Servicer
and Trustee. Trustee shall notify each Rating Agency of such removal of
Servicer. At the time Servicer shall cease to act as Servicer pursuant to this
Section 10.2 or Section 8.5, the Back-up Servicer (or, if for a period of 90
days from such time there is no Back-up Servicer, the Trustee) without any
further action by any Person shall automatically be appointed as successor
servicer (the "Successor Servicer"). Notwithstanding the above, if the Back-up
Servicer is legally unable to act as Successor Servicer on the date of the
removal of Servicer, Servicer shall not be removed and shall continue to act as
Servicer until the Trust Termination Date. Prior to the termination of the
Servicer pursuant to Section 10.2 or the resignation of Servicer pursuant to
Section 8.5, Servicer shall have the right to remove Back-up Servicer and
appoint a new Back-up Servicer at any time as long as the Rating Agency
Condition is satisfied with respect to such action.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to Servicer with respect to servicing functions under
this Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on Servicer by the terms and provisions
hereof, and all references in this Agreement to Servicer shall be deemed to
refer to the Successor Servicer. Any Successor Servicer, by its acceptance of
its appointment, will automatically agree to be bound by the terms and
provisions of each Credit Enhancement. Notwithstanding the above, or anything in
this Section to the contrary, the Trustee, if it becomes Servicer pursuant to
this Section, shall have no responsibility or obligation (i) to repurchase or
substitute any receivable, including any obligation of the Servicer under
Section 3.10, (ii) for any representation or warranty of the Servicer hereunder,
and (iii) for any act or omission of either a predecessor or successor Servicer
other than the Trustee. The Trustee may conduct any activity required of it as
Servicer hereunder through an Affiliate or through an agent. Neither the Trustee
nor any other Successor Servicer shall be deemed to be in default hereunder due
to any act or omission of a predecessor Servicer, including but not limited to
failure to timely deliver to the Trustee any Monthly Servicer's Certificate, any
funds required to be deposited to the Trust, or any breach of its duty to
cooperate with a transfer of servicing as required by Section 10.01.
(c) In connection with such appointment and assumption, Trustee shall
be entitled to such compensation, or may make such arrangements for the
compensation of the Successor Servicer out of Collections, as it and such
Successor Servicer shall agree; provided that no such compensation shall be in
excess of the Servicing Fee permitted to Servicer pursuant to Section 3.2 and
any other amounts payable to the Servicer hereunder. Transferor agrees that if
Servicer is terminated hereunder, it will agree to deposit the portion of the
Collections in respect of Finance Charge Receivables that it is entitled to
receive pursuant to Article IV to pay its share of the compensation of the
Successor Servicer. The Servicer being terminated shall bear all costs of a
Service Transfer, including but not limited to those of the Trustee reasonably
allocable to specific employees and overhead, legal fees and expenses,
accounting and financial consulting fees and expenses, and costs of amending the
Agreement, if necessary.
(d) All authority and power granted to the Successor Servicer under
this Agreement shall automatically cease and terminate upon termination of the
Trust pursuant to Section 12.1 and shall pass to and be vested in Transferor and
Transferor is hereby authorized and empowered to execute and deliver, on behalf
of the Successor Servicer, as attorney-in-fact or otherwise, all documents and
other instruments, and to do and accomplish all other acts or things necessary
or appropriate to effect the purposes of such transfer of servicing rights. The
Successor Servicer agrees to cooperate with Transferor in effecting the
termination of the responsibilities and rights of the Successor Servicer to
conduct servicing on the Receivables. The Successor Servicer shall transfer its
electronic records relating to the Receivables to Transferor in such electronic
form as Transferor may reasonably request and shall transfer all other records,
correspondence and documents to Transferor in the manner and at such times as
Transferor shall reasonably request. To the extent that compliance with this
Section 10.2 shall require the Successor Servicer to disclose to Transferor
information of any kind which the Successor Servicer deems to be confidential,
Transferor shall be required to enter into such customary licensing and
confidentiality agreements as the Successor Servicer shall deem necessary to
protect its interests.
SECTION 10.3 Notification to Holders. Within two Business Days after
Servicer becomes aware of any Servicer Default, Servicer shall give prompt
written notice thereof to Trustee and any Credit Enhancement Provider, and
Trustee shall give notice to the Investor Holders at their respective addresses
appearing in the Certificate Register. Upon any termination or appointment of a
Successor Servicer pursuant to this Article X, Trustee shall give prompt written
notice thereof to Investor Holders at their respective addresses appearing in
the Certificate Register.
SECTION 10.4 Waiver of Past Defaults. The Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66-2/3% of
the Investor Interest of each Series adversely affected by any default by
Servicer or Transferor may, on behalf of all Holders of such Series, waive any
default by Servicer or Transferor in the performance of its obligations
hereunder and its consequences, except a default in the failure to make any
required deposits or payments of interest or principal relating to such Series
pursuant to Article IV which default does not result from the failure of the
Paying Agent to perform its obligations to make any required deposits or
payments of interest and principal in accordance with Article IV. Upon any such
waiver of a past default, such default shall cease to exist, and any 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 except to the extent expressly so waived.
ARTICLE XI TRUSTEE
SECTION 11.1 Duties of Trustee. (a) Trustee, prior to the occurrence
of any Servicer Default and after the curing or waiver of all Servicer Defaults
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement, no duties shall be implied
against Trustee, and its permissive rights shall not be construed as duties. If
a Responsible Officer has received written notice that a Servicer Default has
occurred (which has not been cured or waived), Trustee shall exercise such of
the rights and powers vested in it by this Agreement, and use the same degree of
care and skill in its exercise, as a prudent person would exercise or use under
the circumstances in the conduct of such person`s own affairs unless it is
acting as successor Service, in which case it shall use the same degree of care
and skill as required of the Servicer under this Agreement.
(b) Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
substantially conform to the requirements of this Agreement.
(c) Subject to subsection 11.1(a), no provision of this Agreement shall
be construed to relieve Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided that:
(i) Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of Trustee, unless it shall be proved that Trustee was
negligent in ascertaining the pertinent facts;
(ii) Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of the Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 50%
of the Investor Interest of any Series relating to the time, method and
place of conducting any proceeding for any remedy available to Trustee,
or exercising any trust or power conferred upon Trustee in relation to
such Series, under this Agreement; and
(iii) Trustee shall not be charged with knowledge of any
failure by Servicer referred to in clauses (a), (b) or (c) of Section
10.1 unless a Responsible Officer of Trustee obtains actual knowledge
of such failure or Trustee receives written notice of such failure from
Servicer or any Holders of Investor Certificates evidencing Undivided
Interests aggregating not less than 10% of the Investor Interest of any
Series adversely affected thereby.
(d) 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 is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
Trustee to perform, monitor or be responsible for the manner of performance of,
any of the obligations of Servicer under this Agreement except during such time,
if any, as Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, Servicer in accordance with the terms of this
Agreement.
(e) Except for actions expressly authorized by this Agreement, Trustee
shall take no action reasonably likely to impair the interests of the Trust in
any Receivable now existing or hereafter created or to impair the value of any
Receivable now existing or hereafter created.
(f) Except as provided in this subsection 11.1(f), Trustee shall have
no power to vary the corpus of the Trust including the power to (i) accept any
substitute obligation for a Receivable initially assigned to the Trust under
Section 2.1, (ii) add any other investment, obligation or security to the Trust,
except for an addition permitted under Section 2.1(b) or (iii) withdraw from the
Trust any Receivables, except for a withdrawal permitted under Sections 2.6,
9.2, 10.2, 12.1 or 12.2 or subsections 2.4(d), 2.4(e) or Article IV.
(g) If the Paying Agent or the Transfer Agent and Registrar shall fail
to perform any obligation, duty or agreement in the manner or on the day
required to be performed by the Paying Agent or the Transfer Agent and
Registrar, as the case may be, under this Agreement, then, subject to subsection
11.1(d), Trustee shall be obligated promptly to perform such obligation, duty or
agreement in the manner so required.
(h) If Transferor has agreed to transfer any of its insurance premium
finance receivables (other than the Receivables) to another Person, upon the
written request of Transferor, Trustee shall enter into such intercreditor
agreements with the transferee of such receivables as are customary and
necessary to identify separately the rights, if any, of the Trust and such other
Person in Transferor's insurance premium finance receivables; provided that
Trustee shall not be required to enter into any intercreditor agreement which
could adversely affect the interests of the Holders and, upon the request of
Trustee, Transferor will deliver an Opinion of Counsel on any matters relating
to such intercreditor agreement, reasonably requested by Trustee.
SECTION 11.2 Certain Matters Affecting Trustee. Except as otherwise
provided in Section 11.1:
(a) Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accord with, any assignment of Receivables in
Supplemental Accounts, the initial report, the monthly Servicer's certificate,
the annual Servicer's certificate, the monthly payment instructions and
notification to Trustee, the monthly Holder's statement, any resolution,
Officer'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 to it pursuant to this Agreement by the proper
party or parties;
(b) Trustee may consult with counsel, and any Opinion of Counsel shall
be full and complete authorization and protection in respect of any action taken
or suffered or omitted by it hereunder in good faith and in accordance with such
Opinion of Counsel;
(c) Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement or any Credit Enhancement, or to
institute, conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Holders or any Credit Enhancement
Provider, pursuant to the provisions of this Agreement, unless such Holders or
Credit Enhancement Provider shall have offered to Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however, relieve Trustee of
the obligations, upon the occurrence of any Servicer Default (which has not been
cured), to exercise such of the rights and powers vested in it by this Agreement
and any Credit Enhancement, and to use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs;
(d) Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;
(e) Trustee shall not be bound to make any investigation into the
facts of matters stated in any assignment of Receivables in Accounts as of the
Cut Off Date or any Reassignment of Removed Accounts, the initial report, any
daily Servicer's report, the monthly Servicer's certificate, the annual
Servicer's certificate, the monthly payment instructions and notification to
Trustee, the monthly Holder's statement, 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 Holders of
Investor Certificates evidencing Undivided Interests aggregating more than 50%
of the Investor Interest of any Series which could be adversely affected if
Trustee does not perform such acts;
(f) 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, and Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney or custodian
(including any Registrar or Paying Agent) appointed with due care by it
hereunder; and
(g) except as may be required by subsection 11.1(a), Trustee shall not
be required to make any initial or periodic examination of any documents or
records related to the Receivables or the Accounts for the purpose of
establishing the presence or absence of defects, the compliance by Transferor
with its representations and warranties or for any other purpose.
SECTION 11.3 Trustee Not Liable for Recitals in Certificates. Trustee
assumes no responsibility for the correctness of the recitals contained herein
and in the Certificates (other than the certificate of authentication on the
Certificates). Except as set forth in Section 11.15, Trustee makes 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. Trustee shall not be accountable for
the use or application by Transferor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to Transferor in respect of the Receivables or deposited in or withdrawn from
the Collection Account, the Excess Funding Account or the Finance Charge
Account, or any Series Account by Servicer.
SECTION 11.4 Trustee May Not Own Certificates. Trustee in its
individual capacity shall not, but in a fiduciary or any other capacity may,
become the owner of Investor Certificates. In connection with such ownership in
other than its individual capacity, Trustee shall have the same rights as it
would have if it were not Trustee.
SECTION 11.5 Servicer to Pay Trustee's Fees and Expenses. Servicer
shall pay to Trustee from time to time, and Trustee shall be entitled to
receive, 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 Trust hereby created and in the
exercise and performance of any of the powers and duties hereunder of Trustee,
and, subject to Section 8.4, Servicer will pay or reimburse Trustee (without
reimbursement from any Investor Account, any Series Account or otherwise) upon
its request for all reasonable expenses, disbursements and advances incurred or
made by Trustee in accordance with any of the provisions of this Agreement
except any such expense, disbursement or advance as may arise from its own
negligence or bad faith and except as provided in the following sentence. If
Trustee is appointed Successor Servicer pursuant to Section 10.2, the provisions
of this Section 11.5 shall not apply to expenses, disbursements and advances
made or incurred by Trustee in its capacity as Successor Servicer.
The obligations of Servicer under this Section 11.5 shall survive the
termination of the Trust and the resignation or removal of Trustee.
SECTION 11.6 Eligibility Requirements for Trustee. Trustee hereunder
shall at all times be a corporation organized and doing business under the laws
of the United States of America or any state thereof authorized under such laws
to exercise corporate trust powers, having a long-term unsecured debt rating of
at least Baa3 by Moody's and BBB- by Standard & Poor's, having, in the case of
an entity that is subject to risk-based capital adequacy requirements,
risk-based capital of at least $50,000,000 or, in the case of an entity that is
not subject to risk-based capital adequacy requirements, having a combined
capital and surplus of at least $50,000,000 and subject to supervision or
examination by Federal or state authority. If such corporation publishes 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 11.6, 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. Trustee shall at all times be licensed or be
exempt from licensing under the Licensing Laws of each Permitted State. In case
at any time Trustee shall cease to be eligible in accordance with the provisions
of this Section 11.6, Trustee shall resign immediately in the manner and with
the effect specified in Section 11.7.
SECTION 11.7 Resignation or Removal of Trustee. (a) Trustee may at any
time resign and be discharged from the Trust hereby created by giving written
notice thereof to Servicer. Upon receiving such notice of resignation, Servicer
shall promptly appoint a successor trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time Trustee shall cease to be eligible in accordance
with the provisions of Section 11.6 hereof and shall fall to resign after
written request therefor by Transferor, or if at any time Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of Trustee or of its property shall be appointed, or any public officer
shall take charge or control of Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then Transferor may, but
shall not be required to, remove Trustee and promptly appoint a successor
trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.7 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 11.8 hereof and any liability of Trustee arising hereunder
shall survive such appointment of a successor trustee.
SECTION 11.8 Successor Trustee. (a) Any successor trustee appointed as
provided in Section 11.7 hereof shall execute, acknowledge and deliver to
Transferor and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as Trustee herein. The predecessor Trustee
shall deliver to the successor trustee all documents and statements held by it
hereunder, and Transferor and the predecessor Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section 11.8 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 11.6.
(c) Upon acceptance of appointment by a successor trustee as provided
in this Section 11.8, such successor trustee shall mail notice of such
succession hereunder to all Holders at their addresses as shown in the
Certificate Register.
SECTION 11.9 Merger or Consolidation of Trustee. Any Person into which
Trustee may be merged or converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which Trustee
shall be a party, or any Person succeeding to the corporate trust business of
Trustee, shall be the successor of Trustee hereunder, provided such Person shall
be eligible under Section 11.6, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust may at the time be located, 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, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity
and for the benefit of the Holders, such title to the trust, or any part
thereof, and, subject to the other provisions of this Section 11.10, such
powers, duties, obligations, rights and trusts as Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 11.6 and no
notice to Holders of the appointment of any co-trustee or separate trustee shall
be required under Section 11.8 hereof.
(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 Trustee shall be conferred or imposed upon and exercised
or performed by 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 Trustee joining in such
act), except to the extent that under any laws of any jurisdiction in
which any particular act or acts are to be performed (whether as
Trustee hereunder or as successor to Servicer hereunder), 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 Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) 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 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 XI. 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 Trustee or separately, as may
be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, Trustee. Every such
instrument shall be filed with Trustee and a copy thereof given to Servicer.
(d) Any separate trustee or co-trustee may at any time constitute
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to 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
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 11.11 Tax Returns. If the Trust shall be required to file tax
returns, Servicer (or Transferor, if Back-up Servicer is Servicer) shall prepare
or cause to be prepared any tax returns required to be filed by the Trust and
shall remit such returns to Trustee for signature and, to the extent possible,
file such returns at least five days before such returns are due to be filed.
Trustee is hereby authorized to sign any such return on behalf of the Trust.
Servicer (or Transferor, if Back-up Servicer is Servicer) shall prepare or shall
cause to be prepared all tax information required by law to be distributed to
Holders and shall deliver such information to Trustee at least five days prior
to the date it is required by law to be distributed to Holders. Trustee, upon
request, shall furnish Servicer (or Transferor, if Back-up Servicer is Servicer)
with all such information known to Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust, and shall cause
such tax returns to be signed in the manner required by law. In no event shall
Trustee or Servicer (or Transferor, if Back-up Servicer is Servicer) be liable
for any liabilities, costs or expenses of the Trust, the Investor Holders or the
Certificate Owners arising under any tax law, including Federal, state, local or
foreign income or excise taxes or any other tax imposed on or measured by income
(or any interest or penalty with respect thereto or arising from a failure to
comply therewith).
SECTION 11.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or any Series
of Certificates may be prosecuted and enforced by Trustee without the possession
of any of the Certificates or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by Trustee shall be brought in its
own name as trustee. Any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
Trustee, its agents and counsel, be for the ratable benefit of any Series of
Holders in respect of which such judgment has been obtained.
SECTION 11.13 Suits for Enforcement. If a Servicer Default shall occur
and be continuing, Trustee, in its discretion may, subject to the provisions of
Section 10.1, proceed to protect and enforce its rights and the rights of any
Series of Holders under this Agreement by a suit, action or proceeding in equity
or at law or otherwise, whether for the specific performance of any covenant or
agreement contained in this Agreement or in aid of the execution of any power
granted in this Agreement or for the enforcement of any other legal, equitable
or other remedy as Trustee, being advised by counsel, shall deem most effectual
to protect and enforce any of the rights of Trustee or any Series of Holders.
SECTION 11.14 Rights of Holders to Direct Trustee. Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 50% of the
Aggregate Investor Interest (or, with respect to any remedy, trust or power that
does not relate to all Series, 50% of the Aggregate Investor Interest of the
Investor Certificates of all Series to which such remedy, trust or power
relates) shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to Trustee, or exercising any trust or
power conferred on Trustee; provided that (a) subject to Section 11.1, Trustee
shall have the right to decline to follow any such direction if Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of Trustee, determine that the proceedings so directed
would be illegal or involve it in personal liability or be unduly prejudicial to
the rights of Holders not parties to such direction and (b) nothing in this
Agreement shall impair the right of Trustee to take any action deemed proper by
Trustee and which is not inconsistent with such direction of such Holders of
Investor Certificates.
SECTION 11.15 Representations and Warranties of Trustee. Trustee
represents and warrants that:
(i) Trustee is a banking corporation organized, existing and
authorized to engage in the business of banking under the laws of the
State of New York;
(ii) Trustee has full power, authority and right to execute,
deliver and perform this Agreement, and has taken all necessary action
to authorize the execution, delivery and performance by it of this
Agreement; and
(iii) this Agreement has been duly executed and delivered by
Trustee.
SECTION 11.16 Maintenance of Office or Agency. Trustee will maintain
at its expense in the Borough of Manhattan, the City of New York an office or
offices, or agency or agencies, where notices and demands to or upon Trustee in
respect of the Certificates and this Agreement may be served. Trustee initially
appoints the Corporate Trust Office as its office for such purposes in New York.
Trustee will give prompt written notice to Servicer and to Holders (or in the
case of Holders of Bearer Certificates, in the manner provided for in the
related Supplement) of any change in the location of the Certificate Register or
any such office or agency.
SECTION 11.17 Obligor Claims. In connection with any offset defenses,
or affirmative claim for recovery, asserted in legal actions brought by Obligors
under one or more Receivables based upon provisions therein or upon other rights
or remedies arising from any Requirements of Law applicable to the Receivables:
(a) The Trustee is the holder of the Receivables only as trustee on
behalf of the holders of the Certificates, and not as principal or in any
individual or personal capacity.
(b) The Trustee shall not be personally liable for, or obligated to
pay Obligors, any affirmative claims asserted thereby, or responsible to holders
of the Certificates for any offset defense amounts applied against Receivable
payments, pursuant to such legal actions.
(c) The Trustee will pay, solely from available Trust money,
affirmative claims for recovery by Obligors only pursuant to final judicial
orders or judgments, or judicially approved settlement agreements, resulting
from such legal actions.
(d) The Trustee will comply with judicial orders and judgments which
require its actions or cooperation in connection with Obligors' legal actions to
recover affirmative claims against holders of the Grantor Trust Certificates.
(e) The Trustee will cooperate with and assist the Transferor, the
Servicer, or holders of the Certificates in their defense of legal actions by
Obligors to recover affirmative claims if such cooperation and assistance is not
contrary to the interest of the Trustee as a party to such legal actions and if
the Trustee is satisfactorily indemnified for all liability, costs and expenses
arising therefrom.
(f) The Transferor hereby agrees to indemnify, hold harmless and
defend the Trustee from and against any and all liability, loss, costs and
expenses of the Trustee resulting from any affirmative claims for recovery
asserted or collected by Obligors under their Receivables.
SECTION 11.18 Liabilities to Obligors. No liability to any Obligor
under any of the Receivables arising out of any act or o mission to act of the
Servicer or any Transferor in servicing the Obligations is intended to be
assumed by the Trust or the Trustee under, or as a result of, this Agreement and
the transactions contemplated hereby and, to the maximum extent permitted and
valid under applicable provisions of law, the Trust and the Trustee expressly
disclaim such assumption.
ARTICLE XII TERMINATION
SECTION 12.1 Termination of Trust. (a) The respective obligations and
responsibilities of Transferor, Servicer and Trustee created hereby (other than
the obligation of Trustee to make payments to Holders as hereafter set forth)
shall terminate, except with respect to the duties described in Section 11.5 and
subsections 2.4(c) and 12.3(b), on the Trust Termination Date; provided that the
Trust shall not terminate on the date specified in clause (a) of the definition
of "Trust Termination Date" if each of Servicer and Transferor notify Trustee in
writing, not later than five Business Days preceding such date, that they desire
that the Trust not terminate on such date, which notice (such notice, a "Trust
Extension") shall specify the date on which the Trust shall terminate (such
date, the "Extended Trust Termination Date"); provided that the Extended Trust
Termination Date shall be not later than April 7, 2020. Servicer and Transferor
may on any date following the Trust Extension, so long as no Series of
Certificates is outstanding, deliver a notice in writing to Trustee changing the
Extended Trust Termination Date.
(b) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no later than the Series Termination Date
with respect to such Series. Unless otherwise provided in a Supplement, in the
event that the Investor Interest of any Series of Certificates is greater than
zero on its Series Termination Date (after giving effect to all transfers,
withdrawals, deposits and drawings to occur on such date and the payment of
principal to be made on such Series on such date), Trustee will sell or cause to
be sold, and pay the proceeds first, to all Holders of such Series pro rata in
final payment of all principal of and accrued interest on such Series of
Certificates, and second, as provided in the related Supplement, an amount of
Principal Receivables and the related Finance Charge Receivables (or interests
therein) up to 110% of the Investor Interest of such Series at the close of
business on such date (but in no event in excess of the applicable Investor
Percentages of Principal Receivables and Finance Charge Receivables on such
date). Trustee shall notify each Credit Enhancement Provider and each Rating
Agency of the proposed sale of such Receivables and shall provide each Credit
Enhancement Provider an opportunity to bid on such Receivables. Transferor shall
be permitted to purchase such Receivables in such case and shall have a right of
first refusal with respect thereto. Any proceeds of such sale in excess of such
principal and interest paid shall be paid to Transferor. Upon such Series
Termination Date with respect to the applicable Series of Certificates, final
payment of all amounts allocable to any Investor Certificates of such Series
shall be made in the manner provided in Section 12.3.
SECTION 12.2 Optional Purchase. (a) If so provided in any Supplement,
Transferor may, but shall not be obligated to, cause a final distribution to be
made in respect of the related Series of Certificates on a Distribution Date
specified in such Supplement by depositing into the Distribution Account or the
applicable Series Account, not later than the Transfer Date preceding such
Distribution Date, for application in accordance with Section 12.3, the amount
specified in such Supplement; provided that if the rating test referred to below
is not satisfied at the time of such deposit, no such event shall occur unless
Transferor shall deliver an Opinion of Counsel reasonably acceptable to Trustee
that such deposit into the Distribution Account as provided in the related
Supplement would not constitute a fraudulent conveyance of Transferor. For
purposes of the foregoing, the "rating test" will be deemed to have been
satisfied if (x) the short-term deposits of Transferor are rated at least P-3 by
Moody's, (y) the long-term unsecured debt obligations of Transferor are rated at
least Baa3 by Moody's or (z) the counterparty risk or long-term unsecured debt
of Mellon Bank Corporation is rated at least Baa3 by Moody's (but the rating
test may only be satisfied pursuant to this clause (z) so long as (1) neither
Transferor's short-term deposits nor Transferor's unsecured long-term debt
obligations are rated by Moody's and (2) Moody's has not notified Transferor
that reliance upon Mellon Bank Corporation's ratings for this purpose would
result in the lowering of Moody's then-existing rating of the Investor
Certificates).
(b) The amount deposited pursuant to subsection 12.2(a) shall be paid
to the Investor Holders of the related Series pursuant to Section 12.3 on the
related Distribution Date following the date of such deposit. All Certificates
of a Series which are purchased by Transferor pursuant to subsection 12.2(a)
shall be delivered by Transferor upon such purchase to, and be canceled by, the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to
Trustee and Transferor. The Investor Interest of each Series which is purchased
by Transferor pursuant to subsection 12.2(a) shall, for the purposes of the
definition of "Transferor Interest," be deemed to be equal to zero on the
Distribution Date following the making of the deposit, and the Transferor
Interest shall thereupon be deemed to have been increased by the Investor
Interest of such Series.
SECTION 12.3 Final Payment with Respect to any Series. (a) Written
notice of any termination, specifying the Distribution Date upon which the
Investor Holders of any Series may surrender their Certificates for payment of
the final distribution with respect to such Series and cancellation, shall be
given (subject to at least two Business Days' prior notice from Servicer to
Trustee) by Trustee to Investor Holders of such Series mailed not later than the
fifth day of the month of such final distribution (or in the manner provided by
the Supplement relating to such Series) specifying (i) the Distribution Date
(which shall be the Distribution Date in the month (x) in which the deposit is
made pursuant to subsection 2.4(e), 9.2(a), 10.2(a), or subsection 12.2(a) of
this Agreement or such other section as may be specified in the related
Supplement, or (y) in which the related Series Termination Date occurs) upon
which final payment of such Investor Certificates will be made upon presentation
and surrender of such Investor Certificates at the office or offices therein
designated (which, in the case of Bearer Certificates, shall be outside the
United States), (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Investor
Certificates at the office or offices therein specified. Servicer's notice to
Trustee in accordance with the preceding sentence shall be accompanied by an
Officers' Certificate setting forth the information specified in Article V of
this Agreement covering the period during the then current calendar year through
the date of such notice and setting forth the date of such final distribution.
Trustee shall give such notice to the Transfer Agent and Registrar and the
Paying Agent at the time such notice is given to such Investor Holders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 12.1(a) or the occurrence of the Series Termination Date with respect
to any Series, all funds then on deposit in the Finance Charge Account, the
Excess Funding Account, the Distribution Account or any Series Account
applicable to the related Series shall continue to be held in trust for the
benefit of the Holders of the related Series and the Paying Agent or Trustee
shall pay such funds to the Holders of the related Series upon surrender of
their Certificates (which surrenders and payments, in the case of Bearer
Certificates, shall be made only outside the United States). In the event that
all of the Investor Holders of any Series shall not surrender their Certificates
for cancellation within six months after the date specified in the
above-mentioned written notice, Trustee shall give a second written notice (or,
in the case of Bearer Certificates, publication notice) to the remaining
Investor Holders of such Series upon receipt of the appropriate records from the
Transfer Agent and Registrar to surrender their Certificates for cancellation
and receive the final distribution with respect thereto. If within one and
one-half years after the second notice with respect to a Series, all the
Investor Certificates of such Series shall not have been surrendered for
cancellation, Trustee may take appropriate steps or may appoint an agent to take
appropriate steps, to contact the remaining Investor Holders of such Series
concerning surrender of their Certificates, and the cost thereof shall be paid
out of the funds in the Distribution Account or any Series Account held for the
benefit of such Investor Holders. Trustee and the Paying Agent shall pay to
Transferor upon request any monies held by them for the payment of principal or
interest which remains unclaimed for two years. After payment to Transferor,
Investor Holders entitled to the money must look to the Transferor for payment
as general creditors unless applicable abandoned property law designates another
Person.
(c) All Certificates surrendered for payment of the final distribution
with respect to such Certificates and cancellation shall be canceled by the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to
Trustee and Transferor.
SECTION 12.4 Termination Rights of Transferor. Upon the termination of
the Trust pursuant to Section 12.1, and after payment of all amounts due
hereunder on or prior to such termination, Trustee shall execute a written
reconveyance substantially in the form of Exhibit G pursuant to which it shall
reconvey to Transferor (without recourse, representation or warranty) all right,
title and interest of the Trust in the Receivables, whether then existing or
thereafter created, all moneys due or to become due with respect to such
Receivables (including all accrued interest theretofore posted as Finance Charge
Receivables and Recoveries) and all proceeds of such Receivables and Unearned
Premiums relating to such Receivables, and all proceeds thereof, except for
amounts held by Trustee pursuant to subsection 12.3(b). Trustee shall execute
and deliver such instruments of transfer and assignment, in each case without
recourse, as shall be reasonably requested by Transferor to vest in Transferor
all right, title and interest which the Trust had in the Receivables.
ARTICLE XIII MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment. (a) This Agreement or any Supplement may be
amended in writing from time to time by Servicer, Back-up Servicer, Transferor
and Trustee, without the consent of any of Holders; provided that such action
shall not, as evidenced by an Opinion of Counsel for Transferor addressed and
delivered to Trustee, adversely affect in any material respect the interests of
any Investor Holder; provided further that the Rating Agency Condition shall
have been satisfied with respect to such action. This Agreement or any
Supplement may be amended in writing by Servicer, Back-up Servicer, Transferor
and Trustee, without the consent of any of the Holders to provide for additional
Credit Enhancement or substitute Credit Enhancement with respect to a Series, or
to change the definition of Eligible Account; provided that such action shall
not, in the reasonable belief of Transferor, as evidenced by an Officer's
Certificate, adversely affect in any material respect the interests of any
Investor Holders; provided further that the Rating Agency Condition shall have
been satisfied with respect to such action.
(b) This Agreement or any Supplement may also be amended in writing
from time to time by Servicer, Back-up Servicer, Transferor and Trustee with the
consent of the Holders of Investor Certificates evidencing Undivided Interests
aggregating not less than 66-2/3% of the Investor Interest of each outstanding
Series adversely affected by such amendment for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or any Supplement or modifying in any manner the rights of
Investor Holders of any Series then issued and outstanding; provided that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, distributions which are required to be made on any Investor Certificates of
such Series without the consent of each Investor Holder of such Series, (ii)
change the definition of or the manner of calculating the Investor Interest or
the Investor Percentage of such Series without the consent of each Investor
Holder of such Series or (iii) reduce the aforesaid percentage required to
consent to any such amendment, without the consent of each Investor Holder of
all Series adversely affected. Trustee may, but shall not be obligated to, enter
into any such amendment which affects Trustee's rights, duties or immunities
under this Agreement or otherwise.
(c) Notwithstanding anything in this Section 13.1 to the contrary, the
Supplement with respect to any Series may be amended on the terms and in
accordance with the procedures provided in such Supplement.
(d) Promptly after the execution of any such amendment (other than an
amendment pursuant to subsection (a)), Trustee shall furnish notification of the
substance of such amendment to each Investor Holder of each Series adversely
affected and to each Rating Agency providing a rating for such Series.
(e) It shall not be necessary for the consent of Investor Holders
under this Section 13.1 to approve the particular form of any proposed
amendment, 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 Investor Holders shall be subject to
such reasonable requirements as Trustee may prescribe.
(f) Any Supplement executed and delivered pursuant to Section 6.9 and
any amendments regarding the addition to or removal of Receivables from the
Trust as provided in Section 2.1(b) or 2.6, executed in accordance with the
provisions hereof, shall not be considered amendments to this Agreement for the
purpose of subsections 13.1(a) and (b).
(g) In connection with any amendment, Trustee may request an Opinion
of Counsel from Transferor or Servicer to the effect that the amendment complies
with all requirements of this Agreement.
SECTION 13.2 Protection of Right, Title and Interest to Trust. (a)
Servicer shall cause this Agreement, all amendments hereto and/or all financing
statements and continuation statements and any other necessary documents
covering the Holders and Trustee's right, title and interest to the Trust to be
promptly recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the
Holders or Trustee, as the case may be, hereunder to all property comprising the
Trust. Servicer shall deliver to Trustee file-stamped copies of, or filing
receipts for, any document recorded, registered or filed as provided above, as
soon as available following such recording, registration or filing. Transferor
shall cooperate fully with Servicer in connection with the obligations set forth
above and will execute any and all documents reasonably required to fulfill the
intent of this subsection 13.2(a).
(b) Within 30 days after Transferor makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement filed in accordance with subsection (a) seriously
misleading within the meaning of Section 9-402(7) of the UCC as in effect in the
Commonwealth of Pennsylvania, Transferor shall give Trustee notice of any such
change and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Trust's security interest in the
Receivables and the proceeds thereof.
(c) Each of Transferor and Servicer will give Trustee prompt written
notice of any relocation of any office from which it services Receivables or
keeps records concerning the Receivables or of its principal executive office
and whether, as a result of such relocation, the applicable provisions of the
UCC would require the filing of any amendment of any previously filed financing
or continuation statement or of any new financing statement and shall file such
financing statements or amendments as may be necessary to continue the
perfection of the Trust's security interest in the Receivables and the proceeds
thereof. Each of Transferor and Servicer will at all times maintain each office
from which it services Receivables and its principal executive office within the
United States of America.
SECTION 13.3 Limitation on Rights of Holders. (a) The death or
incapacity of any Holder shall not operate to terminate this Agreement or the
Trust, nor shall such death or incapacity entitle such Holder'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
hereto or any of them.
(b) No Holder shall have any right to vote (except with respect to the
Investor Holders as provided in Section 13.1 hereof) or in any manner otherwise
control the operation and management of the Trust, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the Holders from time to
time as partners or members of an association; nor shall any Holder be under any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
(c) No Holder shall have any right by virtue 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 written notice to Trustee, and unless the Holders of Certificates
evidencing Undivided Interests aggregating more than 50% of the Investor
Interest of any Series which may be adversely affected but for the institution
of such suit, action or proceeding, shall have made written request upon Trustee
to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and Trustee, for 60 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; it being understood and intended, and being
expressly covenanted by each Holder with every other Holder and Trustee, that no
one or more Holders shall have the right in any amount whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb or prejudice the rights of the Holders of any other of the Certificates,
or to obtain or seek to obtain priority over or preference to any other such
Holder, or to enforce any right under this Agreement, except in the manner
herein provided and for the equal, ratable and common benefit of all Holders.
For the protection and enforcement of the provisions of this Section 13.3, each
and every Holder and Trustee shall be entitled to such relief as can be given
either at law or in equity.
SECTION 13.4 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 13.5 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at, sent by facsimile to, sent by courier or mailed by
registered mail, return receipt requested, to (a) in the case of Transferor, to
Mellon Bank, N.A., One Mellon Bank Center, Suite 1910, 500 Grant Street,
Pittsburgh, Pennsylvania 15258-0001 Attention: Chief Financial Officer and
General Counsel, (b) in the case of Servicer, to AFCO Credit Corporation, 10
Hanover Square Street, New York, New York 10004, Attention: Fredrick B. Ollet,
III, Vice President and Chief Financial Officer, with a copy to Robert Ratner,
Esq., Senior Vice President, General Counsel and Secretary, (c) in the case of
Trustee, to the Corporate Trust Office, (d) in the case of the Back-up Servicer
Premium Financing Specialists, Inc., (e) in the case of the Credit Enhancement
Provider for a particular Series, the address, if any, specified in the
Supplement relating to such Series and (f) in the case of the Rating Agency for
a particular Series, the address, if any, specified in the Supplement relating
to such Series; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party. Unless
otherwise provided with respect to any Series in the related Supplement any
notice required or permitted to be mailed to a Holder shall be given by first
class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register, or with respect to any notice required or permitted to be
made to the Holders of Bearer Certificates, by publication in the manner
provided in the related Supplement. If and so long as any Series or Class is
listed on the Luxembourg Stock Exchange and such Exchange shall so require, any
Notice to Investor Holders shall be published in an authorized newspaper of
general circulation in Luxembourg within the time period prescribed in this
Agreement. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Holder receives such notice.
SECTION 13.6 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Holders thereof.
SECTION 13.7 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 8.2, this Agreement may not be
assigned by Servicer without the prior consent of Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66-2/3% of
the Investor Interest of each Series on a Series by Series basis and notice to
each Rating Agency.
SECTION 13.8 Certificates Non-Assessable and Fully Paid. It is the
intention of the parties to this Agreement that the Holders shall not be
personally liable for obligations of the Trust, that the Undivided Interests
represented by the Certificates shall be non-assessable for any losses or
expenses of the Trust or for any reason whatsoever, and that Certificates upon
authentication thereof by Trustee pursuant to Sections 2.1 and 6.2 are and shall
be deemed fully paid.
SECTION 13.9 Further Assurances. Transferor and Servicer agree to do
and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by Trustee more fully to
effect the purposes of this Agreement, including the execution of any financing
statements or continuation statements relating to the Receivables for filing
under the provisions of the UCC of any applicable jurisdiction.
SECTION 13.10 No Waiver, Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of Trustee, any Credit Enhancement
Provider or the Investor Holders, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
SECTION 13.11 Counterparts. This Agreement may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
SECTION 13.12 Third Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Holders and, to the
extent provided in the related Supplement, to the Credit Enhancement Provider
named therein, and their respective successors and permitted assigns. Except as
otherwise provided in this Article XIII, no other Person will have any right or
obligation hereunder.
SECTION 13.13 Actions by Holders. (a) Wherever in this Agreement a
provision is made that an action may be taken or a notice, demand or instruction
given by Investor Holders, such action, notice or instruction may be taken or
given by any Investor Holder, unless such provision requires a specific
percentage of Investor Holders.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Holder shall bind such Holder and every subsequent
holder of such Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof in respect of anything done or omitted
to be done by Trustee or Servicer in reliance thereon, whether or not notation
of such action is made upon such Certificate.
SECTION 13.14 Rule 144A Information. For so long as any of the
Investor Certificates of any Series or any Class are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, each of
Transferor, Servicer, Trustee and the Enhancement Provider for such Series agree
to cooperate with each other to provide to any Investor Holders of such Series
or Class and to any prospective purchaser of Certificates designated by such an
Investor Holder upon the request of such Investor Holder or prospective
purchaser, any information required to be provided to such holder or prospective
purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the
Securities Act.
SECTION 13.15 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
SECTION 13.16 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
<PAGE>
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Agreement to be duly executed by their respective officers as of the day and
year first above written.
MELLON BANK, N.A., Transferor
By:_________________________
Name:
Title:
AFCO CREDIT CORPORATION, Servicer
By:_________________________
Name:
Title:
AFCO ACCEPTANCE CORPORATION, Servicer
By:_________________________
Name:
Title:
PREMIUM FINANCING SPECIALISTS, INC.,
Back-up Servicer
By:_________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, Trustee
By:_________________________
Name:
Title:
_____________________________________________
MELLON BANK, N.A.
Transferor
AFCO CREDIT CORPORATION
Servicer
AFCO ACCEPTANCE CORPORATION
Servicer
PREMIUM FINANCING SPECIALISTS, INC.
Back-Up Servicer
and
THE FIRST NATIONAL BANK OF CHICAGO
Trustee
on behalf of the Series 1996-1 Holders
_____________________________________________
SERIES 1996-1 SUPPLEMENT
Dated as of December 1, 1996
to
POOLING AND SERVICING AGREEMENT
Dated as of December 1, 1996
_____________________________________________
MELLON BANK PREMIUM FINANCE LOAN MASTER TRUST
Series 1996-1
_____________________________________________
<PAGE>
TABLE OF CONTENTS
PAGE
<PAGE>
EXHIBITS
- --------
EXHIBIT A-1 Form of Class A Certificate
EXHIBIT A-2 Form of Class B Certificate
EXHIBIT B Form of Monthly Payment Instructions and
Notification to Trustee
EXHIBIT C Form of Monthly Series 1996-1 Holders'
Statement
SCHEDULE 1
Schedule to Exhibit B of the Pooling and Servicing Agreement with respect to the
Investor Certificates
<PAGE>
Series 1996-1 SUPPLEMENT, dated as of December 1, 1996 (this "Series
Supplement"), by and among MELLON BANK, N.A., a national banking association, as
Transferor, AFCO Credit Corporation, a New York corporation, as Servicer, AFCO
Acceptance Corporation, a California corporation, as Servicer, Premium Financing
Specialists, Inc., a ______________ corporation, as Back-up Servicer, and The
First National Bank of Chicago, a national banking association, as Trustee under
the Pooling and Servicing Agreement dated as of December 1, 1996 by and among
each Servicer, the Back-up Servicer, the Transferor and Trustee (the
"Agreement").
Section 6.9 of the Agreement provides, among other things, that
Transferor and Trustee may at any time and from time to time enter into a
supplement to the Agreement for the purpose of authorizing the delivery by
Trustee to Transferor for the execution and redelivery to Trustee for
authentication of one or more Series of Certificates.
Pursuant to this Series Supplement, Transferor and the Trust shall
create a new Series of Investor Certificates and shall specify the Principal
Terms thereof.
SECTION 1. Designation. (a) There is hereby created a Series of
Investor Certificates to be issued in two classes pursuant to the Agreement and
this Series Supplement and to be known together as the "Series 1996-1
Certificates." The two classes shall be designated the Class A Floating Rate
Asset Backed Certificates, Series 1996-1 (the "Class A Certificates") and the
Class B Floating Rate Asset Backed Certificates, Series 1996-1 (the "Class B
Certificates"). The Class A Certificates and the Class B Certificates shall be
substantially in the form of Exhibits A-1 and A-2, respectively. In addition,
there is hereby created a third Class which constitutes an uncertificated
interest in the Trust, shall be deemed to be an "Investor Certificate" for all
purposes under the Agreement and this Series Supplement, except as expressly
provided herein, and shall be known as the Collateral Interest, Series 1996-1
and have the rights assigned to the Collateral Interest in this Series
Supplement.
(b) Series 1996-1 shall be included in Group One (as defined below).
Series 1996-1 shall not be subordinated to any other Series.
(c) The Collateral Interest Holder, as holder of an "Investor
Certificate" under the Agreement, shall be entitled to the benefits of the
Agreement and this Series Supplement upon payment by the Collateral Interest
Holder of amounts owing on the Closing Date pursuant to the Loan Agreement.
Notwithstanding the foregoing, except as expressly provided herein, the
provisions of Article VI and Article XII of the Agreement relating to the
registration, authentication, delivery, presentation, cancellation ad surrender
of Registered Certificates shall not be applicable to the Collateral Interest.
SECTION 2. Definitions. If any term or provision contained herein
shall conflict with or be inconsistent with any provision contained in the
Agreement, the terms and provisions of this Series Supplement shall govern.
References to any Article, Section or subsection are references to Articles,
Sections or subsections of the Agreement, except as otherwise expressly
provided. All capitalized terms not otherwise defined herein are defined in the
Agreement, and the interpretive provisions set out in Section 1.2 of the
Agreement apply to this Series Supplement. Each capitalized term defined herein
relates only to the Investor Certificates and no other Series of Certificates
issued by the Trust.
"Accumulation Period" means, solely for the purposes of the definition
of Group One Monthly Principal Payment as such term is defined in each
Supplement relating to Group One, the Controlled Accumulation Period.
"Accumulation Shortfall" initially means zero and thereafter means,
with respect to any Monthly Period during the Controlled Accumulation Period,
the excess, if any, of the Controlled Deposit Amount for the previous Monthly
Period over the amount deposited into the Principal Funding Account pursuant to
subsection 4.11(e)(i) with respect to the Class A Certificates for the previous
Monthly Period.
"Adjusted Investor Interest" means, on any date of determination, an
amount equal to the sum of (a) the Class A Adjusted Investor Interest and (b)
the Class B Investor Interest and (c) the Collateral Interest.
"Aggregate Investor Default Amount" means, as to any Monthly Period,
the sum of the Investor Default Amounts in respect of such Monthly Period.
"Available Investor Principal Collections" means, as to any Monthly
Period, an amount equal to (a) the Investor Principal Collections for such
Monthly Period, minus (b) the amount of Reallocated Principal Collections with
respect to such Monthly Period which pursuant to Section 4.14 are required to
fund the Class A Required Amount and the Class B Required Amount (other than any
portions thereof that are applied pursuant to (x) subsection 4.11(a)(iv) and (y)
subsection 4.13(c) (to the extent such portions pursuant to subsection 4.13(c)
are available to pay the Class B Investor Default Amount), which shall, without
duplication, be included as Available Investor Principal Collections), plus (c)
the amount of Shared Principal Collections with respect to Group One that are
allocated to Series 1996-1 in accordance with subsection 4.15(b).
"Available Reserve Account Amount" means, as to any Transfer Date, the
lesser of (a) the amount on deposit in the Reserve Account on such date (after
taking into account any interest and earnings retained in the Reserve Account
pursuant to subsection 4.17(b) on such date, but before giving effect to any
deposit made or to be made pursuant to subsection 4.13(i) to the Reserve Account
on such date) and (b) the Required Reserve Account Amount.
"Base Rate" means, as to any Monthly Period, the annualized percentage
equivalent of a fraction, the numerator of which is equal to the sum of the
Class A Monthly Interest, the Class B Monthly Interest and the Collateral
Monthly Interest, each for the related Distribution Date, and the Investor
Servicing Fee with respect to such Monthly Period and the denominator of which
is the Investor Interest as of the close of business on the last day of such
Monthly Period.
"Class A Additional Interest" is defined in Section 4.8(a).
"Class A Adjusted Investor Interest" means, on any date of
determination, an amount equal to the Class A Investor Interest minus the
Principal Funding Account Balance on such date of determination.
"Class A Available Funds" means, as to any Monthly Period, an amount
equal to the sum of (a) the Class A Floating Allocation of Finance Charge
Collections allocated to the Investor Certificates for such Monthly Period, (b)
with respect to any Monthly Period during the Controlled Accumulation Period
prior to the payment in full of the Class A Investor Interest, the Principal
Funding Investment Proceeds arising pursuant to subsection 4.16(b), if any, with
respect to the related Transfer Date and (c) amounts, if any, to be withdrawn
from the Reserve Account which will be deposited into the Finance Charge Account
on the related Transfer Date pursuant to subsections 4.17(b) and 4.17(d) (or
which will be required to be deposited in the Finance Charge Account pursuant to
such subsections on the related Transfer Date (before giving effect to any
permitted netting)).
"Class A Carry-Over Amount" is defined in subsection 4.8(d).
"Class A Certificate Rate" means, with respect to the period from and
including the Closing Date to but excluding March 17, 1996, a per annum rate
equal to ___% and with respect to each Interest Period thereafter, a per annum
rate equal to ____% per annum in excess of LIBOR, as determined on the related
LIBOR Determination Date.
"Class A Certificates" is defined in subsection 1(a) of this Series
Supplement.
"Class A Deficiency Amount" is defined in subsection 4.8(a).
"Class A Fixed Allocation" means, for any Monthly Period following the
Revolving Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Class A Investor Interest as
of the close of business on the last day of the Revolving Period and the
denominator of which is equal to the Investor Interest as of the close of
business on the last day of the Revolving Period.
"Class A Floating Allocation" means, for any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is the Class A Adjusted Investor Interest as of the close
of business on the last day of the preceding Monthly Period and the denominator
of which is equal to the Adjusted Investor Interest as of the close of business
on such day; provided that, with respect to the First Monthly Period, the Class
A Floating Allocation means the percentage equivalent of a fraction, the
numerator of which is the Class A Initial Investor Interest and the denominator
of which is the Initial Investor Interest.
"Class A Holder" means the Person in whose name a Class A Certificate
is registered in the Certificate Register.
"Class A Initial Investor Interest" means the aggregate initial
principal amount of the Class A Certificates, which is $___________.
"Class A Investor Allocation" means, for any Monthly Period, (a) with
respect to Default Amounts, Finance Charge Collections and Principal Collections
during the Revolving Period, the Class A Floating Allocation, and (b) with
respect to Principal Collections during the Controlled Accumulation Period or
Rapid Amortization Period, the Class A Fixed Allocation.
"Class A Investor Default Amount" means, as to each Transfer Date, an
amount equal to the product of (a) the Aggregate Investor Default Amount for the
related Monthly Period and (b) the Class A Floating Allocation applicable for
the related Monthly Period.
"Class A Investor Interest" means, on any date of determination, an
amount equal to (a) the Class A Initial Investor Interest, minus (b) the
aggregate amount of principal payments made to Class A Holders prior to such
date and minus (c) the excess, if any, of the aggregate amount of Class A
Investor Charge-Offs pursuant to subsection 4.12(a) over Class A Investor
Charge-Offs reimbursed pursuant to subsection 4.13(b) prior to such date of
determination; provided that the Class A Investor Interest may not be reduced
below zero.
"Class A Monthly Interest" is defined in subsection 4.8(a).
"Class A Monthly Principal" is defined in subsection 4.9(a).
"Class A Optimal Interest" is defined in subsection 4.8(a).
"Class A Required Amount" is defined in subsection 4.10(a).
"Class A Scheduled Payment Date" means the December 2001 Distribution
Date.
"Class A Servicing Fee" is defined in subsection 3(a) of this Series
Supplement.
"Class A Shortfall Amount" means, as of any Distribution Date, an
amount, if positive, equal to (x) Class A Available Funds for such Monthly
Period less, if the Originators are not the Servicer, the Class A Servicing Fee
for such Monthly Period minus (y) Class A Optimal Interest for the related
Monthly Interest Period.
"Class B Additional Interest" is defined in subsection 4.8(b).
"Class B Available Funds" means, as to any Monthly Period, an amount
equal to the Class B Floating Allocation of Finance Charge Collections allocated
to the Investor Certificates for such Monthly Period.
"Class B Carry-Over Amount" is defined in subsection 4.8(d).
"Class B Certificate Rate" means, with respect to the period from and
including the Closing Date to but excluding March 15, 1996, a rate per annum
equal to ____% and with respect to each Interest Period thereafter, a per annum
rate equal to ____% per annum in excess of LIBOR, as determined on the related
LIBOR Determination Date.
"Class B Certificates" is defined in subsection 1(a) of this Series
Supplement.
"Class B Deficiency Amount" is defined in subsection 4.8(b).
"Class B Fixed Allocation" means, for any Monthly Period following the
Revolving Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Class B Investor Interest as
of the close of business on the last day of the Revolving Period and the
denominator of which is equal to the Investor Interest as of the close of
business on the last day of the Revolving Period.
"Class B Floating Allocation" means, for any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is the Class B Investor Interest as of the close of
business on the last day of the preceding Monthly Period and the denominator of
which is equal to the Adjusted Investor Interest as of the close of business on
such day; provided that, with respect to the first Monthly Period, the Class B
Floating Allocation means the percentage equivalent of a fraction, the numerator
of which is the Class B Initial Investor Interest and the denominator of which
is the Initial Investor Interest.
"Class B Holder" means the Person in whose name a Class B Certificate
is registered in the Certificate Register.
"Class B Initial Investor Interest" means the aggregate initial
principal amount of the Class B Certificates, which is $__________.
"Class B Investor Allocation" means, for any Monthly Period, (a) with
respect to Default Amounts and Finance Charge Collections at any time and
Principal Collections during the Revolving Period, the Class B Floating
Allocation, and (b) with respect to Principal Collections during the Controlled
Accumulation Period or Rapid Amortization Period, the Class B Fixed Allocation.
"Class B Investor Charge-Off" is defied in subsection 4.12(b).
"Class B Investor Default Amount" means, as to each Transfer Date, an
amount equal to the product of (a) the Aggregate Investor Default Amount for the
related Monthly Period and (b)the Class B Floating Allocation applicable for the
related Monthly Period.
"Class B Investor Interest" means, on any date of determination, an
amount equal to (a) the Class B Initial Investor Interest, minus (b) the
aggregate amount of principal payments made to Class B Holders prior to such
date, minus (c) the aggregate amount of Class B Investor Charge-Offs for all
prior Transfer Dates pursuant to subsection 4.12(b), minus (d) the amount of the
Reallocated Class B Principal Collections allocated pursuant to subsection
4.14(a) on all prior Transfer Dates for which the Collateral Interest has not
been reduced, minus (e) an amount equal to the amount by which the Class B
Investor Interest has been reduced on all prior Transfer Dates pursuant to
subsection 4.12(a) and plus (f) the aggregate amount of Excess Spread allocated
and available on all prior Transfer Dates pursuant to subsection 4. 13(d), for
the purpose of reimbursing amounts deducted pursuant to the foregoing clauses
(c), (d) and (e); provided that the Class B Investor Interest may not be reduced
below zero.
"Class B Monthly Interest" is defined in subsection 4.8(b).
"Class B Monthly Principal" is defined in subsection 4.9(b).
"Class B Optimal Interest" is defined in subsection 4.8(b).
"Class B Required Amount" is defined in subsection 4.10(b).
"Class B Scheduled Payment Date" means the January 2002 Distribution
Date.
"Class B Servicing Fee" is defined in subsection 3(a).
"Class B Shortfall Amount" means, as of any Distribution Date, an
amount, if positive, equal to (x) Class B Available Funds for such Monthly
Period less, if the Originators are not the Servicer, the Class B Servicing Fee
for such Monthly Period minus (y) Class B Optimal Interest for the related
Monthly Interest Period.
"Closing Date" means December __, 1996.
"Collateral Allocation" means, for any Monthly Period, (a) with
respect to Default Amounts and Finance Charge Collections at any time and
Principal Collections during the Revolving Period, the Collateral Floating
Allocation, and (b) with respect to Principal Collections during the Controlled
Accumulation Period or Rapid Amortization Period, the Collateral Fixed
Allocation.
"Collateral Available Funds" means, as to any Monthly Period, a amount
equal to the Collateral Floating Allocation of Finance Charge Collections
allocated to the Investor Certificates and deposited in the Finance Charge
Account for such Monthly Period (or required to be deposited in the Finance
Charge Account on the related Transfer Date (before giving effect to any
permitted netting)) with respect to the preceding Monthly Period pursuant to the
third paragraph of subsection 4.3(a) of the Agreement.
"Collateral Charge-Off" is defied in subsection 4.12(c).
"Collateral Default Amount" means, as to any Transfer Date, an amount
equal to the product of (a) the Aggregate Investor Default Amount for the
related Monthly Period and (b) the Collateral Floating Allocation applicable for
the related Monthly Period.
"Collateral Fixed Allocation" means, for any Monthly Period following
the Revolving Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Collateral Interest as
of the close of business on the last day of the Revolving Period and the
denominator of which is equal to the Investor Interest as of the close of
business on the last day of the Revolving Period.
"Collateral Floating Allocation" means, for any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is the Collateral Interest as of the close of business on
the last day of the preceding Monthly Period and the denominator of which is
equal to the Adjusted Investor Interest as of the close of business on such day;
provided that, with respect to the first Monthly Period, the Collateral Floating
Allocation means the percentage equivalent of a fraction, the numerator of
which is the Collateral Initial Interest and the denominator of which is the
Initial Investor Interest.
"Collateral Initial Interest" means $__________.
"Collateral Interest" means, on any date of determination, a
fractional undivided interest in the Trust which shall consist of the right to
receive, to the extent necessary to make the required payments to the Collateral
Interest Holder under this Series Supplement, the portion of Collections
allocable thereto under the Agreement and this Series Supplement, and funds on
deposit in the Collection Account allocable thereto pursuant to the Agreement
and this Series Supplement. On any date, for purposes of all calculations in the
Agreement and this Series Supplement, the amount of the Collateral Interest
shall be an amount equal to (a) the Collateral Initial Interest, minus (b) the
aggregate amount of principal payments made to the Collateral Interest Holder
prior to such date, minus (c) the aggregate amount of Collateral Charge-Offs for
all prior Transfer Dates pursuant to subsection 4.12(c), minus (d) the amount of
Reallocated Principal Collections allocated pursuant to subsections 4.14(a) and
(b) on all prior Transfer Dates, minus (e) an amount equal to the amount by
which the Collateral Interest has been reduced on all prior Transfer Dates
pursuant to subsections 4.12(a) and (b), and plus (f) the aggregate amount of
Excess Spread allocated and available on all prior Transfer Dates pursuant to
subsection 4.13(h), for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (c), (d) and (e); provided that the Collateral Interest
may not be reduced below zero.
"Collateral Interest Holder" means the entity so designated in the
Loan Agreement.
"Collateral Interest Servicing Fee" is defined in subsection 3(a) of
this Series Supplement.
"Collateral Monthly Interest" is defined in subsection 4.8(c).
"Collateral Monthly Principal" is defined in subsection 4.9(c).
"Collateral Rate" means, for any Interest Period, the rate specified
in the Loan Agreement.
"Controlled Accumulation Amount" means for any Transfer Date with
respect to the Controlled Accumulation Period prior to the payment in full of
the Class A Investor Interest, $__________; provided that if the Controlled
Accumulation Period Length is modified pursuant to subsection 4.11(i), (i) the
Controlled Accumulation Amount for each Transfer Date with respect to the
Controlled Accumulation Period shall mean the amount determined in accordance
with Section 4.11(i) on the date on which the Controlled Accumulation Period has
most recently been modified and (ii) the sum of the Controlled Accumulation
Amounts for all Transfer Dates with respect to the modified Controlled
Accumulation Period shall not be less than the Class A Investor Interest.
"Controlled Accumulation Date" means _______________.
"Controlled Accumulation Period" means, unless a Pay Out Event shall
have occurred prior thereto, the period commencing at the close of business on
the Controlled Accumulation Date or such later date as is determined in
accordance with subsection 4.11(i) and ending on the first to occur of (a) the
commencement of the Rapid Amortization Period and (b) the Series 1996-1
Termination Date.
"Controlled Accumulation Period Length" is defined in subsection
4.11(i).
"Controlled Deposit Amount" means, with respect to any Transfer Date,
the sum of (a) the Controlled Accumulation Amount for such Transfer Date and (b)
any existing Accumulation Shortfall.
"Covered Amount" means an amount determined as of each Transfer Date
with respect to any Interest Period as the product of (a) (i) a fraction, the
numerator of which is the actual number of days in such Interest Period and the
denominator of which is 360, times (ii) the Class A Certificate Rate for such
Monthly Period, and (b)the Principal Funding Account Balance as of the Record
Date preceding such Transfer Date.
"Credit Enhancement" means (a) with respect to the Class A
Certificates, the subordination of the Class B Certificates and the Collateral
Interest, and (b) with respect to the Class B Certificates, the subordination of
the Collateral Interest.
"Credit Enhancement Provider" means the Collateral Interest Holder.
"Cumulative Series Principal Shortfall" means the sum of the Series
Principal Shortfalls (as such term is defined in each of the related
Supplements) for each Series in Group One.
"Daily Principal Shortfall" means, on any date of determination, the
excess of the Group One Monthly Principal Payment for the Monthly Period
relating to such date over the month to date amount of Principal Collections for
such Monthly Period allocable to investor certificates of all outstanding Series
in Group One, not subject to reallocation, which are on deposit or to be
deposited in the Principal Account on such date.
"Deficiency Amount" means, at any date of determination, the sum of
the Class A Deficiency Amount and the Class B Deficiency Amount.
"Distribution Date" means January 15, 1996 and the fifteenth day of
each calendar month thereafter, or if such fifteenth day is not a Business Day,
the next succeeding Business Day.
"Excess Insurer Concentration Amount" means as of any date of
determination an amount equal to the sum of (i) with respect to each Tier 1
Insurer, the amount, if positive, by which the aggregate amount of the portion
of the Aggregate Receivables relating to the financing of insurance premiums of
such Tier 1 Insurer exceeds 25% of the amount of the Aggregate Receivables as of
such date of determination, (ii) with respect to each Tier 2 Insurer, the
amount, if positive, by which the aggregate amount of the portion of the
Aggregate Receivables relating to the financing of insurance premiums of such
Tier 2 Insurer exceeds 10% of the Aggregate Receivables as of such date of
determination and (iii) with respect to each Tier 3 Insurer, the amount, if
positive, by which the aggregate amount of the portion of Aggregate Receivables
relating to the financing of insurance premiums of any single Tier 3 Insurer
exceeds 5% of the Aggregate Receivables as of such date of determination.
"Excess Principal Funding Investment Proceeds" means, with respect to
each Transfer Date relating to the Controlled Accumulation Period, the amount,
if any, by which the Principal Funding Investment Proceeds for such Transfer
Date exceed the Covered Amount determined on such Transfer Date.
"Excess Spread" means, with respect to any Transfer Date, the sum of
(a) the sum of the amounts, if any, with respect to such Transfer Date specified
pursuant to subsections 4.11(a)(iv), 4.11(b)(iii) and 4.11(c)(ii), plus (b) the
Excess Finance Charge Collections, if any, allocated to the Investor Interest
pursuant to Section 4.5 for that Transfer Date.
"Fixed Investor Percentage" means, with respect to any Monthly Period,
the percentage equivalent of a fraction, the numerator of which is the Investor
Interest as of the close of business on the last day of the Revolving Period and
the denominator of which is the greater of (a) the aggregate amount of Beginning
of Month Principal Receivables for such Monthly Period and (b) the sum of the
numerators used to calculate the Investor Percentages (as such term is defined
in the Agreement) for allocations with respect to Principal Receivables for all
outstanding Series on such date of determination; provided that with respect to
any Monthly Period in which a Reset Date occurs, the denominator determined
pursuant to clause (a) shall be (i) the aggregate amount of Beginning of Month
Principal Receivables for such Monthly Period for the period from and including
the first day of such Monthly Period to but excluding the Reset Date and (ii)
the aggregate amount of Principal Receivables in the Trust as of the beginning
of the day on the Reset Date (after adjusting for the aggregate amount of
Principal Receivables added to or removed from the Trust on the Reset Date, if
applicable), for the period from and including the Reset Date to and including
the last day of such Monthly Period.
"Floating Investor Percentage" means, with respect to any Monthly
Period, the percentage equivalent of a fraction, the numerator of which is the
Adjusted Investor Interest as of the close of business on the last day of the
preceding Monthly Period (or with respect to the Monthly Period, the Initial
Investor Interest) and the denominator of which is the greater of (a) the
aggregate amount of Beginning of Month Principal Receivables, and (b) the sum of
the numerators used to calculate the Investor Percentages (as such term is
deemed in the Agreement) for allocations with respect to Finance Charge
Receivables, Default Amounts or Principal Receivables, as applicable, for all
outstanding Series on such date of determination; provided that with respect to
any Monthly Period in which a Reset Date occurs, the denominator determined
pursuant to clause (a) shall be (i) the aggregate amount of Beginning of Month
Principal Receivables for the period from and including the first day of the
prior Monthly Period to but excluding the Reset Date and (ii) the aggregate
amount of Principal Receivables in the Trust as of the beginning of the day on
the Reset Date (after adjusting for the aggregate amount of Principal
Receivables added to or removed from the Trust on the Reset Date, if
applicable), for the period from and including the Reset Date to and including
the last day of such Monthly Period.
"Group One" means Series 1996-1 and each other Series specified in the
related Supplement to be included in Group One.
"Group One Monthly Principal Payment" means, with respect to any
Monthly Period, for all Series in Group One (including Series 1996-1) which are
in an Amortization Period or Accumulation Period (as such terms are defined in
the related Supplements for all Series in Group One), the sum of (a) the
Controlled Distribution Amount for the related Transfer Date for any Series in
its Controlled Amortization Period (as such terms are defined in the related
Supplements for all Series in Group One), (b) the Controlled Deposit Amount for
the related Transfer Date for any Series in its Accumulation Period, other than
its Rapid Accumulation Period, as applicable (as such terms are defined in the
related Supplements for all Series in Group One), (c) the Investor Interest as
of the end of the prior Monthly Period taking into effect any payments to be
made on the following Distribution Date for any Series in Group One in its
Principal Amortization Period or Rapid Amortization Period (as such terms are
defined in the related Supplements for all Series in Group One), (d) the
Adjusted Investor Interest as of the end of the prior Monthly Period taking into
effect any payments or deposits to be made on the following Transfer Date and
Distribution Date for any Series in Group One in its Rapid Accumulation Period
(as such terms are defined in the related Supplements for all Series in Group
One), (e) the excess of the Collateral Interest as of the Transfer Date
occurring in such Monthly Period over the Required Collateral Interest for the
related Transfer Date, assuming no Accumulation Shortfall and (f) such other
amounts as may be specified in the related Supplements for all Series in Group
One.
"Initial Investor Interest" means $_______________.
"Interest Funding Account" shall have the meaning set forth in
subsection 4.18(a).
"Interest Payment Date" shall mean the 15th day of December, March,
June and September (or, if any such day is not a Business Day, the next
succeeding Business Day), and the Expected Final Payment Date, commencing on the
March 17, 1997 Distribution Date.
"Interest Period" means, with respect to any Payment Date, the period
from and including the previous Payment Date through the day preceding such
Payment Date, except the initial Interest Period will be the period from and
including the Closing Date through the day preceding the initial Payment Date.
"Investment Grade Insurer Percentage" means as of any date of
determination a fraction (expressed as a percentage) the numerator of which is
the aggregate amount of the portion of the Aggregate Receivables relating to the
financing of insurance premiums of the Top Ten Investment Grade Insurers as of
such date of determination and the denominator of which is the portion of the
Aggregate Receivables relating to the financing of insurance premiums of the Top
Ten Insurers as of such date of determination.
"Investor Certificates" means the Class A Certificates, the Class B
Certificates and the Collateral Interest.
"Investor Default Amount" means, with respect to any Receivables in
Defaulted Accounts, an amount equal to the product of (a) the Receivables in
Defaulted Accounts and (b) the Floating Investor Percentage on the day such
Receivable became a Receivable in a Defaulted Account.
"Investor Holder" means (a) with respect to the Class A Certificates,
the holder of record of a Class A Certificate, (b) with respect to the Class B
Certificates, the holder of record of a Class B Certificate and (c) with respect
to the Collateral Interest, the Collateral Interest Holder.
"Investor Interest" means, on any date of determination, a amount
equal to the sum of (a) the Class A Investor Interest, (b) the Class B Investor
Interest and (c) the Collateral Interest, each as of such date.
"Investor Percentage" means, for any Monthly Period, (a) with respect
to Finance Charge Receivables, Finance Charge Collections and Default Amounts at
any time and Principal Receivables and Principal Collections during the
Revolving Period, the Floating Investor Percentage and (b) with respect to
Principal Receivables and Principal Collections during the Controlled
Accumulation Period or the Rapid Amortization Period, the Fixed Investor
Percentage.
"Investor Principal Collections" means, with respect to any Monthly
Period, the sum of (a) the aggregate amount deposited or required to be
deposited on the related Transfer Date (before giving effect to any permitted
netting) into the Principal Account for such Monthly Period pursuant to
subsections 4.7(a)(ii), (iii) and (iv), 4.7(b)(ii), (iii) and (iv), or
4.7(c)(ii), in each case, as applicable to such Monthly Period, (b) the
aggregate amount to be treated as Investor Principal Collections pursuant to
subsections 4.11 (a) (iv), and 4.13(a), (b), (c), (d), (g) and (h) for such
Monthly Period (other than such amount paid from Reallocated Principal
Collections), and (c) the aggregate amount of Unallocated Principal Collections
deposited or required to be deposited on the related Transfer Date (before
giving effect to any permitted netting) into the Principal Account pursuant to
subsection 4.7(d).
"Investor Servicing Fee" is defined in subsection 3(a) of this Series
Supplement.
"LIBOR" means, for any Interest Period, the London interbank offered
rate for three-month United States dollar deposits determined by Trustee for
each Interest Period in accordance with the provisions of Section 4.19.
"LIBOR Determination Date" means March 13, 1996 for the initial
Interest Period and the second London Business Day prior to the commencement of
each subsequent Interest Period.
"Loan Agreement" means the agreement among Transferor, each Servicer,
Trustee, and the Collateral Interest Holder, dated as of December 1, 1996, as
amended or modified from time to time.
"London Business Day" means any Business Day on which dealings in
deposits in United States dollars are transacted in the London interbank market.
"Minimum Aggregate Principal Receivables" means, as of any date of
determination, an amount equal to the sum of the numerators used to calculate
the Investor Percentage with respect to the allocation of Principal Collections
for each Series outstanding on such date.
"Minimum Transferor Interest" means as of any date of determination,
an amount equal to __% (a) the amount of Principal Receivables as of such date
of determination plus (b) the amount on deposit in the Excess Funding Account on
the date of determination; provided that Transferor may increase or reduce the
percentage used to determine the Minimum Transferor Interest (but not below __%)
upon (a) 30 day's prior notice to Trustee, each Rating Agency and any Credit
Enhancement Provider, (b) satisfaction of the Rating Agency Condition, and (c)
delivery to Trustee and each such Credit Enhancement Provider of an Officer's
Certificate stating that Transferor reasonably believes that such reduction will
not, based on the facts known to such officer at the time of such certification,
then or thereafter cause a Pay Out Event to occur with respect to any Series.
"Monthly Interest Period" is defined in subsection 4.8(a).
"Monthly Payment Rate" means, in respect of any Monthly Period, a
fraction (expressed as a percentage), the numerator of which shall equal the
aggregate Collections received by the Servicer during such Monthly Period and
the denominator of which shall equal the aggregate amount of Principal
Receivables as of the first day of such Monthly Period.
"Monthly Period" is defined in the Agreement, except that the first
Monthly Period with respect to the Investor Certificates begins on and includes
the Closing Date and ends on and includes December 31, 1996.
"Payment Date" shall mean any Interest Payment Date and any Special
Payment Date.
"Pay Out Commencement Date" means the date on which a Trust Pay Out
Event is deemed to occur pursuant to Section 9.1 of the Agreement or a Series
1996-1 Pay Out Event is deemed to occur pursuant to Section 9 of this Series
Supplement.
"Portfolio Adjusted Yield" means, with respect to any Transfer Date,
the average of the percentages obtained for each of the three preceding Monthly
Periods by subtracting the Base Rate from the Portfolio Yield for such Monthly
Period and deducting 0.50% from the result for each Monthly Period.
"Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is an
amount equal to the sum of (a) the Finance Charge Collections deposited or
required to be deposited on the related Transfer Date (before giving effect to
any permitted netting) into the Finance Charge Account and allocable to the
Investor Certificates for such Monthly Period and (b) the Principal Funding
Investment Proceeds deposited or required to be deposited into the Finance
Charge Account on the Transfer Date (before giving effect to any permitted
netting) related to such Monthly Period, and (c) the amount of the Reserve Draw
Amount (up to the Available Reserve Account Amount) plus any amounts of interest
and earnings described in Section 4.17, each deposited or required to be
deposited into the Finance Charge Account on the Transfer Date (before giving
effect to any permitted netting) relating to such Monthly Period, after
subtracting the Aggregate Investor Default Amount for such Monthly Period, and
the denominator of which is the Investor Interest as of the close of business on
the last day of such Monthly Period.
"Principal Account" is defined in subsection 4.16(a).
"Principal Funding Account" is defined in subsection 4.16(a).
"Principal Funding Account Balance" means, with respect to any date of
determination, the principal amount, if any, on deposit in the Principal Funding
Account on such date of determination.
"Principal Funding Investment Proceeds" means, with respect to each
Transfer Date, the investment earnings on funds in the Principal Funding Account
(net of investment expenses ad losses) for the period from and including the
immediately preceding Transfer Date to but excluding such Transfer Date.
"Principal Funding Investment Shortfall" means, with respect to each
Transfer Date relating to the Controlled Accumulation Period, the amount, if
any, by which the Principal Funding Investment Proceeds for such Transfer Date
are less than the Covered Amount determined as of such Transfer Date.
"Rapid Amortization Period" means the period commencing on the Pay Out
Commencement Date and ending on the earlier to occur of (a) the Series 1996-1
Termination Date and (b) the termination of the Trust pursuant to Section 12.1.
"Rating Agency" means Moody's and Standard & Poor's.
"Rating Agency Condition" means the notification in writing by each
Rating Agency to Transferor, Servicer and Trustee that an action will not result
in any Rating Agency reducing or withdrawing its then existing rating of the
Class A Certificates or the Class B Certificates.
"Reallocated Class B Principal Collections" means, with respect to any
Transfer Date, Principal Collections applied in accordance with subsection
4.14(a) in an amount not to exceed the product of (a) the Class B Investor
Allocation for the Monthly Period relating to such Transfer Date and (b) the
Investor Percentage for the Monthly Period relating to such Transfer Date and
(c) the amount of Principal Collections for the Monthly Period relating to such
Transfer Date; provided that such amount shall not exceed the Class B Investor
Interest after giving effect to any Class B Investor Charge-Offs for such
Transfer Date.
"Reallocated Collateral Principal Collections" means, with respect to
any Transfer Date, Principal Collections applied in accordance with subsections
4.14(a) and (b) in an amount not to exceed the product of (a) the Collateral
Allocation for the Monthly Period relating to such Transfer Date and (b) the
Investor Percentage for the Monthly Period relating to such Transfer Date and
(c) the amount of Principal Collections for the Monthly Period relating to such
Transfer Date; provided that such amount shall not exceed the Collateral
Interest after giving effect to any Collateral Charge-Offs for such Transfer
Date.
"Reallocated Principal Collections" means the sum of (a) Reallocated
Class B Principal Collections and (b) Reallocated Collateral Principal
Collections.
"Reference Banks" means four major banks in the London interbank
market selected by Servicer.
"Required Collateral Interest" means (a) initially, $_____________ and
(b) on any Transfer Date thereafter, ____% of the Adjusted Investor Interest on
such Transfer Date, after taking into account deposits into the Principal
Funding Account on such Transfer Date and payments to be made on the related
Distribution Date, and the Collateral Interest on the prior Transfer Date, after
any adjustments to be made on such date, but not less than $15,000,000; provided
that (x) if either (i) there is a reduction in the Collateral Interest pursuant
to clause (c), (d) or (e) of the definition of such term or (ii) a Pay Out Event
with respect to the Investor Certificates has occurred, the Required Collateral
Interest for any Transfer Date shall (subject to clauses (y) and (z) equal the
Required Collateral Interest for the Transfer Date immediately preceding such
reduction or Pay Out Event, (y) in no event shall the required Collateral
Interest exceed the sum of the outstanding principal amounts of (i) the Class A
Certificates and (ii) the Class B Certificates, each as of the last day of the
Monthly Period preceding such Transfer Date after taking into account the
payments to be made on the related Distribution Date and (z) the Required
Collateral Interest may be reduced at Transferor's option at any time to a
lesser amount if Transferor, Servicer, the Collateral Interest Holder and
Trustee have been provided evidence that the Rating Agency Condition has been
satisfied.
"Required Investment Grade Insurer Percentage" means 90%.
"Required Reserve Account Amount" means, with respect to any Transfer
Date on or after the Reserve Account Funding Date, an amount equal to (a) 0.50%
of the outstanding principal balance of the Class A Certificates or (b) any
other amount designated by Transferor; provided that if such designation is of a
lesser amount, Transferor shall (i) provide Servicer, the Collateral Interest
Holder and Trustee with evidence that the Rating Agency Condition has been
satisfied and (ii) deliver to Trustee a certificate of an authorized officer to
the effect that, based on the facts known to such officer at such time, in the
reasonable belief of Transferor, such designation will not cause a Pay Out Event
or an event that, after the giving of notice or the lapse of time, would cause a
Pay Out Event to occur with respect to Series 1996-1.
"Reserve Account" is defined in subsection 4.17(a).
"Reserve Account Funding Date" means the Transfer Date which occurs
not later than the earliest of[: (a)] the Transfer Date with respect to the
Monthly Period which commences 3 months prior to the commencement of the
Controlled Accumulation Period; (b) the first Transfer Date for which the
Portfolio Adjusted Yield is less than ____%, but in such event the Reserve
Account Funding Date shall not be required to occur earlier than the Transfer
Date with respect to the Monthly Period which commences 12 months prior to the
commencement of the Controlled Accumulation Period; (c) the first Transfer Date
for which the Portfolio Adjusted Yield is less than ____%, but in such event the
Reserve Account Funding Date shall not be required to occur earlier than the
Transfer Date with respect to the Monthly Period which commences 6 months prior
to the commencement of the Controlled Accumulation Period; and (d) the first
Transfer Date for which the Portfolio Adjusted Yield is less than ____%, but in
such event the Reserve Account Funding Date shall not be required to occur
earlier than the Transfer Date with respect to the Monthly Period which
commences 4 months prior to the commencement of the Controlled Accumulation
Period].
"Reserve Account Surplus" means, as of any Transfer Date following the
Reserve Account Funding Date, the amount, if any, by which the amount on deposit
in the Reserve Account exceeds the Required Reserve Account Amount.
"Reserve Draw Amount" is defined in subsection 4.17(c).
"Reset Date" means each of (a) a Removal Date on which, if any Series
has been paid in full, Principal Receivables in an aggregate amount
approximately equal to the initial investor interest of such Series are removed
from the Trust and (b) a date on which there is an increase in the Investor
Interest under any Variable Interest issued by the Trust.
"Revolving Period" means the period from and including the Closing
Date to, but not including, the earlier of (a) the day the Controlled
Accumulation Period commences and (b) the Pay Out Commencement Date.
"Series 1996-1" means the Series of the Mellon Bank Premium Finance
Loan Master Trust represented by the Investor Certificates.
"Series 1996-1 Certificates" means the Class A Certificates and the
Class B Certificates.
"Series 1996-1 Holders" means the holder of record of a Series 1996-1
Certificate.
"Series 1996-1 Pay Out Event" is defined in Section 9 of this Series
Supplement.
"Series 1996-1 Termination Date" means the earliest to occur of (a)
the Distribution Date on which the Investor Interest is paid in full, (b) the
______________ ____ Distribution Date and (c) the Trust Termination Date.
"Series Finance Charge Shortfall" means, with respect to any Transfer
Date, an amount equal to the excess, if any, of (a) the sum of the amounts
specified in clauses (a) through (j) of Section 4.13 for that Transfer Date over
(b) the sum of the amounts, if any, with respect to such Transfer Date specified
pursuant to subsections 4.11(a)(vi), 4.11(b)(iv) and 4.11 (c)(iii).
"Series Principal Shortfall" means, with respect to any Transfer Date,
the excess, if any, of (a)(i) with respect to any Transfer Date relating to the
Controlled Accumulation Period, the sum of (A) the Controlled Deposit Amount for
such Transfer Date, (B) on the Transfer Date after the Transfer Date on which
the Class A Adjusted Investor Interest is reduced to zero, the Class B Invested
Amount and (C) the excess, if any, of the Collateral Interest for such Transfer
Date over the Required Collateral Interest for such Transfer Date, (ii) with
respect to any Transfer Date during the Rapid Amortization Period, the Adjusted
Investor Interest and (iii) with respect to any Transfer Date relating to the
Revolving Period, the amount specified in clause (a)(i)(C) above over (b) the
Investor Principal Collections minus the Reallocated Principal Collections
(other than any portions thereof that are applied pursuant to (x) subsection
4.11(a)(iv) and (y) subsection 4.13(c) (to the extent such portions pursuant to
subsection 4.13(c) are available to pay the Class B Investor Default Amount))
for such Transfer Date.
"Series Servicing Fee Percentage" means 0.50%.
"Shared Principal Collections" means, as the context requires, either
(a) the amount allocated to the Investor Certificates which may be applied to
the Series Principal Shortfall with respect to other outstanding Series in Group
One or (b) the amounts allocated to the investor certificates of other Series in
Group One which the applicable Supplements for such Series specify are to be
treated as "Shared Principal Collections" and which may be applied to cover the
Series Principal Shortfall with respect to the Investor Certificates.
"Shortfall Amount" is defined in subsection 4.8(d).
"Special Payment Date" shall mean each Distribution Date with respect
to the Rapid Amortization Period.
"Telerate Page 3750" means the display page currently so designated on
the Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
"Tier 1 Insurer" means as of any date of determination, an
insurance carrier which has a then current (i) claims-paying ability rating from
Standard & Poor's of at least A-, but below AAA and (ii) insurance financial
strength rating from Moody's of at least A3, but below Aaa.
"Tier 2 Insurer" means as of any date of determination, an insurance
carrier which has a then current (i) claims-paying ability rating from Standard
& Poor's of at least BBB-, but below A- and (ii) insurance financial strength
rating from Moody's of at least Baa3, but below A3.
"Tier 3 Insurer" means as of any date of determination, an insurer
that did not have (i) a claims-paying ability rating of at least investment
grade (i.e., in one of the top four generic rating categories, irrespective of
any plus or minus) from Standard & Poor's and (ii) an insurance financial
strength rating of at least investment grade (i.e., in one of the top four
generic rating categories, irrespective of any plus or minus) from Moody's.
"Top 10 Insurer" means as of any date of determination any of the
insurance carriers listed one through ten on the most recent Insurer Schedule
delivered to the Rating Agencies by the Originators or the Transferor.
"Top 10 Investment Grade Insurer" means as of any date of
determination any Top 10 Insurer which is an Investment Grade Insurer.
"Unallocated Principal Collections" is deemed in subsection 4.7(d).
SECTION 3. Servicing Compensation. The share of the Servicing Fee
allocable to Series 1996-1 with respect to any Transfer Date (the "Investor
Servicing Fee") shall be equal to one-twelfth of the product of (i) the Series
Servicing Fee Percentage and (ii) the Adjusted Investor Interest as of the last
day of the Monthly Period preceding such Transfer Date; provided that with
respect to the first Transfer Date, the Investor Servicing Fee shall equal
$____________. The share of the Investor Servicing Fee allocable to the Class A
Investor Interest with respect to any Transfer Date (the "Class A Servicing
Fee") shall equal one-twelfth of the product of (i) the Class A Floating
Allocation, (ii) Series Servicing Fee Percentage and (iii) the Adjusted Investor
Interest as of the last day of the Monthly Period preceding such Transfer Date;
provided that with respect to the first Transfer Date, the Class A Servicing Fee
shall equal $____________. The share of the Investor Servicing Fee allocable to
the Class B Investor Interest with respect to any Transfer Date (the "Class B
Servicing Fee") shall equal one-twelfth of the product of (i) the Class B
Floating Allocation, (ii) the Series Servicing Fee Percentage Rate and (iii) the
Adjusted Investor Interest as of the last day of the Monthly Period preceding
such Transfer Date; provided that with respect to the first Transfer Date, the
Class B Servicing Fee shall equal $____________. The share of the Investor
Servicing Fee allocable to the Collateral Interest with respect to any Transfer
Date (the "Collateral Interest Servicing Fee") shall equal one-twelfth of the
product of (i) the Collateral Floating Allocation, (ii) the Series Servicing Fee
Percentage and (iii) the Adjusted Investor Interest as of the last day of the
Monthly Period preceding such Transfer Date; provided that with respect to the
first Transfer Date, the Collateral Interest Servicing Fee shall equal
$_____________. Except as specifically provided above, the Servicing Fee shall
be paid by the cash flows from the Trust allocated to Transferor or the
certificateholders of other Series (as provided in the related Supplements) and
in no event shall the Trust, Trustee or the Investor Holders be liable therefor.
The Class A Servicing Fee shall be payable to Servicer solely to the extent
amounts are available for distribution in respect thereof pursuant to
subsections 4.11(a) (ii) and 4.13(a). The Class B Servicing Fee shall be payable
solely to the extent amounts are available for distribution in respect thereof
pursuant to subsections 4.11(b)(ii) and 4.13(c). The Collateral Interest
Servicing Fee shall be payable solely to the extent amounts are available for
distribution in respect thereof pursuant to subsection 4.13(f) or if applicable
subsection 4.11(c)(i).
SECTION 4. Reassignment and Transfer Terms. The Investor Certificates
shall be subject to retransfer to Transferor at its option, in accordance with
subsection 12.2(a), on any Distribution Date on or after the Distribution Date
on which the Investor Interest is reduced to an amount less than or equal to 5%
of the Initial Investor Interest. The deposit required in connection with any
such repurchase shall include the amount, if any, on deposit in the Principal
Funding Account and will be equal to the sum of (a) the Investor Interest and
(b) accrued and unpaid interest on the Investor Certificates through the day
preceding the Distribution Date on which the repurchase occurs.
SECTION 5. Delivery and Payment for the Investor Certificates.
Transferor shall execute and deliver the Series 1996-1 Certificates to Trustee
for authentication in accordance with Section 6.1. The Trustee shall deliver
such Certificates when authenticated in accordance with Section 6.2.
SECTION 6. Depository; Form of Delivery of Investor Certificates. (a)
The Class A Certificates and the Class B Certificates shall be delivered as
Book-Entry Certificates as provided in Sections 6.1 and 6.10.
(b) The Depository for Series 1996-1 shall be The Depository Trust
Company, and the Class A Certificates and Class B Certificates shall be
initially registered in the name of Cede & Co., its nominee.
SECTION 7. Article IV of Agreement. Sections 4.1 through 4.5 shall
read in their entirety as provided in the Agreement. Article IV (except for
Sections 4.1 through 4.5 thereof) shall be read in its entirety as follows and
shall be applicable only to the Investor Certificates:
ARTICLE IV RIGHTS OF HOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.6 Rights of Holders and the Collateral Interest Holder. The
Investor Certificates shall represent undivided interests in the Trust,
consisting of the right to receive, to the extent necessary to make the required
payments with respect to such Investor Certificates at the times and in the
amounts specified in this Agreement, (a) the applicable Investor Percentage of
Collections received with respect to the Receivables and (b) funds on deposit in
the Collection Account, the Finance Charge Account, the Principal Account, the
Principal Funding Account, the Reserve Account and the Distribution Account. The
Collateral Interest shall be subordinate to the Class A Certificates and the
Class B Certificates to the extent described herein. The Class B Certificates
shall be subordinate to the Class A Certificates to the extent described herein.
Transferor shall not have any interest in the Collection Account, the Finance
Charge Account, the Principal Account, the Principal Funding Account, the
Reserve Account or the Distribution Account, except as specifically provided in
this Article IV.
SECTION 4.7 Allocations. (a) Allocations During the Revolving Period.
During the Revolving Period, Servicer shall, prior to the close of business on
the day any Collections are deposited in the Collection Account, allocate to the
Investor Holders or Transferor and pay or deposit from the Collection Account
the following amounts as set forth below (subject to Section 4.3):
(i) Deposit into the Finance Charge Account an amount equal
to the product of (A) the Investor Percentage on the Date of
Processing of such Collections and (B) the Finance Charge Collections
on such Date of Processing to be applied in accordance with Section
4.11.
(ii) Deposit into the Principal Account an amount equal to
the product of (A) the Collateral Allocation on the Date of Processing
of such Collections, (B) the Investor Percentage on the Date of
Processing of such Collections and (C) the aggregate amount of
Principal Collections on such Date of Processing to be applied first
in accordance with Section 4.14 and then in accordance with Section
4.11(e).
(iii) Deposit into the Principal Account an amount equal to
the product of (A) the Class B Investor Allocation on the Date of
Processing of such Collections, (B) the Investor Percentage on the
Date of Processing of such Collections and (C) the aggregate amount of
Principal Collections on such Date of Processing to be applied first
in accordance with Section 4.14 and then in accordance with Section
4.11(e).
(iv) (A) Deposit into the Principal Account an amount equal
to the product of (1) the Class A Investor Allocation on the Date of
Processing of such Collections, (2) the Investor Percentage on the
Date of Processing of such Collections and (3) the aggregate amount of
Principal Collections Receivables on such Date of Processing; provided
that the amount deposited into the Principal Account pursuant to this
subsection 4.7(a)(iv)(A) shall not exceed the Daily Principal
Shortfall, and (B) pay to Transferor an amount equal to the excess, if
any, identified in the proviso to clause (A) above; provided that the
amount to be paid to Transferor pursuant to this subsection
4.7(a)(iv)(B) with respect to any Date of Processing shall be paid to
Transferor only to the extent that the Transferor Interest on such
Date of Processing is greater than zero (after giving effect to the
inclusion in the Trust of all Receivables created on or prior to such
Date of Processing and the application of payments referred to in
subsection 4.3(b)) and otherwise shall be deposited into the Excess
Funding Account in accordance with subsection 4.7(d).
(b) Allocations During the Controlled Accumulation Period. During the
Controlled Accumulation Period, Servicer shall, prior to the close of business
on the day any Collections are deposited in the Collection Account, allocate to
the Investor Holders or Transferor and pay or deposit from the Collection
Account the following amounts as set forth below (subject to Section 4.3):
(i) Deposit into the Finance Charge Account an amount equal
to the product of (A) the Investor Percentage on the Date of
Processing of such Collections and (B) the aggregate amount of
Collections processed in respect of Finance Charge Receivables on such
Date of Processing to be applied in accordance with Section 4.11.
(ii) Deposit into the Principal Account an amount equal to
the product of (A) the Collateral Allocation on the Date of Processing
of such Collections, (B) the Investor Percentage on the Date of
Processing of such Collections and (C) the aggregate amount of
Principal Collections on such Date of Processing to be applied first
in accordance with Section 4.14 and then in accordance with subsection
4.11(e).
(iii) Deposit into the Principal Account an amount equal to
the product of (A) the Class B Investor Allocation on the Date of
Processing of such Collections, (B) the Investor Percentage on the
Date of Processing of such Collections and (C) the aggregate amount of
Principal Collections on such Date of Processing to be applied first
in accordance with Section 4.14 and then in accordance with subsection
4.11(e).
(iv) (A) Deposit into the Principal Account an amount equal
to the product of (1) the Class A Investor Allocation on the Date of
Processing of such Collections, (2) the Investor Percentage on the
Date of Processing of such Collections and (3) the aggregate amount of
Principal Collections on such Date of Processing; provided that the
amount deposited into the Principal Account pursuant to this
subsection 4.7(b)(iv)(A) shall not exceed the Daily Principal
Shortfall, and (B) pay to Transferor an amount equal to the excess
identified in the proviso to clause (A) above, if any; provided that
the amount to be paid to Transferor pursuant to this subsection
4.7(b)(iv)(B) with respect to any Date of Processing shall be paid to
Transferor only to the extent that the Transferor Interest on such
Date of Processing is greater than zero (after giving effect to the
inclusion in the Trust of all Receivables created on or prior to such
Date of Processing and the application of payments referred to in
subsection 4.3(b)) and otherwise shall be deposited into the Excess
Funding Account in accordance with subsection 4.7(d).
(c) Allocations During the Rapid Amortization Period. During the Rapid
Amortization Period, Servicer shall, prior to the close of business on the day
any Collections are deposited in the Collection Account, allocate to the
Investor Holders and pay or deposit from the Collection Account the following
amounts as set forth below (subject to Section 4.3):
(i) Deposit into the Finance Charge Account an amount equal
to the product of (A) the Investor Percentage on the Date of
Processing of such Collections and (B) the aggregate amount of
Collections processed in respect of Finance Charge Receivables on such
Date of Processing to be applied in accordance with Section 4.11.
(ii) (A) Deposit into the Principal Account an amount equal
to the product of (1) the Investor Percentage on the Date of
Processing of such Collections and (2) the aggregate amount of
Principal Collections on such Date of Processing; provided that the
aggregate amount deposited into the Principal Account pursuant to this
subsection 4.7(c)(ii)(A) shall not exceed the sum of the Investor
Interest as of the close of business on the last day of the prior
Monthly Period (after taking into account any payments to be made on
the Distribution Date relating to such prior Monthly Period and
deposits and any adjustments to be made to the Investor Interest to be
made on the Transfer Date relating to such Monthly Period) and any
Reallocated Principal Collections relating to the Monthly Period in
which such deposit is made and (B) pay to Transferor an amount equal
to the excess, if any, identified in the proviso to clause (A) above;
provided that the amount to be paid to Transferor pursuant to this
subsection 4.7(c)(ii)(B) with respect to any Date of Processing shall
be paid to Transferor only to the extent that the Transferor Interest
on such Date of Processing is greater than zero (after giving effect
to the inclusion in the Trust of all Receivables created on or prior
to such Date of Processing and the application of payments referred to
in subsection 4.3(b)) and otherwise shall be deposited into the Excess
Funding Account in accordance with subsection 4.7(d).
(d) Excess Funding Account. Any Principal Collections or Finance
Charge Collections not allocated and paid to Transferor because of the
limitations contained in subsections 4.7(a)(iv)(B), 4.7(b)(iv) and 4.7(c)(ii)(B)
and any amounts allocable to the Investor Certificates deposited in the
Principal Account pursuant to subsection 2.4(d)(iii) ("Unallocated Principal
Collections") shall be held in the Excess Funding Account and, prior to the
commencement of the Controlled Accumulation Period or the Rapid Amortization
Period shall be paid to Transferor when, and only to the extent that, the
Transferor Interest is greater than zero. For each Transfer Date with respect to
the Controlled Accumulation Period or the Rapid Amortization Period, any such
Unallocated Principal Collections held in the Excess Funding Account on such
Transfer Date shall be included in the Investor Principal Collections which to
the extent available shall be distributed as Available Investor Principal
Collections to be applied pursuant to Section 4.11 on such Transfer Date.
With respect to the Investor Certificates, and notwithstanding
anything in the Agreement or this Series Supplement to the contrary, if at any
time Servicer is required to make daily deposits from the Collection Account
into the Finance Charge Account or the Principal Account pursuant to subsections
4.7(a), 4.7(b) and 4.7(c) with respect to any Monthly Period:
(i) on or after the related Determination Date, Servicer may
withdraw from the Finance Charge Account and the Principal Account any
portion of the principal balance held in each such account in excess
of the aggregate amount that will be required to be distributed to
Investor Holders or (if Transferor is not Servicer) Servicer or
deposited in the Principal Funding Account from that account (directly
or after deposit into the Distribution Account) on the related
Distribution Date and transfer such funds to Transferor (except that
any such excess amount held in the Principal Account, and any portion
of such excess amount held in the Finance Charge Account that would
have been treated as a portion of Investor Principal Collections on
the related Transfer Date, shall be transferred to Transferor only to
the extent that the Transferor Interest on the date of transfer is
greater than zero (after giving effect to the inclusion in the Trust
of all Receivables created on or prior to such date and the
application of payments referred to in subsection 4.3(b) and otherwise
shall be deposited into the Excess Funding Account in accordance with
subsection 4.7(d)); and
(ii) on any date, Servicer may withdraw from the Collection
Account, the Finance Charge Account or the Principal Account any
amounts inadvertently deposited in the such account that should not
have been so deposited.
The foregoing supersedes clause (i)(x) of the fourth grammatical paragraph of
subsection 4.3(a) for purposes of the Investor Certificates.
SECTION 4.8 Determination of Monthly Interest. (a) The amount of
monthly interest distributable from the Finance Charge Account with respect to
the Class A Certificates on any Transfer Date (the "Class A Monthly Interest")
shall equal the lesser of (x) Class A Available Funds for such Monthly Period
less, if the Originators are not the Servicer, the Class A Servicing Fee for
such Monthly period and (y) the product of (i)(A) a fraction, the numerator of
which is the actual number of days in the period (the "Monthly Interest Period")
from (and including) the immediately preceding Distribution Date (or in the case
of the first Distribution Date, the Closing Date) to (but excluding) the related
Distribution Date and the denominator of which is 360, times (B) the Class A
Certificate Rate, times (ii) the outstanding principal balance of the Class A
Certificates determined as of the Record Date preceding the related Transfer
Date (the "Class A Optimal Interest"); provided that in addition to Class A
Monthly Interest an amount equal to the amount of any unpaid Class A Deficiency
Amounts, as defined below, plus an amount equal to the product of (A)(1) a
fraction, the numerator of which is the actual number of days in the related
Monthly Interest Period and the denominator of which is 360, times (2) the sum
of the Class A Certificate Rate in effect with respect to the related Monthly
Period, plus 2% per annum, and (B) any Class A Deficiency Amount from the prior
Transfer Date, as defined below (or the portion thereof which has not
theretofore been paid to Class A Holders) (the "Class A Additional Interest")
shall also be distributable from the Finance Charge Account with respect to the
Class A Certificates on any Transfer Date, and on such Transfer Date Trustee
shall deposit such funds, to the extent available, into the Distribution
Account. The "Class A Deficiency Amount" for any Transfer Date shall equal the
excess, if any, of the aggregate amount accrued pursuant to this subsection
4.8(a) for the prior Monthly Interest Period over the amount actually deposited
or available to be deposited into the Interest Funding Account for payment to
the Class A Holders on the applicable Payment Date.
(b) The amount of monthly interest distributable from the Finance
Charge Account with respect to the Class B Certificates on any Transfer Date
(the "Class B Monthly Interest") shall equal the lesser of (x) Class B Available
Funds for such Monthly Period less, if the Originators are not the Servicer, the
Class B Servicing Fee for such Monthly Period and (y) the product of (i)(A) a
fraction, the numerator of which is the actual number of days in the period from
(and including) the immediately preceding Distribution Date (or in the case of
the first Distribution Date, the Closing Date) to (but excluding) the related
Distribution Date and the denominator of which is 360, times (B) the Class B
Certificate Rate, times (ii) the outstanding principal balance of the Class B
Certificates determined as of the Record Date preceding the related Transfer
Date (the "Class B Monthly Interest"); provided that in addition to the Class B
Monthly Interest an amount equal to the amount of any unpaid Class B Deficiency
Amounts, as defined below, plus an amount equal to the product of (A)(1) a
fraction, the numerator of which is the actual number of days in the related
Monthly Interest Period and the denominator of which is 360, times (2) the
outstanding principal balance of the Class B Certificates determined as of the
Record Date preceding the related Transfer Date (the "Class B Optimal
Interest"); provided that in addition to Class B Monthly Interest an amount
equal to the amount of any unpaid Class A Deficiency Amounts, as defined below,
plus an amount equal to the product of (A) (1) a fraction, the numerator of
which is the actual number of days in the related Monthly Interest Period and
the denominator of which is 360 times (2) the Monthly sum of the Class B
Certificate Rate in effect with respect to the related Monthly Period, plus 2%
per annum, and (B) any Class B Deficiency Amount from the prior Transfer Date,
as defined below (or the portion thereof which has not theretofore been paid to
Class B Holders) (the "Class B Additional Interest") shall also be distributable
from the Finance Charge Account with respect to the Class B Certificates on any
Transfer Date, and on such Transfer Date Trustee shall deposit such funds, to
the extent available, into the Distribution Account. The "Class B Deficiency
Amount" for any Transfer Date shall equal the excess, if any, of the aggregate
amount accrued pursuant to this subsection 4.8(b) as of the prior Monthly
Interest Period over the amount actually deposited or available to be deposited
into the Interest Funding Account for payment to the Class B Holders on the
applicable Payment Date.
(c) The amount of monthly interest distributable from the Finance
Charge Account with respect to the Collateral Interest on any Transfer Date
shall equal the product of (i)(A) a fraction, the numerator of which is the
actual number of days in the period from (and including) the immediately
preceding Distribution Date (or in the case of the first Distribution Date, the
Closing Date) to (but excluding) the related Distribution Date and the
denominator of which is 360, times (B) the Collateral Rate in effect with
respect to the related Interest Period, times (ii) the Collateral Interest
determined as of the Record Date preceding such Transfer Date (the "Collateral
Monthly Interest"); provided that for the purposes of determining Collateral
Monthly Interest only, the Collateral Rate shall not exceed a per annum rate of
1% in excess of LIBOR as determined on the related LIBOR Determination Date.
(d) In the event a Class A Shortfall Amount or Class B Shortfall
amount is not paid on any Distribution Date, interest shall accrue on such
Shortfall Amount at the applicable Class A or Class B LIBOR Rate plus 2% (such
Shortfall Amount plus interest thereon, compounded monthly, a "Class A
Carry-Over Amount" or "Class B Carry-Over Amount", respectively) and shall be
payable on the next succeeding Distribution Date.
SECTION 4.9 Determination of Monthly Principal. (a) The amount of
monthly principal distributable from the Principal Account with respect to the
Class A Certificates on each Transfer Date ("Class A Monthly Principal"),
beginning with the Transfer Date in the month following the month in which the
Controlled Accumulation Period or, if earlier, the Rapid Amortization Period,
begins, shall be equal to the least of (i) the Available Investor Principal
Collections on deposit in the Principal Account with respect to such Transfer
Date, (ii) for each Transfer Date with respect to the Controlled Accumulation
Period prior to the Class A Scheduled Payment Date, the Controlled Deposit
Amount for such Transfer Date and (iii) the Class A Adjusted Investor Interest
on such Transfer Date prior to any deposit into the Principal Funding Account to
be made on such day.
(b) The amount of monthly principal distributable from the Principal
Account with respect to the Class B Certificates on each Transfer Date (the
"Class B Monthly Principal") for the Controlled Accumulation Period, beginning
with the Transfer Date after the one on which the Class A Adjusted Investor
Interest is reduced to zero (and for the Rapid Amortization Period beginning
with the Transfer Date on which the Class A Investor Interest is reduced to
zero, after giving effect to payments to be made on the related Distribution
Date), shall be an amount equal to the lesser of (i) the excess, if any, of (A)
the Available Investor Principal Collections on such Transfer Date over (B) any
Class A Monthly Principal on such Transfer Date and (ii) the Class B Investor
Interest (after taking into account any adjustments to be made on such Transfer
Date pursuant to Sections 4.12 and 4.14) on such Transfer Date.
(c) The amount of monthly principal (the "Collateral Monthly
Principal") distributable from the Principal Account with respect to the
Collateral Interest on each Transfer Date shall be (i) during the Revolving
Period following any reduction of the Required Collateral Interest pursuant to
clause (z) of the proviso in the definition thereof an amount equal to the
lesser of (A) the excess, if any, of the Collateral Interest (after taking into
account any adjustments to be made on such Transfer Date pursuant to Sections
4.12 and 4.14) over the Required Collateral Interest on such Transfer Date, and
(B) the Available Investor Principal Collections on such Transfer Date or (ii)
during the Controlled Accumulation Period or Rapid Amortization Period an amount
equal to the lesser of (A) the excess, if any, of the Collateral Interest (after
taking into account any adjustments to be made on such Transfer Date pursuant to
Sections 4.12 and 4.14) over the Required Collateral Interest on such Transfer
Date, and (B) the excess, if any, of (1) the Available Investor Principal
Collections on such Transfer Date over (2) the sum of the Class A Monthly
Principal and the Class B Monthly Principal for such Transfer Date.
SECTION 4.10 Coverage of Required Amount. (a) On or before each
Transfer Date, Servicer shall determine the amount (the "Class A Required
Amount"), if any, by which the sum of (i) the Class A Monthly Interest for such
Transfer Date, plus (ii) the Class A Deficiency Amount, if any, for such
Transfer Date, plus (iii) the Class A Additional Interest, if any, for such
Transfer Date, plus (iv) the Class A Servicing Fee for the prior Monthly Period
plus (v) the Class A Servicing Fee, if any, due but not paid on any prior
Transfer Date, plus (vi) the Class A Investor Default Amount, if any, for such
Transfer Date, exceeds the Class A Available Funds deposited or available to be
deposited for the related Monthly Period.
(b) On or before each Transfer Date, Servicer shall also determine the
amount (the "Class B Required Amount"), if any, equal to the sum of (i) the
amount, if any, by which the sum of (A) the Class B Monthly Interest for such
Transfer Date, plus (B) the Class B Deficiency Amount, if any, for such Transfer
Date plus (C) the Class B Additional Interest, if any, for such Transfer Date,
plus (D) the Class B Servicing Fee for the prior Monthly Period plus (E) the
Class B Servicing Fee, if any, due but not paid on any prior Transfer Date,
exceeds the Class B Available Funds deposited or available to be deposited for
the related Monthly Period plus (ii) the Class B Investor Default Amount, if
any, for the prior Monthly Period.
(c) If the sum of the Class A Required Amount and the Class B Required
Amount for such Transfer Date is greater than zero, Servicer shall give written
notice to Trustee of such positive Class A Required Amount or Class B Required
Amount on or before such Transfer Date. In addition:
(i) If the Class A Required Amount for such Transfer Date is
greater than zero, all or a portion of the Excess Spread with respect
to such Transfer Date in an amount equal to the Class A Required
Amount, to the extent available, for such Transfer Date shall be
distributed from the Finance Charge Account on such Transfer Date
pursuant to subsection 4.13(a). If the Class A Required Amount for
such Transfer Date exceeds the amount of Excess Spread with respect to
such Transfer Date, the Principal Collections allocable to the
Collateral Interest and the Class B Certificates with respect to the
prior Monthly Period shall be applied as specified in Section 4.14.
(ii) If the Class B Required Amount for such Transfer Date
is greater than zero, all or a portion of the Excess Spread with
respect to such Transfer Date in an amount equal to the Class B
Required Amount, to the extent available, for such Transfer Date shall
be distributed from the Finance Charge Account on such Transfer Date
pursuant to subsection 4.13(c). If the Class B Required Amount for
such Transfer Date exceeds the amount of Excess Spread available to
fund the Class B Required Amount pursuant to subsection 4.13(c), the
Principal Collections allocable to the Collateral Interest (after
application to the Class A Required Amount) shall be applied as
specified in Section 4.14;
provided that the sum of any payments pursuant to this paragraph shall not
exceed the sum of the Class A Required Amount and the Class B Required Amount.
SECTION 4.11 Monthly Payments. On or before each Transfer Date,
Servicer shall instruct Trustee in writing (which writing shall be substantially
in the form of Exhibit B) to withdraw, and Trustee, acting in accordance with
such instructions, shall withdraw on such Transfer Date or the related
Distribution Date, as applicable, to the extent of available funds, the amounts
required to be withdrawn from the Finance Charge Account, the Principal Account
and the Principal Funding Account as follows:
(a) An amount equal to the Class A Available Funds for the related
Monthly Period will be distributed or deposited on each Transfer Date, to the
extent available, in the following priority:
(i) an amount equal to Class A Monthly Interest, plus any
Class A Deficiency Amount, plus any Class A Additional Interest (in
each case for such Transfer Date) shall be deposited by Servicer or
Trustee into the Interest Funding Account for payment to Class A
Holders on the applicable Payment Date;
(ii) an amount equal to the Class A Servicing Fee for such
Transfer Date, plus any Class A Servicing Fee due but not paid to
Servicer on any prior Transfer Date shall be distributed to Servicer;
(iii) an amount equal to the Class A Investor Default
Amount, if any, for the preceding Monthly Period shall be treated as a
portion of Investor Principal Collections and deposited into the
Principal Account on such Transfer Date; and
(iv) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed or deposited as set forth in
Section 4.13.
If the Back-up Servicer is the Servicer, the amounts described in
clause (ii) of this subsection 4.11(a) shall be paid prior to the amounts
described in clause (i) of this subsection 4.11(a).
(b) An amount equal to the Class B Available Funds for the related
Monthly Period will be distributed or deposited on each Transfer Date, to the
extent available, in the following priority:
(i) an amount equal to the Class B Monthly Interest, plus
any Class B Deficiency Amount, plus any Class B Additional Interest
(in each case for such Transfer Date) shall be deposited by Servicer
or Trustee into the Interest Funding Account for payment to the Class
B Holders on the applicable Payment Date;
(ii) an amount equal to the Class B Servicing Fee for such
Transfer Date, plus any Class B Servicing Fee due but not paid to
Servicer on any prior Transfer Date for such Transfer Date shall be
distributed to Servicer; and
(iii) the balance, if any, shall constitute Excess Spread
and shall be allocated and distributed or deposited as set forth in
Section 4.13.
If the Back-up Servicer is Servicer, the amounts described in clause
(ii) of this subsection 4.11(b) shall be paid prior to the amounts described in
clause (i) of this subsection 4.11(b).
(c) An amount equal to the Collateral Available Funds for the related
Monthly Period will be distributed or deposited on each Transfer Date, to the
extent available, in the following priority:
(i) if the Originators are no longer Servicer, an amount
equal to the Collateral Interest Servicing Fee for such Transfer Date,
plus any Collateral Interest Servicing Fee due but not paid to
Servicer on any prior Transfer Date shall be distributed to Servicer;
(ii) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed or deposited as set forth in
Section 4.13.
(d) During the Revolving Period, an amount equal to the Available
Investor Principal Collections for the related Monthly Period will be
distributed on each Transfer Date, to the extent available, in the following
priority:
(i) an amount equal to the Collateral Monthly Principal for
such Transfer Date shall be distributed to the Collateral Interest
Holder in accordance with the Loan Agreement;
(ii) an amount equal to the lesser of (A) the product of (1)
a fraction, the numerator of which is equal to the Available Invest
Principal Collections remaining after the application specified in
subsection 4.11(d)(i) and the denominator of which is equal to the sum
of the available investor principal Collections available for sharing
as specified in the related Series Supplement for each Series in Group
One and (2) the Cumulative Series Principal Shortfall and (B) such
remaining Available Investor Principal Collections, shall remain in
the Principal Account to be treated as Shared Principal Collections
and applied to Series in Group One other than this Series 1996-1; and
(iii) an amount equal to the excess, if any, of (A) the
Available Investor Principal Collections for such Transfer Date over
(B) the applications specified in subsections 4.11(d)(i) and (ii)
above shall be paid to Transferor; provided that the amount to be paid
to Transferor pursuant to this subsection 4.11(d)(iii) with respect to
such Transfer Date shall be paid to Transferor only to the extent that
the Transferor Interest on such Transfer Date is greater than zero
(after giving effect to the inclusion in the Trust of all Receivables
created on or prior to such Transfer Date and the application of
payments referred to in subsection 4.3(b)) and otherwise shall be
deposited into the Excess Funding Account in accordance with
subsection 4.7(d).
(e) During the Controlled Accumulation Period or the Rapid
Amortization Period, an amount equal to the Available Investor Principal
Collections for the related Monthly Period will be distributed on each Transfer
Date, to the extent available, in the following priority:
(i) an amount equal to the Class A Monthly Principal for
such Transfer Date, shall be (A) during the Controlled Accumulation
Period, deposited into the Principal Funding Account, and (B) during
the Rapid Amortization Period, deposited into the Distribution
Account;
(ii) after giving effect to the distribution referred to in
clause (i), an amount equal to the Class B Monthly Principal, shall be
deposited into the Distribution Account;
(iii) for each Transfer Date (other than the Transfer Date
immediately preceding the Series 1996-1 Termination Date, in which
case on the Series 1996-1 Termination Date) after giving effect to the
distribution referred to in clauses (i) and (ii), an amount equal to
Collateral Monthly Principal shall be distributed to the Collateral
Interest Holder in accordance with the Loan Agreement;
(iv) an amount equal to the lesser of (A) the product of (1)
a fraction, the numerator of which is equal to the Available Investor
Principal Collections remaining after the application specified in
subsections 4.11(e)(i), (ii) and (iii) and the denominator of which is
equal to the sum of the available investor principal Collections
available for sharing as specified in the related Supplement for each
Series in Group One and (2) the Cumulative Series Principal Shortfall
and (B) such remaining Available Investor Principal Collections, shall
remain in the Principal Account to be treated as Shared Principal
Collections and applied to Series in Group One other than this Series
1996-1; and
(v) an amount equal to the excess, if any, of (A) the
Available Investor Principal Collections over (B) the applications
specified in subsections 4.11(e)(i) through (iv) shall be paid to
Transferor; provided that the amount to be paid to Transferor pursuant
to this subsection 4.11(e)(v) with respect to such Transfer Date shall
be paid to Transferor only to the extent that the Transferor Interest
on such Transfer Date is greater than zero (after giving effect to the
inclusion in the Trust of all Receivables created on or prior to such
Transfer Date and the application of payments referred to in
subsection 4.3(b)) and otherwise shall be deposited into the Excess
Funding Account in accordance with subsection 4.7(d).
(f) On the earlier to occur of (i) the first Transfer Date with
respect to the Rapid Amortization Period and (ii) the Transfer Date immediately
preceding the Class A Scheduled Payment Date, Trustee, acting in accordance with
instructions from Servicer, shall withdraw from the Principal Funding Account
and deposit in the Distribution Account the amount on deposit in the Principal
Funding Account.
(g) On each Payment Date, Trustee shall pay in accordance with Section
5.1 to the Class A Holders from the Interest Funding Account, the amount
deposited into the Interest Funding Account pursuant to subsection 4.11(a)(i) on
the preceding Transfer Date and (b) to the Class B Holders from the Interest
Funding Account, the amount deposited into the Interest Funding Account pursuant
to subsection 4.11(b)(i) on the preceding Transfer Date.
(h) On the earlier to occur of (i) the first Special Payment Date with
respect to the Rapid Amortization Period and (ii) the Class A Scheduled Payment
Date and on each Payment Date thereafter, Trustee, acting in accordance with
instructions from Servicer, shall pay in accordance with Section 5.1 from the
Distribution Account the amount so deposited into the Distribution Account
pursuant to subsections 4.11(e) and (f) on the related Transfer Date in the
following priority:
(i) an amount equal to the lesser of such amount on deposit
in the Distribution Account and the Class A Investor Interest shall be
paid to the Class A Holders; and
(ii) for each Special Payment Date with respect to the Rapid
Amortization Period and on the Class B Scheduled Payment Date, after
giving effect to the distributions referred to in clause (i) above, an
amount equal to the lesser of such amount on deposit in the
Distribution Account and the Class B Investor Interest shall be paid
to the Class B Holders.
(i) The Controlled Accumulation Period is scheduled to commence at the
close of business on the Controlled Accumulation Date; provided that if the
Controlled Accumulation Period Length (determined as described below) on any
Determination Date on or after the _____________ Determination Date is less than
12 months, upon written notice to Trustee, Transferor and each Rating Agency,
Servicer, at its option, may elect to modify the date on which the Controlled
Accumulation Period actually commences to the first day of the month that is a
number of months prior to the month in which the Class A Scheduled Payment Date
occurs at least equal to the Controlled Accumulation Period Length (so that, as
a result of such election, the number of Monthly Periods in the Controlled
Accumulation Period will at least equal the Controlled Accumulation Period
Length); provided that (i) the length of the Controlled Accumulation Period will
not be less than one month; (ii) such determination of the Controlled
Accumulation Period Length shall be made on each Determination Date on and after
the _____________ Determination Date but prior to the commencement of the
Controlled Accumulation Period, and any election to shorten the Controlled
Accumulation Period shall be subject to the subsequent lengthening of the
Controlled Accumulation Period to the Controlled Accumulation Period Length
determined on any subsequent Determination Date, but the Controlled Accumulation
Period shall in no event commence prior to the Controlled Accumulation Date, and
(iii) notwithstanding any other provision of this Series Supplement to the
contrary, no election to postpone the commencement of the Controlled
Accumulation Period shall be made after a Pay Out Event shall have occurred and
be continuing with respect to any other Series. The "Controlled Accumulation
Period Length" will mean a number of months such that the amount available for
distribution of principal on the Class A Certificates on the Class A Scheduled
Payment Date is expected to equal or exceed the Class A Investor Interest,
assuming for this purpose that (1) the payment rate with respect to Principal
Collections remains constant at the lowest level of such payment rate during the
twelve preceding Monthly Periods (or such lower payment rate as Servicer may
select), (2) the total amount of Principal Receivables in the Trust (and the
principal amount on deposit in the Excess Funding Account, if any) remains
constant at the level on such date of determination, (3) no Pay Out Event with
respect to any Series will subsequently occur and (4) no additional Series
(other than any Series being issued on such date of determination) will be
subsequently issued. Any notice by Servicer electing to modify the commencement
of the Controlled Accumulation Period pursuant to this clause (i) shall specify
(i) the Controlled Accumulation Period Length, (ii) the commencement date of the
Controlled Accumulation Period and (iii) the Controlled Accumulation Amount with
respect to each Monthly Period during the Controlled Accumulation Period.
SECTION 4.12 Investor Charge-Offs. (a) On or before each Transfer
Date, Servicer shall calculate the Class A Investor Default Amount. If on any
Transfer Date, the Class A Investor Default Amount for the prior Monthly Period
exceeds the sum of the amount allocated with respect thereto pursuant to
subsection 4.11(a)(iii), subsection 4.13(a) and Section 4.14 with respect to
such Monthly Period, the Collateral Interest (after giving effect to reductions
for any Collateral Charge-Offs and any Reallocated Principal Collections on such
Transfer Date) will be reduced by the amount of such excess, but not by more
than the lesser of the Class A Investor Default Amount and the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
any Reallocated Principal Collections on such Transfer Date) for such Transfer
Date. If such reduction would cause the Collateral Interest to be a negative
number, the Collateral Interest will be reduced to zero, and the Class B
Investor Interest (after giving effect to reductions for any Class B Investor
Charge-Offs and any Reallocated Class B Principal Collections on such Transfer
Date) will be reduced by the amount by which the Collateral Interest would have
been reduced below zero. If such reduction would cause the Class B Investor
Interest to be a negative number, the Class B Investor Interest will be reduced
to zero, and the Class A Investor Interest will be reduced by the amount by
which the Class B Investor Interest would have been reduced below zero, but not
by more than the Class A Investor Default Amount for such Transfer Date (a
"Class A Investor Charge-Off"). If the Class A Investor Interest has been
reduced by the amount of any Class A Investor Charge-Offs, it will be reimbursed
on any Transfer Date (but not by an amount in excess of the aggregate Class A
Investor Charge-Offs) by the amount of Excess Spread allocated and available for
such purpose pursuant to subsection 4.13(b).
(b) On or before each Transfer Date, Servicer shall calculate the
Class B Investor Default Amount. If on any Transfer Date, the Class B Investor
Default Amount for the prior Monthly Period exceeds the amount of Excess Spread
and Reallocated Collateral Principal Collections which are allocated and
available to fund such amount pursuant to subsection 4.13(c) and Section 4.14,
the Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and any Reallocated Principal Collections on such Transfer Date and
any adjustments with respect thereto as described in Section 4.12(a)) will be
reduced by the amount of such excess but not by more than the lesser of the
Class B Investor Default Amount and the Collateral Interest (after giving effect
to reductions for any Collateral Charge-Offs and any Reallocated Principal
Collections on such Transfer Date and any adjustments with respect thereto as
described in subsection 4.12(a)) for such Transfer Date. If such reduction would
cause the Collateral Interest to be a negative number, the Collateral Interest
shall be reduced to zero and the Class B Investor Interest shall be reduced by
the amount by which the Collateral Interest would have been reduced below zero,
but not by more than the Class B Investor Default Amount for such Transfer Date
(a "Class B Investor Charge-Off"). The Class B Investor Interest will also be
reduced by the amount of Reallocated Class B Principal Collections in excess of
the Collateral Interest pursuant to Section 4.14 and the amount of any portion
of the Class B Investor Interest allocated to the Class A Certificates to avoid
a reduction in the Class A Investor Interest pursuant to subsection 4.12(a). The
Class B Investor Interest will thereafter be reimbursed (but not to an amount in
excess of the unpaid principal balance of the Class B Certificates) on any
Transfer Date by the amount of Excess Spread allocated and available for that
purpose as described under subsection 4.13(d).
(c) On or before each Transfer Date, Servicer shall calculate the
Collateral Default Amount. If on any Transfer Date, the Collateral Default
Amount for the prior Monthly Period exceeds the amount of Excess Spread which is
allocated and available to fund such amount pursuant to subsection 4.13(g), the
Collateral Interest will be reduced by the amount of such excess but not by more
than the lesser of the Collateral Default Amount and the Collateral Interest for
such Transfer Date (a "Collateral Charge-Off"). The Collateral Interest will
also be reduced by the amount of Reallocated Principal Collections pursuant to
Section 4.14 and the amount of any portion of the Collateral Interest allocated
to the Class A Certificates or the Class B Certificates to avoid a reduction in
the Class A Investor Interest, pursuant to subsection 4.12(a), or the Class B
Investor Interest, pursuant to subsection 4.12(b), respectively. The Collateral
Interest will thereafter be reimbursed on any Transfer Date by the amount of the
Excess Spread allocated and available for that purpose as described under
subsection 4.13(h).
SECTION 4.13 Excess Spread. On or before each Transfer Date, Servicer
shall instruct Trustee in writing (which writing shall be substantially in the
form of Exhibit B) to apply, and Trustee, acting in accordance with such
instructions shall apply, Excess Spread with respect to the related Monthly
Period, to make the following distributions on each Transfer Date in the
following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class A Required Amount
and be applied in accordance with, and in the priority set forth in, subsection
4.11(a);
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Investor Principal Collections and deposited into the Principal
Account on such Transfer Date;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class B Required Amount
and be applied first in accordance with, and in the priority set forth in,
subsection 4.11(b) and then any remaining amount available to pay the Class B
Investor Default Amount shall be treated as a portion of Investor Principal
Collections and deposited into the Principal Account on such Transfer Date;
(d) an amount equal to the aggregate amount by which the Class B
Investor Interest has been reduced below the initial Class B Investor Interest
for reasons other than the payment of principal to the Class B Holders (but not
in excess of the aggregate amount of such reductions which have not been
previously reimbursed) will be treated as a portion of Investor Principal
Collections and deposited into the Principal Account on such Transfer Date;
(e) an amount equal to the Collateral Monthly Interest plus the amount
of any past due Collateral Monthly Interest for such Transfer Date will be paid
to the Collateral Interest Holder in accordance with the Loan Agreement;
(f) if the Originators are Servicer, an amount equal to the aggregate
amount of accrued but unpaid Collateral Interest Servicing Fees will be paid to
Servicer;
(g) an amount equal to the Collateral Default Amount, if any, for the
prior Monthly Period will be treated as a portion of Investor Principal
Collections and deposited into the Principal Account on such Transfer Date;
(h) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced below the Required Collateral Interest for reasons
other than the payment of principal to the Collateral Interest Holder (but not
in excess of the aggregate amount of such reductions which have not been
previously reimbursed) will be treated as a portion of Investor Principal
Collections and deposited into the Principal Account on such Transfer Date;
(i) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as described
in subsection 4.17(f), an amount up to the excess, if any, of the Required
Reserve Account Amount over the Available Reserve Account Amount shall be
deposited into the Reserve Account;
(j) an amount equal to the sum of (x) any Class A Shortfall Amount for
the current Distribution Date and (y) any accrued and unpaid Class A Carry-Over
Amount from a prior Distribution Date shall be deposited by Servicer or Trustee
in the Interest Funding Account for payment to the Class A Holders on the
applicable Payment Date;
(k) an amount equal to the sum of (x) any Class B Shortfall Amount for
the current Distribution Date and (y) any accrued and unpaid Class B Carry-Over
Amount from a prior Distribution Date shall be deposited by Servicer or Trustee
into the Interest Funding Account for payment to the Class B Holders on the
applicable Payment Date;
(l) an amount equal to all other amounts due under the Loan Agreement
(to the extent payable from "Available Principal Funds," as defined therein)
shall be distributed in accordance with the Loan Agreement; and
(m) the balance, if any, after giving effect to the payments made
pursuant to clauses (a) through (l) shall constitute "Excess Finance Charge
Collections" to be applied with respect to other Series in accordance with
Section 4.5 of the Agreement.
SECTION 4.14 Reallocated Principal Collections. On or before each
Transfer Date, Servicer shall instruct Trustee in writing (which writing shall
be substantially in the form of Exhibit B) to, and Trustee in accordance with
such instructions shall, withdraw from the Principal Account and apply
Reallocated Principal Collections (applying all Reallocated Collateral Principal
Collections in accordance with subsections 4.14(a) and (b) prior to applying any
Reallocated Class B Principal Collections in accordance with subsection 4.14(a)
for any amounts still owing after the application of Reallocated Collateral
Principal Collections) with respect to such Transfer Date, to make the following
distributions on each Transfer Date in the following priority:
(a) an amount equal to the excess, if any, of (i) the Class A Required
Amount, if any, with respect to such Transfer Date over (ii) the amount of
Excess Spread with respect to the related Monthly Period, shall be applied
pursuant to subsections 4.11(a)(i), (ii), and (iii) and
(b) an amount equal to the excess, if any, of (i) the Class B Required
Amount, if any, with respect to such Transfer Date over (ii) the amount of
Excess Spread allocated and available to the Class B Certificates pursuant to
subsection 4.13(c) on such Transfer Date shall be applied first pursuant to
subsections 4.11(b)(i) and (ii) and then pursuant to subsection 4.13(c).
On each Transfer Date, the Collateral Interest shall be reduced by the
amount of Reallocated Collateral Principal Collections and by the amount of
Reallocated Class B Principal Collections for such Transfer Date. If such
reduction would cause the Collateral Interest (after giving effect to any
Collateral Charge-Offs for such Transfer Date) to be a negative number, the
Collateral Interest (after giving effect to any Collateral Charge-Offs for such
Transfer Date) shall be reduced to zero and the Class B Investor Interest shall
be reduced by the amount by which the Collateral Interest would have been
reduced below zero. If the reallocation of Reallocated Principal Collections
would cause the Class B Investor Interest (after giving effect to any Class B
Investor Charge-Offs for such Transfer Date) to be a negative number on any
Transfer Date, Reallocated Principal Collections shall be reallocated on such
Transfer Date in an aggregate amount not to exceed the amount which would cause
the Class B Investor Interest (after giving effect to any Class B Investor
Charge-Offs for such Transfer Date) to be reduced to zero.
SECTION 4.15 Shared Principal Collections. (a) The portion of Shared
Principal Collections on deposit in the Principal Account equal to the amount of
Shared Principal Collections allocable to Series 1996-1 on any Transfer Date
shall be applied as Available Investor Principal Collections pursuant to Section
4.11 and pursuant to such Section 4.11 shall be deposited in the Distribution
Account or distributed in accordance with the Loan Agreement.
(b) Shared Principal Collections allocable to Series 1996-1 with
respect to any Transfer Date means an amount equal to the Series Principal
Shortfall, if any, with respect to Series 1996-1 for such Transfer Date;
provided that if the aggregate amount of Shared Principal Collections for all
Series for such Transfer Date is less than the Cumulative Series Principal
Shortfall for such Transfer Date, then Shared Principal Collections allocable to
Series 1996-1 on such Transfer Date shall equal the product of (i) Shared
Principal Collections for all Series for such Transfer Date and (ii) a fraction,
the numerator of which is the Series Principal Shortfall with respect to Series
1996-1 for such Transfer Date and the denominator of which is the aggregate
amount of Cumulative Series Principal Shortfall for all Series for such Transfer
Date.
(c) Solely for the purpose of determining the amount of Available
Investor Principal Collections to be treated as Shared Principal Collections on
any Transfer Date allocable to other Series in Group One, on each Determination
Date, Servicer shall determine the Class A Required Amount, Class B Required
Amount, Excess Spread and Reallocated Principal Collections as of such
Determination Date for the following Transfer Date.
SECTION 4.16 Principal Account and Principal Funding Account. (a) The
Trustee shall establish and maintain in the name of the Trust, on behalf of the
Trust, for the benefit of the Investor Holders, two segregated trust accounts
(the "Principal Account" and the "Principal Funding Account"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Investor Holders or establish and maintain the Principal Account
and the Principal Funding Account with a Qualified Institution. The Trustee
shall possess all right, title and interest in all funds on deposit from time to
time in the Principal Account and the Principal Funding Account and in all
proceeds thereof. The Principal Account and the Principal Funding Account shall
be under the sole dominion and control of Trustee for the benefit of the
Investor Holders. If at any time a Qualified Institution holding the Principal
Account and the Principal Funding Account ceases to be a Qualified Institution,
Transferor shall notify Trustee, and Trustee upon being notified (or Servicer on
its behalf) shall, within 10 Business Days, establish a new Principal Account
and a new Principal Funding Account meeting the conditions specified above, and
shall transfer any cash or any investments to such new Principal Account and
Principal Funding Account. The Trustee, at the direction of Servicer, shall (i)
make withdrawals from the Principal Account and the Principal Funding Account
from time to time, in the amounts and for the purposes set forth in this Series
Supplement, and (ii) on each Transfer Date (from and after the commencement of
the Controlled Accumulation Period) prior to termination of the Principal
Funding Account make a deposit into the Principal Funding Account in the amount
specified in, and otherwise in accordance with, subsection 4.11(e).
(b) Funds on deposit in the Principal Account and the Principal
Funding Account shall be invested pursuant to the written direction of Servicer
by Trustee in Permitted Investments. Funds on deposit in the Principal Funding
Account on any Transfer Date, after giving effect to any withdrawals from the
Principal Funding Account on such Transfer Date, shall be invested in such
investments that will mature so that such funds will be available for withdrawal
on or prior to the following Transfer Date. The Trustee shall maintain for the
benefit of the Investor Holders possession of the negotiable instruments or
securities, if any, evidencing such Permitted Investments. No Permitted
Investment shall be disposed of prior to its maturity.
On the Transfer Date occurring in the month following the commencement
of the Controlled Accumulation Period and on each Transfer Date thereafter with
respect to the Controlled Accumulation Period, Trustee, acting at Servicer's
direction given on or before such Transfer Date, shall transfer from the
Principal Funding Account to the Finance Charge Account the Principal Funding
Investment Proceeds on deposit in the Principal Funding Account, but not in
excess of the Covered Amount, for application as Class A Available Funds applied
pursuant to subsection 4.11(a)(i).
Any Excess Principal Funding Investment Proceeds shall be paid to
Transferor on each Transfer Date. An amount equal to any Principal Funding
Investment Shortfall will be deposited in the Finance Charge Account on each
Transfer Date from the Reserve Account to the extent funds are available
pursuant to subsection 4.17(d). Principal Funding Investment Proceeds (including
reinvested interest) shall not be considered part of the amounts on deposit in
the Principal Funding Account for purposes of this Series Supplement.
SECTION 4.17 Reserve Account. (a) The Trustee shall establish and
maintain in the name of the Trust, on behalf of the Trust, for the benefit of
the Investor Holders, a segregated trust account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Investor Holders or establish and maintain the
Reserve Account with a Qualified Institution. The Trustee shall possess all
right, title and interest in all funds on deposit from time to time in the
Reserve Account and in all proceeds thereof. The Reserve Account shall be under
the sole dominion and control of Trustee for the benefit of the Investor
Holders. If at any time a Qualified Institution holding the Reserve Account
ceases to be a Qualified Institution, Transferor shall notify Trustee, and
Trustee upon being notified (or Servicer on its behalf) shall, within 10
Business Days, establish a new Reserve Account meeting the conditions specified
above, and shall transfer any cash or any investments to such new Reserve
Account. The Trustee, at the direction of Servicer, shall (i) make withdrawals
from the Reserve Account from time to time in an amount up to the Available
Reserve Account Amount at such time, for the purposes set forth in this Series
Supplement, and (ii) on each Transfer Date (from and after the Reserve Account
Funding Date) prior to termination of the Reserve Account make a deposit into
the Reserve Account in the amount specified in, and otherwise in accordance
with, subsection 4.13(i).
(b) Funds on deposit in the Reserve Account shall be invested by
Trustee in Permitted Investments pursuant to the written direction of Servicer.
Funds on deposit in the Reserve Account on any Transfer Date, after giving
effect to any withdrawals from the Reserve Account on such Transfer Date, shall
be invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the following Transfer Date. The Trustee
shall maintain for the benefit of the Investor Holders possession of the
negotiable instruments or securities, if any, evidencing such Permitted
Investments. No Permitted Investment shall be disposed of prior to its maturity.
On each Transfer Date, all interest and earnings (net of losses and investment
expenses) accrued since the preceding Transfer Date on funds on deposit in the
Reserve Account shall be retained in the Reserve Account (to the extent that the
Available Reserve Account Amount is less than the Required Reserve Account
Amount) and the balance, if any, shall be deposited into the Finance Charge
Account and included in Class A Available Funds for such Transfer Date. For
purposes of determining the availability of funds or the balance in the Reserve
Account for any reason under this Series Supplement, except as otherwise
provided in the preceding sentence, investment earnings on such funds shall be
deemed not to be available or on deposit.
(c) On or before each Transfer Date with respect to the Controlled
Accumulation Period prior to the payment in full of the Class A Investor
Interest and on or before the first Transfer Date with respect to the Rapid
Amortization Period, Servicer shall calculate the "Reserve Draw Amount" which
shall be equal to the Principal Funding Investment Shortfall with respect to
each Transfer Date with respect to the Controlled Accumulation Period or the
first Transfer Date with respect to the Rapid Amortization Period less, in each
case, the amount of funds deposited into the Finance Charge Account on such
Transfer Date pursuant to subsection 4.17(b).
(d) If the Reserve Draw Amount for any Transfer Date is greater than
zero, the Reserve Draw Amount, up to the Available Reserve Account Amount, shall
be withdrawn from the Reserve Account on such Transfer Date by Trustee (acting
in accordance with the instructions of Servicer), deposited into the Finance
Charge Account and included in Class A Available Funds for such Transfer Date.
(e) If the Reserve Account Surplus on any Transfer Date, after giving
effect to all deposits to and withdrawals from the Reserve Account with respect
to such Transfer Date, is greater than zero, Trustee, acting in accordance with
the instructions of Servicer, shall withdraw from the Reserve Account, and pay
in accordance with the Loan Agreement, an amount equal to such Reserve Account
Surplus.
(f) Upon the earliest to occur of (i) the termination of the Trust
pursuant to Article XII, (ii) the first Transfer Date relating to the Rapid
Amortization Period and (iii) the Transfer Date immediately preceding the Class
A Scheduled Payment Date, Trustee, acting in accordance with the instructions of
Servicer, after the prior payment of all amounts owing to the Series 1996-1
Holders that are payable from the Reserve Account as provided herein, shall
withdraw from the Reserve Account and pay in accordance with the Loan Agreement,
all amounts, if any, on deposit in the Reserve Account and the Reserve Account
shall be deemed to have terminated for purposes of this Series Supplement.
SECTION 4.18 Interest Funding Account. (a) The Trustee shall establish
and maintain in the name of the Trust, on behalf of the Trust, for the benefit
of the Investor Holders, two segregated trust account ( the "Interest Funding
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Investor Holders or establish and
maintain the Interest Funding Account with a Qualified Institution. The Trustee
shall possess all right, title and interest in all funds on deposit from time to
time in the Interest Funding Account and in all proceeds thereof. The Interest
Funding Account shall be under the sole dominion and control of Trustee for the
benefit of the Investor Holders. If at any time a Qualified Institution holding
the Interest Funding Account ceases to be a Qualified Institution, Transferor
shall notify Trustee, and Trustee upon being notified (or Servicer on its
behalf) shall, within 10 Business Days, establish a new Interest Funding Account
meeting the conditions specified above, and shall transfer any cash or any
investments to such Interest Funding Account. The Trustee, at the direction of
Servicer, shall make withdrawals from the Interest Funding Account from time to
time, in the amounts and for the purposes set forth in this Series Supplement.
(b) Funds on deposit in the Interest Funding Account shall be invested
pursuant to the written direction of Servicer by Trustee in Permitted
Investments. Funds on deposit in the Interest Funding Account on any Transfer
Date, after giving effect to any withdrawals from the Interest Funding Account
on such Transfer Date, shall be invested in such investments that will mature so
that such funds will be available for withdrawal on or prior to the following
Transfer Date. The Trustee shall maintain for the benefit of the Investor
Holders possession of the negotiable instruments or securities, if any,
evidencing such Permitted Investments. No Permitted Investment shall be disposed
of prior to its maturity.
(c) On each Distribution Date, the Servicer shall direct the Trustee
in writing to withdraw from the Interest Funding Account and pay to the
Transferor all interest and other investment income (net of losses and
investment expenses) on funds on deposit in the Interest Funding Account.
(d) Reinvested interest and other investment income on funds deposited
in the Interest Funding Account shall not be considered to be principal amounts
on deposit therein for purposes of this Supplement.
SECTION 4.19 Determination of LIBOR. (a) On each LIBOR Determination
Date, Trustee will determine LIBOR on the basis of the rate for deposits in
United States dollars for a period equal to the relevant Interest Period
(commencing on the first day of such Interest Period) which appears on Telerate
Page 3750 as of 11:00 a.m., London time, on such date. If such rate does not
appear on Telerate Page 3750, the rate for that LIBOR Determination Date will be
determined on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks at approximately 11:00 am., London time, on
that day to prime banks in the London interbank market for a period equal to the
relevant Interest Period (commencing on the first day of such Interest Period).
The Trustee will request the principal London office of each of the Reference
Banks to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that LIBOR Determination Date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that LIBOR Determination Date will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by Servicer, at approximately
11:00 a.m., New York City time, on that day for loans in United States dollars
to leading European banks for a period equal to the relevant Interest Period
(commencing on the first day of such Interest Period).
(b) The Class A Certificate Rate and Class B Certificate Rate
applicable to the then current and the immediately preceding Interest Periods
may be obtained by any Investor Holder by telephoning Trustee at its Corporate
Trust Office at _____________.
(c) On each LIBOR Determination Date prior to 12:00 noon New York City
time, Trustee shall send to Servicer by facsimile, notification of LIBOR for the
following Interest Period.
SECTION 4.20 Transferor's or Servicer's Failure to Make a Deposit or
Payment. If Servicer or Transferor fails to make, or give instructions to make,
any payment or deposit (other than as required by subsection 2.4(d) and (e) and
12.2(a) or Section 10.2 and 12.1) required to be made or given by Servicer or
Transferor, respectively, at the time specified in the Agreement (including
applicable grace periods), Trustee shall make such payment or deposit from the
applicable Investor Account without instruction from Servicer or Transferor. The
Trustee shall be required to make any such payment, deposit or withdrawal
hereunder only to the extent that Trustee has sufficient information to allow it
to determine the amount thereof; provided that Trustee shall in all cases be
deemed to have sufficient information to determine the amount of interest
payable to the Series 1996-1 Holders on each Distribution Date. The Servicer
shall, upon request of Trustee, promptly provide Trustee with all information
necessary to allow Trustee to make such payment, deposit or withdrawal. Such
funds or the proceeds of such withdrawal shall be applied by Trustee in the
manner in which such payment or deposit should have been made by Transferor or
Servicer, as the case may be.
SECTION 4.21 Quarterly Deposits into the Accounts. With respect to any
Collection Periods related to Payment Date, as long as the conditions contained
in Section 4.3(a) of the Agreement are satisfied, the Servicer need not deposit
Collections into the Collection Account, the Excess Funding Account, the Finance
Charge Account or the Principal Funding Account [or make payments to the
Transferor] on or before the second Business Day following the Date of
Processing of such Collections, but may make such deposits, payments and
withdrawals on the Transfer Date immediately prior to each Payment Date. On any
date, including a date on which deposits are being made pursuant to this Section
4.21, any amounts required to be calculated under this Article IV shall be
calculated on a monthly basis.
SECTION 8. Article V of the Agreement. Article V of the Agreement
shall read in its entirety as follows and shall be applicable only to the
Investor Holders:
ARTICLE V DISTRIBUTIONS AND REPORTS TO INVESTOR HOLDERS
SECTION 5.1 Distributions. (a) On each Payment Date, Trustee shall
distribute (in accordance with the certificate delivered on or before the
related Transfer Date by Servicer to Trustee pursuant to subsection 3.4(b)) to
each Class A Holder of record on the immediately preceding Record Date (other
than as provided in subsection 2.4(e) or Section 12.3 respecting a final
distribution) such Holder's pro rata share (based on the aggregate Undivided
Interests represented by Class A Certificates held by such Holder) of amounts on
deposit in the Interest Funding Account as are payable to the Class A Holders
pursuant to Section 4.11(a)(i) and 4.11(g) by check mailed to each Class A
Holder (at such Holder's address as it appears in the Certificate Register),
except that with respect to Class A Certificates registered in the name of the
nominee of a Clearing Agency, such distribution shall be made in immediately
available funds.
(b) On any Special Payment Date and on the Class A Scheduled Payment
Date, Trustee shall distribute (in accordance with the certificate delivered on
or before the related Transfer Date by Servicer to Trustee pursuant to
subsection 3.4(b)) to each Class A Holder of record on the immediately preceding
Record Date (other than as provided in subsection 2.4(e) or Section 12.3
respecting a final distribution) such Holder's pro rata share (based on the
aggregate Undivided Interests represented by Class A Certificates held by such
Holder) of amounts on deposit in the Distribution Account as are payable to the
Class A Holders pursuant to Section 4.11(e), 4.11(f) and 4.11(h)(i) by check
mailed to each Class A Holder (at such Holder's address as it appears in the
Certificate Register), except that with respect to Class A Certificates
registered in the name of the nominee of a Clearing Agency, such distribution
shall be made in immediately available funds.
(c) On each Payment Date, Trustee shall distribute (in accordance with
the certificate delivered on or before the related Transfer Date by Servicer to
Trustee pursuant to subsection 3.4(b) to each Class B Holder of record on the
immediately preceding Record Date (other than as provided in subsection 2.4(e)
or Section 12.3 respecting a final distribution) such Holder's pro rata share
(based on the aggregate Undivided Interests represented by Class B Certificates
held by such Holder) of amounts on deposit in the Interest Funding Account as
are payable to the Class B Holders pursuant to Section 4.11(b)(i) and 4.11(g) by
check mailed to each Class B Holder (at such Holder's address as it appears in
the Certificate Register), except that with respect to Class B Certificates
registered in the name of the nominee of a Clearing Agency, such distribution
shall be made in immediately available funds.
(d) On any Special Payment Date and on the Class B Scheduled Payment
Date, Trustee shall distribute (in accordance with the certificate delivered on
or before the related Transfer Date by Servicer to Trustee pursuant to
subsection 3.4(b)) to each Class B Holder of record on the immediately preceding
Record Date (other than as provided in subsection 2.4(e) or Section 12.3
respecting a final distribution) such Holder's pro rata share (based on the
aggregate Undivided Interests represented by Class B Certificates held by such
Holder) of amounts on deposit in the Distribution Account as are payable to the
Class B Holders pursuant to Section 4.11(e), 4.11(f) and 4.11(h)(ii) by check
mailed to each Class B Holder (at such Holder's address as it appears in the
Certificate Register), except that with respect to Class B Certificates
registered in the name of the nominee of a Clearing Agency, such distribution
shall be made in immediately available funds.
SECTION 5.2 Monthly Series 1996-1 Holders' Statement. (a) On or before
each Distribution Date, Trustee shall forward to each Series 1996-1 Holder, each
Rating Agency and the Collateral Interest Holder a statement substantially in
the form of Exhibit C prepared by Servicer and delivered to Trustee.
(b) Annual Holders' Tax Statement. On or before January 31 of each
calendar year, beginning with calendar year 1996, Trustee shall distribute to
each Person who at any time during the preceding calendar year was a Series
1996-1 Holder, a statement prepared by Servicer containing the following
information:
(i) the amount of the current distribution allocable to
Class A Monthly Principal, Class B Monthly Principal and Collateral
Monthly Principal, respectively; and
(ii) the amount of the current distribution allocable to
Class A Monthly Interest, Class A Deficiency Amounts, Class A
Additional Interest, Class B Monthly Interest, Class B Deficiency
Amounts, Class B Additional Interest and Collateral Monthly Interest,
and any accrued and unpaid Collateral Monthly Interest, respectively.
Such information shall be aggregated for such calendar year or the applicable
portion thereof during which such Person was a Series 1996-1 Holder, together
with such other customary information (consistent with the treatment of the
Certificates as debt) as Trustee or Servicer deems necessary or desirable to
enable the Series 1996-1 Holders to prepare their tax returns. Such obligations
of Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by Trustee pursuant to
any requirements of the Internal Revenue Code.
SECTION 9. Series 1996-1 Pay Out Events. If any one of the following
events shall occur with respect to the Investor Certificates:
(a) failure on the part of Transferor (i) to make any payment or
deposit required by the terms of (A) the Agreement or (B) this Series
Supplement, on or before the date occurring five days after the date such
payment or deposit is required to be made herein or (ii) duly to observe or
perform in any material respect any covenants or agreements of Transferor set
forth in the Agreement or this Series Supplement (including the covenant of
Transferor contained in Section 11 of this Series Supplement), which failure has
a material adverse effect on the Series 1996-1 Holders (which determination
shall be made without reference to whether any funds are available under the
Collateral Interest) and which continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to Transferor by Trustee, or to Transferor and
Trustee by the Holders of Investor Certificates evidencing Undivided Interests
aggregating not less than 50% of the Investor Interest of this Series 1996-1,
and continues to affect materially and adversely the interests of the Series
1996-1 Holders (which determination shall be made without reference to whether
any funds are available under the Collateral Interest) for such period;
(b) any representation or warranty made by Transferor in the Agreement
or this Series Supplement, or any information contained in a Receivable Schedule
required to be delivered by Transferor pursuant to Section 2.1, (i) shall prove
to have been incorrect in any material respect when made or when delivered,
which continues to be incorrect in any material respect 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 Transferor by Trustee, or to Transferor and
Trustee by the Holders of Investor Certificates evidencing Undivided Interests
aggregating not less than 50% of the Investor Interest of this Series 1996-1,
and (ii) as a result of which the interests of the Series 1996-1 Holders are
materially and adversely affected (which determination shall be made without
reference to whether any funds are available under the Collateral Interest) and
continue to be materially and adversely affected for such period; provided that
a Series 1996-1 Pay Cut Event pursuant to this subsection 9(b) shall not be
deemed to have occurred hereunder if Transferor has accepted reassignment of the
related Receivable, or all of such Receivables, if applicable, during such
period in accordance with the provisions of the Agreement;
(c) the average Portfolio Yield for any three consecutive Monthly
Periods is reduced to a rate which is less than the average Base Rate for such
period;
(d) during any period of 5 consecutive days, the Transferor Interest
averaged over such period is less than the Minimum Transferor Interest for the
same period or (ii) if on any Record Date the sum of (x) the aggregate amount of
Principal Receivables as of the first day of the Monthly Period in which such
Record Date falls and (y) the principal amount on deposit in the Excess Funding
Account is less than the Minimum Aggregate Principal Receivables;
(e) an Originator shall fail to convey Additional Receivables to
Transferor as required by the Receivables Purchase Agreement or Transferor shall
fail to convey Additional Receivables to the Trust, as required by Section
2.1(b);
(f) any Servicer Default shall occur which would have a material
adverse effect on the Series 1996-1 Holders;
(g) the Class A Investor Interest shall not be paid in full on the
Class A Scheduled Payment Date or the Class B Investor Interest shall not be
paid in full on the Class B Scheduled Payment Date;
(h) the Monthly Payment Rate is less than 12% for three consecutive
Monthly Periods;
(i) any of Transferor, Trustee or the Trust becomes required to be
licensed under the Licensing Laws of a Permitted State and such entity fails to
become so licensed within the period specified in the Agreement;
(j) during any period of six consecutive Determination Dates there
exists an Excess Insurer Concentration Amount; or
(k) during any period of six consecutive Determination Dates the
Investment Grade Insurer Percentage as of such Determination Date is less than
the Required Investment Grade Insurer Percentage;
then, in the case of any event described in subsection 9(a), (b) or
(f) hereof, after the applicable grace period set forth in such subsections,
either Trustee or Holders of Series 1996-1 Certificates (including, for this
purpose, the Collateral Interest Holder) evidencing Undivided Interests
aggregating not less than 50% of the Investor Interest of this Series 1996-1 by
notice then given in writing to Transferor and Servicer (and to Trustee if given
by the Holders) may declare that a pay out event (a "Series 1996-1 Pay Out
Event") has occurred as of the date of such notice, and in the case of any event
described in subsection 9(c), (d), (e), (h), (i) or (j) hereof, a Series 1996-1
Pay Out Event shall occur without any notice or other action on the part of
Trustee or the Investor Holders immediately upon the occurrence of such event.
The Series 1996-1 Pay Out Events described in subsection 9(h), (j) and (k) may
be amended by the Transferor at any time without the consent of any Person if
the Rating Agency Condition has been satisfied with respect to such amendment.
SECTION 10. Series 1996-1 Termination. The right of the Investor
Holders to receive payments from the Trust will terminate on the first Business
Day following the Series 1996-1 Termination Date.
SECTION 14. Counterparts. This Series Supplement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and the
same instrument.
SECTION 15. Governing Law. THIS SERIES SUPPLEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 16. Additional Notices. Transferor shall notify the Collateral
Interest Holder promptly after becoming aware of any Lien on any Receivable
other than the conveyances under the Agreement. Transferor shall notify the
Collateral Interest Holder of any merger, consolidation, assumption or transfer
referred to in Section 7.2.
SECTION 17. Additional Representations and Warranties of Servicer.
AFCO Acceptance and AFCO Credit, as initial Servicer, hereby makes, and any
Successor Servicer by its appointment under the Agreement shall make the
following representations and warranties:
(a) All Consents. All authorizations, consents, orders or approvals of
or registrations or declarations with any Governmental Authority required to be
obtained, effected or given by Servicer in connection with the execution and
delivery of this Series Supplement by Servicer and the performance of the
transactions contemplated by this Series Supplement by Servicer, have been duly
obtained, effected or given and are in full force and effect.
(b) Rescission or Cancellation. The Servicer shall not permit any
rescission or cancellation of any Receivable except as ordered by a court of
competent jurisdiction or other Governmental Authority or in accordance with the
normal operating procedures of Servicer.
SECTION 17. No Petition. Transferor, Servicer, Back-up Servicer and
Trustee, by entering into this Series Supplement and each Holder, by accepting a
Series 1996-1 Certificate hereby covenant and agree that they will not at any
time institute against the Trust, or join in any institution against the Trust
of, any bankruptcy proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Investor Holders, the Agreement or this Series Supplement.
SECTION 18. Amendments. This Series Supplement may be amended pursuant
to Section 13.1 of the Agreement. This Series Supplement may also be amended by
Transferor without the consent of Servicer, Back-up Servicer, Trustee or any
Investor Holder if Transferor provides Trustee with: (i) an Opinion of Counsel
to the effect that such amendment or modification would (A) reduce the risk that
the Trust would be treated as taxable as a publicly traded partnership pursuant
to Internal Revenue Code section 7704 or (B) permit the Trust or a relevant
portion thereof to be treated as a "financial asset securitization investment
trust" and (C) in either case, (1) would not cause the Trust to be classified,
for Federal income tax purposes, as an association (or publicly traded
partnership) taxable as a corporation and (2) would not cause or constitute an
event in which gain or loss would be recognized by any Investor Holder; and (ii)
a certificate that such amendment or modification would not materially and
adversely affect any Investor Holder; provided that no such amendment shall be
deemed effective without Trustee's consent, if Trustee's rights, duties and
obligations hereunder are thereby modified. Promptly after the execution of any
such amendment (other than an amendment pursuant to subsection 13.1(a) of the
Agreement), Trustee shall furnish notification of the substance of such
amendment to each Rating Agency.
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Series 1996-1 Supplement to be duly executed by their respective officers as of
the day and year first above written.
MELLON BANK, N.A., Transferor
By:________________________________
Name:
Title:
AFCO CREDIT CORPORATION, Servicer
By:________________________________
Name:
Title:
AFCO ACCEPTANCE CORPORATION, Servicer
By:________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
By:________________________________
Name:
Title:
PREMIUM FINANCING SPECIALISTS, INC.
Back-up Servicer
By:________________________________
Name:
Title:
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT dated as of ____________ __, 1996
(this "Agreement"), is among AFCO Credit Corporation, a New York corporation,
AFCO Acceptance Corporation, a California Corporation (each, an "Originator"
and, collectively, the "Originators") and Mellon Bank, N.A., a national banking
association ("Purchaser").
W I T N E S S E T H:
WHEREAS, each of the Originators intends to sell Receivables to the
Purchaser on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Purchaser desires to purchase Receivables from the
Originators on the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, to obtain the necessary funds to purchase such Receivables,
the Purchaser has entered into the Pooling and Serving Agreement;
NOW, THEREFORE, in consideration of premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Conveyed Property" shall have the meaning set forth in subsection
2.1(a).
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of _______ __, 1996, among the Purchaser, the Servicer, the
Back-up Servicer and the Trustee, as such agreement may be amended,
supplemented, waived, or otherwise modified from time to time.
"Purchase Date" has the meaning specified in subsection 2.1(b).
"Purchase Price" means as of any Purchase Date the product of (i) the
outstanding principal balance of such Receivable or Additional Receivable
conveyed to the Purchaser pursuant to Section 2.1(a) and 2.1(b) and (ii) a
percentage equal to 100% minus the Discount Percentage.
All capitalized terms used herein and not otherwise defined have the
meanings assigned such terms in the Pooling and Servicing Agreement.
SECTION 1.2 Accounting and UCC Terms. All accounting terms not
specifically defined herein shall be construed in accordance with United States
generally accepted accounting principles ("U.S. GAAP"); and all terms used in
Article 9 of the UCC that are used but not specifically defined herein are used
herein as defined therein.
ARTICLE II
SECTION 2.1 The Purchases. The Purchases. () Each Originator hereby
transfers, assigns, and otherwise conveys to the Purchaser without recourse, all
of its right, title and interest in and to (i) the Receivables identified on the
Receivable Schedule delivered to the Purchaser on the Initial Closing Date, (ii)
all monies due or to become due with respect to such Receivables, including all
monies received from insurance companies and state insurance guaranty funds
representing returns of Unearned Premiums and other charges due on such
Receivables, and, (iii) all proceeds of all of the foregoing (the property
described in clauses (i) - (iii) above being, the "Conveyed Property").
(b) After the Cut Off Date, any Additional Receivables that satisfy
the eligibility criteria specified in the definition of "Eligible Receivables"
shall be transferred from the Originators to the Purchaser on the first date
such Additional Receivables satisfy such eligibility criteria (each such day
(including the Initial Closing Date) being, a "Purchase Date").
(c) In connection with such transfer, assignment, and conveyance of
the Conveyed Property and the Additional Receivables, each Originator agrees to
record and file, at its own expense, a financing statement (including any
continuation statements with respect to such financing statement when
applicable) with respect to the Conveyed Property and Additional Receivables
meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the assignment of the Conveyed
Property and Additional Receivables to the Purchaser, and to deliver a
file-stamped copy of such financing statement or continuation statement or other
evidence of such filing (which may, for purposes of this Section 2.1, consist of
telephone confirmation of such filing) to the Purchaser on or prior to the date
of issuance of the Certificates (and in the case of any continuation statements
filed pursuant to this Section 2.1, as soon as practicable after receipt thereof
by Transferor).
(d) In connection with such transfer, each Originator agrees, at its
own expense, on or prior to the Initial Closing Date (i) to indicate in its
computer files that the Receivables have been transferred to the Purchaser
pursuant to this Agreement and then to Trustee, on behalf of the Trust for the
benefit of the Holders, pursuant to Pooling and Servicing Agreement [by
identifying such Receivables as those that may be accessed on the applicable
Originator's computer files through use of one or more of the Database Codes set
forth on Schedule I] and (ii) to deliver to the Trustee a Receivable Schedule
relating to the initial Receivables, which is hereby incorporated into and made
a part of this Agreement. Each Originator further agrees at its own expense,
with respect to Additional Receivables to indicate in its computer files on or
prior to the day on which any Additional Receivables are conveyed to the Trust
that Additional Receivables have been transferred to the Purchaser pursuant to
this Agreement and then to the Trustee, on behalf of the Trust, for the benefit
of the Holders pursuant to the Pooling and Servicing Agreement by identifying
such Receivables as those that may be accessed on Transferor's computer files
through use of one or more of the Database Codes set forth on Schedule I. The
Originators shall not alter the file designations referenced in this subsection
2.1(d) with respect to any Receivables during the term of this Agreement unless
and until such Receivable becomes a Removed Receivable. The Originators further
agree to deliver to the Purchaser at the end of each quarter of the calendar
year and as promptly as possible after the Purchaser may at any time request, a
revised Receivable Schedule containing all Additional Receivables, which
Receivable Schedule shall thereby be incorporated and made a part of this
Agreement. The Originators shall hold the information to be provided with
respect to the Receivables (including Additional Receivables), prior to delivery
to the Purchaser, in trust for the benefit of the Purchaser.
(e) The parties intend that if, and to the extent that, such transfer
is not deemed to be a sale, the Originators shall be deemed hereunder to have
granted to the Purchaser, a first priority perfected security interest in all of
the Originators' right, title and interest in, to and under the Conveyed
Property and that this Agreement shall constitute a security agreement under
applicable law.
(f) No Receivable shall be conveyed to the Purchaser pursuant to
Section 2.1(a) unless with respect to such Receivable:
(i) The applicable Originator delivers to the Purchaser or the
Trustee on the Closing Date a completed Notice of Financed
Premium, which may be delivered on computer disk or through
electronic downloading of such notice onto Trustee's
computer system; and
(ii) The applicable Originator delivers to the Purchaser on the
Closing Date an executed Assignment of Power of Attorney.
SECTION 2.2. Payments and Computations. Payments and Computations. ()
The Purchase Price for Receivables shall be paid or provided for on the Purchase
Date of such Receivables in either of the following ways, at the election of
each Originator: (i) by payment in cash in immediately available funds; or (ii)
in the event that the total Purchase Price is not paid in full in cash by the
Purchaser on the date of Purchase, each such Originator shall receive a
subordinated unsecured promissory note (each such note, a "Subordinated Purchase
Note") from the Purchaser in an original principal amount equal to the portion
of such cash shortfall owed to such Originator. The characteristics of each
Subordinated Purchase Note shall be as follows:
(i) interest shall accrue on the outstanding principal amount of
each Subordinated Purchase Note at a per annum rate of
interest (calculated on the basis of a 360-day year of
twelve 30-day months) equal to ______;
(ii) the outstanding principal of and accrued interest on each
Subordinated Purchase Note shall be payable as, if and when
the Purchaser receives any amounts in respect of the
Transferor Interest;
(iii) all amounts paid with respect to an outstanding
Subordinated Purchase Note shall be allocated first to
accrued interest until all such interest is paid, and then
to outstanding principal;
(iv) the obligation of the Purchaser to repay Subordinated
Purchase Notes issued to the applicable Originator from the
amounts paid to such Purchaser in respect of the Transferor
Interest in the manner prescribed herein, shall be the sole
and exclusive remedy available against the Purchaser and any
such Subordinated Purchase Note shall be fully subordinated
to any rights of Certificateholders under the Pooling and
Servicing Agreement, shall not evidence any rights in the
Receivables or the Transferor Interest, shall be an
obligation and need not be evidenced by any separate
instrument of the Purchaser;
(v) the Purchaser may offset any amount due and owing by the
applicable Originator against any amount due and owing by
the Purchaser to such Originator under the terms of the
Subordinated Purchased Note.
The Purchaser, at its option, may repay all or any portion of the accrued
interest on and principal of any Subordinated Purchase Note at any time.
(b) The Purchaser shall pay all amounts to be paid in cash with respect
to the Purchases to the Originator (or to the Company on behalf of the
Originator of such Receivables) on the date of the Purchase thereof and shall
pay all amounts in respect of principal of and interest on any Subordinated
Purchase Note in accordance with the terms thereof.
SECTION 2.3 Repurchase of Receivables. Repurchase of Receivables. ()
If (i) any of the representations or warranties of any Originator contained in
Sections 3.2, 3.3 or subsection 4.1(f) hereof was not true with respect to such
Originator or any Receivable, as applicable, at the time such representation or
warranty was made, (ii) or if the Originators breach any of the covenants
contained in subsections 4.1(d), (e), (f) or (g) or (iii) there is a breach of
subsection 2.1(f), and as a result thereof, the Purchaser is required to
repurchase any Receivable from the Trust pursuant to subsection 2.4(d) of the
Pooling and Servicing Agreement, then the Originator of the repurchased
Receivable shall be obligated to pay to the Purchaser immediately upon the
Purchaser's demand therefor an amount equal to the amount of all losses, damages
and liabilities of the Purchaser that result from such breach, including but not
limited to the cost of the Purchaser's repurchase obligations pursuant to
subsection 2.4(d) of the Pooling and Servicing Agreement.
(b) Upon any exercise by the Purchaser of its right to designate
Removed Receivables pursuant to Section 2.7 of the Pooling and Servicing
Agreement, the Originator of the removed Receivables will immediately repurchase
such Receivables from the Purchaser by tendering to the Purchaser an amount in
immediately available funds equal to the amount the Purchaser remitted to the
Trust (calculated as set forth in Section 2.7 of the Pooling and Servicing
Agreement) in consideration of the transfer of the removed Receivables from the
Trust to the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Purchaser.
Representations and Warranties of the Purchaser. The Purchaser represents and
warrants to the Originators as follows:
(a) Organization and Good Standing. The Purchaser is a national
banking association duly organized and validly existing in good standing under
the laws of the United States and has full corporate power, authority and legal
right to own its properties and conduct its business as such properties are
presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement.
(b) Due Qualification. The Purchaser is duly qualified to do business
and is in good standing (or is exempt from such requirement) in any state
required in order to conduct its business, and has obtained all necessary
licenses and approvals with respect to the Purchaser required under Federal and
Pennsylvania law (including any necessary licenses required under the Licensing
Laws of each Permitted State).
(c) Purchaser's Deposit Accounts. As of the Initial Closing Date,
deposits in the Purchaser's deposit accounts were insured to the limits provided
by law by BIF.
(d) Binding Obligation; Valid Transfer and Assignment.
(i) The execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions provided for in this
Agreement have been duly authorized by the Purchaser by all necessary
corporate action on its part, and this Agreement will remain from the
time of its execution, an official record of the Purchaser.
(ii) This Agreement constitutes legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except (A) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect affecting
the enforcement of creditors' rights in general and the rights of
creditors of national banking associations, and (B) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(iii) No Conflict. The execution and delivery of this
Agreement, the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof and thereof will not
conflict with, result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time
or both) a material default under, any indenture, contract, agreement,
mortgage, deed of trust or other instrument to which the Purchaser is a
party or by which it or any of its properties are bound.
(iv) No Violation. The execution and delivery of this
Agreement, the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not conflict
with or violate any Requirements of Law applicable to the Purchaser.
SECTION 3.2 Representations and Warranties of Each of the Originators
(a) Organization and Good Standing. Each Originator is a
corporation duly organized and validly existing in good standing under the laws
of the jurisdiction of its incorporation and has full corporate power, authority
and legal right to own its properties and conduct its business as such
properties are presently owned and such business is presently conducted, and to
execute, deliver and perform its obligations under this Agreement.
(b) Due Qualification. Each Originator is duly qualified to do
business and is in good standing (or is exempt from such requirement) in any
state required in order to conduct business, and has obtained all necessary
licenses and approvals with respect to such Originator required under federal
and applicable state law.
SECTION 3.3 Representations and Warranties of Each Originator Relating
to this Agreement and the Receivables. Representations and Warranties of Each
Originator Relating to this Agreement and the Receivables.
(a) Binding Obligation; Valid Transfer and Assignment. Each Originator
jointly and severally hereby represents and warrants to the Purchaser that, as
of the Initial Closing Date:
(i) The execution and delivery of this Agreement by each
Originator and the consummation of the transactions provided
for in this Agreement have been duly authorized by each
Originator by all necessary corporate action on its part,
and this Agreement will remain, from the time of its
execution, an official record of each Originator.
(ii) This Agreement constitutes legal, valid and binding
obligations of each Originator, enforceable against each
Originator in accordance with its terms, except (A) as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of
creditors' rights in general and the rights of creditors of
national banking associations, and (B) as such
enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).
(iii) No Conflict. The execution and delivery of this Agreement,
the performance of the transactions contemplated by this
Agreement, and the fulfillment of the terms hereof will not
conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without
notice or lapse of time or both) a material default under,
any indenture, contract, agreement, mortgage, deed of trust
or other instrument to which Transferor is a party or by
which it or any of its properties are bound.
(iv) No Violation. The execution and delivery of this Agreement,
the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not
conflict with or violate any Requirements of Law applicable
to each Originator.
(v) This Agreement constitutes either (A) a valid transfer,
assignment and conveyance to the Purchaser of all right,
title and interest of each Originator in and to the Conveyed
Property all of which will be held by the Purchaser, free
and clear of any Lien of any Person claiming through or
under the Originators or any of their Affiliates, except for
(i) Liens permitted under subsection 2.5(b) of the Pooling
and Servicing Agreement, or (B) a grant of an enforceable
security interest (as defined in the UCC as in effect in the
States of New York and California) in the Conveyed Property.
If this Agreement constitutes the grant of a security
interest to the Purchaser in the Conveyed Property, upon the
filing of the financing statement described in Section 2.1,
the Purchaser shall have a first priority perfected security
interest in such property, except for Liens permitted under
subsection 2.5(b) of the Pooling and Servicing Agreement.
(vi) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of each Originator,
threatened against an Originator before any court,
regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of
this Agreement (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement,
(iii) seeking any determination or ruling that, in the
reasonable judgment of the Originators, would materially and
adversely affect the performance by the Originators of their
obligations under this Agreement or (iv) seeking any
determination or ruling that would materially and adversely
affect the validity or enforceability of this Agreement,
(vii) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any
governmental body or official required in connection with
the execution and delivery of this Agreement, the
performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof, have been
obtained.
(b) Eligibility of Receivables. Each Originator hereby jointly and
severally represents and warrants to the Purchaser as of the Initial Closing
Date with respect to the initial Receivables, as of each day that Additional
Receivables are conveyed to the Trust with respect to Additional Receivables and
with respect to clause (iv) below as of the date of the delivery of the related
Receivables Schedule, as applicable, that:
(i) Each Receivable is an Eligible Receivable.
(ii) Each Additional Receivable conveyed to the Purchaser is an
Eligible Receivable, and the representations and warranties
set forth in subsection 3.2 and 3.3) are true and correct on
the day such Additional Receivable is conveyed to the Trust.
[(iii) Each Receivable then existing has been conveyed to the
Purchaser free and clear of any Lien of any Person claiming
through or under Transferor or any of its Affiliates (other
than Liens permitted under subsection 2.5(b) of the Pooling
and Servicing Agreement) and in compliance, in all material
respects, with all Requirements of Law applicable to the
Originators.
(iv) The related Receivable Schedule is an accurate and complete
listing in all material respects of (A) on the Closing Date,
all the Receivables as of the Cut Off Date and (B) on the
day any Additional Receivables are conveyed to the
Purchaser, the related Additional Receivables. In either
case, the information contained therein with respect to the
identity of such Receivables is true and correct in all
material respects as of the Cut Off Date or on the day any
Additional Receivable is conveyed to the Purchaser, for any
related Additional Receivable. As of the Cut Off Date, the
aggregate amount of Receivables was $_____________, of which
$_____________ were Principal Receivables.]
(c) Notice of Breach. The representations and warranties set forth in
this Section 3.3 shall survive the transfer and assignment of the respective
Receivables to the Purchaser. Upon discovery by the Purchaser or any Originator
of a breach of any of the representations and warranties set forth in this
Section 3.3, the party discovering such breach shall give prompt written notice
to the other parties mentioned above. The Originators agree to cooperate with
the Purchaser in attempting to cure any such breach.
ARTICLE IV
GENERAL COVENANTS
SECTION 4.1 Covenants of Each Originator. Covenants of Each
Originator. Each Originator jointly and severally covenants that:
(a) Receivables to be General Intangibles. The Originators will take
no action to cause any Receivable to be anything other than a general intangible
as defined under the UCC of the States of New York and California.
(b) Security Interests. Except for the conveyances hereunder, the
Originators shall not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Receivable,
whether now existing or hereafter created, or any interest therein; The
Originators shall immediately notify the Purchaser of the existence of any Lien
on any Receivable; and the Originators shall defend the right, title and
interest of the Purchaser in, to and under the Receivables, whether now existing
or hereafter created, against all claims of third parties claiming through or
under Transferor; provided that nothing in this subsection 4.1(b) shall prevent
or be deemed to prohibit the Originators from suffering to exist upon any of the
Receivables any Liens for municipal or other local taxes if such taxes shall not
at the time be due and payable or if an Originator shall currently be contesting
the validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.
(c) Receivable Allocations. If any Originator is unable for any reason
to transfer Receivables to the Purchaser in accordance with the provisions of
this Agreement (including by reason of the application of an order by any
Federal governmental agency having regulatory authority over such Originator or
any court of competent jurisdiction that Originator not transfer any additional
Principal Receivables to the Purchaser) then, in any such event the Originators
agree to allocate and pay to the Purchaser, after the date of such inability,
all Collections with respect to Principal Receivables, and all amounts which
would have constituted Collections with respect to Principal Receivables but for
such Originator's inability to transfer such Receivables (up to an aggregate
amount equal to the amount of Principal Receivables in the Trust on such date).
(d) Delivery of Assignment and Receivable Schedule. On or prior to the
Determination Date following a Monthly Period during which Additional
Receivables are conveyed to the Purchaser, the Originators shall deliver to the
Purchaser a written assignment in substantially the form of Exhibit A (the
"Assignment") and the applicable Originator shall have indicated in its computer
files on or prior to the applicable day that the Additional Receivables have
been transferred to the Purchaser and, [within five Business Days thereafter,]
the Originators shall have delivered to the Purchaser a Receivable Schedule
which relates to the Additional Receivables, which such Receivable Schedule
shall be deemed automatically, as of the date of such Assignment, incorporated
into and made a part of such Assignment and this Agreement;
(e) On or prior to the Determination Date following a Monthly Period
during which Additional Receivables are conveyed to the Purchaser, the
Originators shall deliver (x) the applicable completed Notice of Finance Premium
for each such Additional Receivable which may be delivered on computer disk or
through electronic down loading of such notice onto the Trustee's computer
system and (y) the applicable Assignment of Power of Attorney for each such
Additional Receivable;
(f) The Originators shall represent and warrant that, as of the day
any Additional Receivable is conveyed to the Purchaser, the Assignment
constitutes either (x) a valid transfer and assignment to the Purchaser of all
right, title and interest of the Purchaser in and to the Additional Receivables,
and all monies due or to become due with respect to such Receivables including
all monies received from insurance companies and state insurance guaranty funds
representing returns of Unearned Premiums and other charges due on such
Receivables and all proceeds thereto, all of which will be held by the
Purchaser, free and clear of any Lien of any Person claiming through or under
the Originators, except for Liens permitted under subsection 2.5(b) of the
Pooling and Servicing Agreement or (y) a grant of a security interest (as
defined in the UCC as in effect in the States of New York or California, as
applicable), in such property to the Purchaser, which is enforceable with
respect to the Additional Receivables, including monies received from insurance
companies and state insurance guaranty funds representing returns of Unearned
Premiums and other charges due on the related Receivables and all proceeds
thereto upon the conveyance of such Additional Receivables to the Trust. If the
Assignment constitutes the grant of a security interest to the Purchaser in such
property, upon the filing of a financing statement as described in Section 2.1
with respect to such Additional Receivables and the proceeds (as defined in the
UCC as in effect in the States of New York or California, as applicable),
thereof, the Trust shall have a first priority perfected security interest in
such property, except for Liens permitted under subsection 2.5(b) of the Pooling
and Servicing Agreement;
(g) The Originators shall not transfer any Receivable to the Purchaser
which if transferred to the Trust by the Purchaser would cause the aggregate
Receivables in the Trust as of the date of transfer to (i) have a weighted
average annual percentage rate that is less than __% or (ii) have a weighted
average original term to maturity of greater than _____, or in each case,
calculated after giving effect to the transfer of such Receivable.
(h) The Originators agree to jointly and severally indemnify, defend
and hold the Purchaser harmless from and against any and all loss, liability,
damage, judgment, claim, deficiency or expense including interest, penalties,
reasonable attorneys' fees and disbursements and amounts paid in settlement to
which the Company may become subject insofar as such loss, liability, damage,
judgment, claim, deficiency or expense arises out of, or is based upon or
relates to, a breach by an Originator of any warranty, representation, covenant
or agreement contained in this Agreement.
ARTICLE V
PURCHASE TERMINATION EVENTS
SECTION 5.1 Purchase Termination. Purchase Termination. If Transferor
or [an Originator] shall consent to the appointment of a conservator or receiver
or liquidator for the winding-up or liquidation of its affairs, or a decree or
order of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator or receiver or liquidator for the
winding-up or liquidation of its affairs shall have been entered against the
Purchaser or [an Originator] (an "Insolvency Event"), the Originators, in the
case of an insolvency of the Purchaser, or the insolvent Originator in the case
of an insolvency of an Originator shall on the day of such Insolvency Event (the
"Appointment Day") immediately cease to transfer Receivables to the Purchaser
and shall promptly give notice to the Purchaser of such Insolvency Event.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Amendment. Amendment.
(a) This Agreement may be amended in writing from time to time by the
Originators and the Purchaser, without the consent of any of Holders; provided
that such action shall not, as evidenced by [an Opinion of Counsel] for
Transferor addressed and delivered to Trustee, adversely affect in any material
respect the interests of any Investor Holder; provided further that the Rating
Agency Condition shall have been satisfied with respect to such action.
(b) This Agreement or any Supplement may also be amended in writing
from time to time by Purchaser and the Originators with the consent of the
Holders of Investor Certificates evidencing Undivided Interests aggregating not
less than 66-2/3% of the Investor Interest of each outstanding Series adversely
affected by such amendment for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
any Supplement or modifying in any manner the rights of Investor Holders of any
Series then issued and outstanding; provided that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, distributions which
are required to be made on any Investor Certificates of such Series without the
consent of each Investor Holder of such Series, or (ii) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of
each Investor Holder of all Series adversely affected.
(c) Promptly after the execution of any such amendment (other than an
amendment pursuant to subsection (a)), Purchaser shall furnish notification of
the substance of such amendment to each Investor Holder of each Series adversely
affected and to each Rating Agency providing a rating for such Series.
(d) It shall not be necessary for the consent of Investor Holders under
this Section 6.1 to approve the particular form of any proposed amendment, 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 Investor Holders shall be subject to such reasonable
requirements as Trustee may prescribe.
SECTION 6.2 Notices, Etc.. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex, facsimile or cable communication) and mailed, telegraphed,
telexed, transmitted, cabled or delivered, if to the Originators, at their
address at _______________; Attention: _________; and if to the Purchaser, at
its address at _________________ Attention: _____________ as to each party, at
such other address as shall be designated by such party in a written notice to
the other parties.
SECTION 6.3 No Waiver; Remedies. No failure on the part of the
Purchaser to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 6.4 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of each Originator and the Purchaser and their respective
successors and assigns, except that no Originator shall have the right to assign
its rights hereunder or any interest herein without the prior written consent of
the Purchaser. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect as between the Purchaser and each Originator until such
time, after the Purchase Termination Date applicable to such Originator, as the
Purchaser shall not have any net ownership interest in any Receivables;
provided, however, that the indemnification provisions of Article VIII shall be
continuing and shall survive any termination of this Agreement.
SECTION 6.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6.6 Acknowledgment of Assignments. Each of the Originators
hereby acknowledges and consents to the assignment by the Purchaser of
Receivables and the rights of the Purchaser under this Agreement pursuant to the
Pooling and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE ORIGINATORS:
AFCO CREDIT CORPORATION
By:______________________________
Title: __________________________
AFCO ACCEPTANCE CORPORATION
By:______________________________
Title: __________________________
THE PURCHASER:
MELLON BANK, N.A.
By:______________________________
Title: __________________________
Exhibit 5.1
November 29, 1996
Mellon Bank, N.A.
One Mellon Bank Center
Suite 1910
500 Grant Street
Pittsburgh, Pennsylvania 15258-0001
Re: Mellon Bank Premium Finance Loan Master Trust
Ladies and Gentlemen:
We have been asked to deliver this opinion in connection with the preparation of
the registration statement on Form S-3 (No. 333-11961) (the "Registration
Statement") relating to the issuance by Mellon Bank Premium Finance Loan Master
Trust (the "Trust") of the Mellon Bank Premium Finance Loan Master Trust Class A
Floating Rate Asset Backed Certificates, Series 1996-1 and the Mellon Bank
Premium Finance Loan Master Trust Class B Floating Rate Asset Backed
Certificates, Series 1996-1 (collectively, the "Certificates") pursuant to a
Pooling and Servicing Agreement, to be dated as of December 1, 1996 and the
Series 1996-1 Supplement thereto, to be dated as of December 1, 1996 (the
"Agreement"), each among Mellon Bank, N.A., as transferor (the "Transferor"),
AFCO Credit Corporation, as servicer (the "Servicer"), AFCO Acceptance
Corporation, as servicer (the "Servicer"), Premium Financing Specialists, Inc.,
as back-up servicer (the "Back-up Servicer") and The First National Bank of
Chicago, a national banking association, as trustee (the "Trustee"). The
Registration Statement has been filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"). All capitalized terms used but not specifically defined herein have the
meaning assigned to such terms in the Agreement.
In connection with this opinion, we have examined original, reproduced or
certified copies of the Articles of Association and By-Laws of the Transferor,
each as amended to date, the Registration Statement, records of actions taken by
the Board of Directors of the Transferor and a form of the Agreement. We have
also examined such other documents, papers, statutes and authorities as we have
deemed necessary as a basis for the opinions hereinafter set forth. In all such
examinations made by us in connection with this opinion, we have assumed the
genuineness of all signatures, the completeness and authenticity of all records
and all documents submitted to us as originals, and the conformity with the
originals of all documents submitted to us as copies thereof. As to various
matters of fact relevant to the opinions hereinafter expressed, we have relied,
to the extent we deemed appropriate, upon representations, statements and
certificates of officers and representatives of the Servicer, the Back-up
Servicer, the Transferor and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not express any opinion herein concerning
any law other than the federal laws of the United States of America and the laws
of the State of New York.
Based upon and subject to the foregoing, we are of the opinion that:
1. When the issuance, execution and delivery of the Certificates have
been authorized by all necessary corporate action of the Transferor in
accordance with the provisions of the Pooling and Servicing Agreement, and when
such Certificates have been duly executed and delivered, authenticated by the
Trustee and sold as described in the Registration Statement, assuming that the
terms of such Certificates are otherwise in compliance with applicable law at
such time, such Certificates will be legally issued, fully paid and
non-assessable and entitled to the benefits of the Pooling and Servicing
Agreement. This opinion is subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto and we
express no opinion with respect to the application of equitable principles or
remedies in any proceeding, whether at law or in equity.
2. The statements set forth in the Registration Statement under the
headings "Prospectus Summary--Tax Status" and "U.S. Federal Income Tax
Consequences," to the extent that they constitute statements of matters of law
or legal conclusions with respect thereto, are correct.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the captions
"Prospectus Summary-Tax Status," "U.S. Federal Income Tax Consequences" and
"Legal Matters" in the Prospectus which forms a part of the Registration
Statement. In giving such consent, we do not admit hereby that we come within
the category of persons whose consent is required under Section 7 of the Act or
the Rules and Regulations of the Commission thereunder.
Very truly yours,
/s/Stroock & Stroock & Lavan
STROOCK & STROOCK & LAVAN
Exhibit 10.1
AFCO Commercial Premium Finance Agreement
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Agent (Name and Address) Insured (Name and Address as shown on the policy)
A)Total Premiums B)Down Payment C)Amount Financed D)Finance Charge E)Total Payments
F) Annual Percentage Rate No. of Payments Amounts of Payments First Installment Due Installment Due Dates
SCHEDULE OF POLICIES
Policy Prefix and Effective Date of Name of Insurance Company and Name and Address Type of Months Premium $
Number Policy/Inst. of General or Policy Issuing Agent or Intermediary Coverage Covered
</TABLE>
(1) DEFINITIONS: The above named insured (the "insured") is the debtor. AFCO
Credit Corporation ("AFCO") is the lender to whom the debt is owed. "Insurance
company" or "company," "insurance policy" or "policy" and "premium" refer to
those items listed under the "Schedule of Policies." Singular words mean plural
and vice-versa as may be required in order to give the agreement meaning.
(2) LIMITED POWER OF ATTORNEY: The insured irrevocably appoints AFCO as its
attorney in fact with full authority to cancel the insurance policies for the
reasons stated in paragraph (14), and to receive all sums assigned to AFCO or in
which it has granted AFCO a security interest. AFCO may execute and deliver on
the insured's behalf all documents, instruments of payment, forms, and notices
of any kind relating to the insurance policies in furtherance of this agreement.
INSURED AGREES TO THE TERMS SET FORTH ABOVE AND ON THE REVERSE SIDE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
_________________________ _________________________________________________ ________ __________
INSURED'S NAME SIGNATURE OF INSURED OR AUTHORIZED REPRESENTATIVE TITLE DATE
</TABLE>
AGENT OR BROKER REPRESENTATIONS
The undersigned warrants and agrees: 1. The policies are in full force and
effect and the information in the Schedule of Policies and the premiums are
correct. 2. The insured has authorized this transaction and recognizes the
security interest assigned herein and has received a copy of this agreement. 3.
To hold in trust for AFCO any payments made or credited to the insured through
or to the undersigned, directly or indirectly, actually or constructively by the
insurance companies or AFCO and to pay the monies as well as any unearned
commissions to AFCO upon demand to satisfy the outstanding indebtedness of the
insured. Any lien the undersigned has or may acquire in the return premiums
arising out of the listed insurance policies is subordinated to AFCO's lien or
security interest therein. 4. The policies comply with AFCO's eligibility
requirements. 5. No audit or reporting form policies, policies subject to
retrospective rating or minimum earned premium are included. The deposit or
provisional premiums are not less than anticipated premiums to be earned for the
full term of the policies. 6. The policies can be cancelled by the insured and
the unearned premiums will be computed on the standard short-rate or pro-rata
table. 7. The undersigned represents that a proceeding in bankruptcy,
receivership, or insolvency has not been instituted by or against the named
insured.
IF THERE ARE ANY EXCEPTIONS TO THE ABOVE STATEMENTS PLEASE LIST BELOW:
THE UNDERSIGNED FURTHER WARRANTS THAT IT HAS RECEIVED THE DOWN PAYMENT AND
ANY OTHER SUMS DUE AS REQUIRED BY THE AGREEMENT AND IS HOLDING SAME OR THEY ARE
ATTACHED TO THIS AGREEMENT
_______________ ____________________________ ________ ____________
AGENT OR BROKER SIGNATURE OF AGENT OR BROKER TITLE DATE
CPFA-1 (1/93)
<PAGE>
(3)PROMISE OF REPAYMENT: The insured requests that AFCO pay the premiums in the
Schedule of Policies. The insured promises to pay to AFCO the amount stated in
Block E above according to the payment schedule, subject to the remaining terms
of this agreement.
(4) SECURITY INTEREST: The insured assigns to AFCO as security for the total
amount payable in this agreement any and all unearned premiums and dividends
which may become payable under the insurance policies for whatever reason and
loss payments which reduce the unearned premiums subject to any mortgagee or
loss
payee interests. The insured gives to AFCO a security interest in all items
mentioned in this paragraph. The insured further grants to AFCO its interest
which may arise under any state insurance guarantee fund relating to any policy
shown in the Schedule of Policies.
(5) WARRANTY OF ACCURACY: The insured warrants to AFCO that the insurance
policies listed in the Schedule have been issued to the insured and are in full
force and effect and that the insured has not assigned any interest in the
policies except for the interest of mortgages and loss payees. The insured
authorizes AFCO to insert or correct on this agreement, if omitted or incorrect,
the insurer's name, the policy numbers, and the due date of the first
installment. AFCO is permitted to correct any obvious errors. In the event of
any change or insertion, AFCO will give the insured written notice of those
changes or corrections made in accordance with this provision.
(6) REPRESENTATION OF SOLVENCY: The insured represents that the insured is not
insolvent or presently the subject of any insolvency proceeding.
(7) ADDITIONAL PREMIUMS: The money paid by AFCO is only for the premium as
determined at the time the insurance policy is issued. The insured agrees to pay
the company any additional premiums which become due for any reason. AFCO may
assign the company any rights it has against the insured for premiums due the
company in excess of the premiums returned to AFCO.
(8) SPECIAL INSURANCE POLICIES: If the insurance policy issued to the insured is
auditable or is a reporting form policy or is subject to retrospective rating,
then the insured promises to pay to the insurance company the earned premium
computed in accordance with the policy provisions which is in excess of the
amount of premium advanced by AFCO which the insurance company retains.
(9) NAMED INSURED: If the insurance policy provides that the first named insured
in the policy shall be responsible for payment of premiums and shall act on
behalf of all other insureds with respect to any actions relating to the policy,
then the same shall apply to this agreement. If such is not the case, then all
insureds' names must be shown on this agreement unless a separate agreemtn
specifies one insured to act in all matters for the others.
(10) FINANCE CHARGE: The finance charge shown in Block D begins to accrue as of
the earliest policy effective date unless otherwise indicated in Schedule of
Policies.
(11) AGREEMENT BECOMES A CONTRACT: This agreement becomes a binding contract
when AFCO mails a written acceptance to the insured.
(12) DEFAULT CHARGES: If the insured is late in making an installment payment to
AFCO by more than the number of days specified by law the insured will pay to
AFCO a delinquency charge not to exceed the maximum charge permitted by law.
(13) DISHONORED CHECK: If an insured's check is dishonored for any reason and if
permitted by law, the insured will pay to AFCO a fee for expenses in processing
that check not to exceed the amount permitted by law.
(14) CANCELLATION: AFCO may cancel the insurance policies after giving any
required statutory notice and the unpaid balance due to AFCO shall be
immediately payable by the insured if any of the following occur: a) the insured
does not pay any installment according to the terms of this agreement; b) the
insured does not comply with any of the terms of this agreement; c) the insured
voluntarily or involuntarily becomes the subject of any type of insolvency
proceedings excepting those under the Federal Bankruptcy laws; d) the insured
stops doing business or ceases to be qualified to do business. AFCO at its
option may enforce payment of this debt without recourse to the security given
to AFCO. If cancellation occurs, the borrower agrees to pay a finance charge on
the balance due at the contract rate of interest until that balance is paid in
full or until such other date as required by law.
(15) CANCELLATION CHARGES: If AFCO cancels any insurance policy in accordance
with the terms of this agreement, then the insured will pay AFCO a cancellation
charge, if permitted, up to the limit specified by law.
(16) MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to AFCO
after AFCO's notice of cancellation of the insurance policy has been mailed may
be credited to the insured's account without affecting the acceleration of this
agreement and without any liability or obligation on AFCO's part to request
reinstatement of a cancelled insurance policy. Any money AFCO receives from an
insurance company shall be credited to the amount due AFCO with any surplus
being paid over to whomever is entitled to the money. No refund of less than
$1.00 shall be made. In the event that AFCO does request, on the insured's
behalf, a reinstatement of the policy, such request does not guarantee that
coverage under the policy will be reinstated or continued.
(17) ATTORNEY FEES-COLLECTION EXPENSE: If, for collection, this agreement is
placed in the hands of an attorney who is not a salaried employee of AFCO, then
the insured agrees to pay reasonable attorney fees and costs including those in
the course of appeal as well as other expenses, as permitted by law or granted
by the court.
(18) REFUND CREDITS: The insured will receive a refund credit of the finance
charge if the account is voluntarily prepaid in full prior to the last
installment due date as required or permitted by law. Any minimum or fully
earned fees will be deducted as permitted by law.
(19) INSURANCE AGENT OR BROKER: The insurance agent or broker named in this
agreement is the insured's agent, not AFCO's, and AFCO is not legally bound by
anything the agent or broker represents to the insured orally or in writing.
(20) NOT A CONDITION OF OBTAINING INSURANCE: This agreement is not required as a
condition of the insured obtaining insurance coverage.
(21) SUCCESSORS AND ASSIGNS: All legal rights given to AFCO shall benefit AFCO's
successors and assigns. The insured will not assign the policies without AFCO's
written consent except for the interest of mortgagees and loss payees.
(22) LIMITATION OF LIABILITY: The insured agrees that AFCO's liability for
breach of any of the terms of this agreement or the wrongful exercise of any of
its powers shall be limited to the amount of the principal balance outstanding
except in the event of gross negligence or willful misconduct.
(23) ENTIRE DOCUMENT - GOVERNING LAW: This document is the entire agreement
between AFCO and the insured and can only be changed in writing and signed by
both parties except as stated in paragraph (5). The laws of the state indicated
in the insured's address as set forth in the Schedule will govern this agreement
unless otherwise stated in that Schedule.
<PAGE>
AFCO Commercial Premium Finance Agreement -- Wisconson
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Agent (Name and Address) Insured (Name and Address as shown on the policy
A)Total Premiums B)Down Payment C)Amount Financed D)Finance Charge E)Total Payments
F) Annual Percentage Rate No. of Payments Amount of Payments First Installment Due Installment Due Dates
SCHEDULE OF POLICIES
Policy Prefix and Effective Date of Name of Insurance Company and Name and Address Type of Months Premium $
Number Policy/Inst. of General or Policy Issuing Agent or Intermediary Coverage Covered
</TABLE>
(1) DEFINITIONS: The above named insured (the "insured") is the debtor. AFCO
Credit Corporation ("AFCO") is the lender to whom the debt is owed. "Insurance
company" or "company", "insurance policy" or "policy" and "premium" refer to
those items listed under the "Schedule of Policies". Singular words mean plural
and vice-versa as may be required in order to give the agreement meaning.
(2) LIMITED POWER OF ATTORNEY: The insured irrevocably appoints AFCO as its
attorney in fact with full authority to cancel the insurance policies for the
reasons stated in paragraph (14), and to receive all sums assigned to AFCO or in
which it has granted AFCO a security interest. AFCO may execute and deliver on
the insured's behalf all documents, instruments of payment, forms, and notices
of any kind relating to the insurance policies in furtherance of this agreement.
INSURED AGREES TO THE TERMS SET FORTH ABOVE AND ON THE REVERSE SIDE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
_________________________ x_________________________________________________ ________ __________
INSURED'S NAME SIGNATURE OF INSURED OR AUTHORIZED REPRESENTATIVE TITLE DATE
</TABLE>
AGENT OR BROKER REPRESENTATIONS
The undersigned warrants and agrees: 1. The policies are in full force and
effect and the information in the Schedule of Policies and the premiums are
correct. 2. The insured has authorized this transaction and recognizes the
security interest assigned herein and has received a copy of this agreement. 3.
To hold in trust for AFCO any payments made or credited to the insured through
or to the undersigned, directly or indirectly, actually or constructively by the
insurance companies or AFCO and to pay the monies as well as any unearned
commissions to AFCO upon demand to satisfy the outstanding indebtedness of the
insured. Any lien the undersigned has or may acquire in the return premiums
arising out of the listed insurance policies is subordinated to AFCO's lien or
security interest therein. 4. The policies comply with AFCO's eligibility
requirements. 5. No audit or reporting form policies, policies subject to
retrospective rating or minimum earned premium are included. The deposit or
provisional premiums are not less than anticipated premiums to be earned for the
full term of the policies. 6. The policies can be cancelled by the insured and
the unearned premiums will be computed on the standard short-rate or pro-rata
table. 7. The undersigned represents that a proceeding in bankruptcy,
receivership, or insolvency has not been instituted by or against the named
insured.
IF THERE ARE ANY EXCEPTIONS TO THE ABOVE STATEMENTS PLEASE LIST BELOW:
THE UNDERSIGNED FURTHER WARRANTS THAT IT HAS RECEIVED THE DOWN PAYMENT AND
ANY OTHER SUMS DUE AS REQUIRED BY THE AGREEMENT AND IS HOLDING SAME OR THEY ARE
ATTACHED TO THIS AGREEMENT
_______________ x___________________________ ________ ____________
AGENT OR BROKER SIGNATURE OF AGENT OR BROKER TITLE DATE
CPFA-1W(7/95)
<PAGE>
(3) PROMISE OF REPAYMENT: The insured requests that AFCO pay the premiums in the
Schedule of Policies. The insured promises to pay to AFCO the amount stated in
Block E above according to the payment schedule, subject to the remaining terms
of this agreement.
(4) SECURITY INTEREST: The insured assigns to AFCO as security for the total
amount payable in this agreement any and all unearned premiums and dividends
which may become payable under the insurance policies for whatever reason and
loss payments which reduce the unearned premiums subject to any mortgagee or
loss payee interests. The insured gives to AFCO a security interest in all items
mentioned in this paragraph. The insured further grants to AFCO its interest
which may arise under any state insurance guarantee fund relating to any policy
shown in the Schedule of Policies.
(5) WARRANTY OF ACCURACY: The insured warrants to AFCO that the insurance
policies listed in the Schedule have been issued to the insured and are in full
force and effect and that the insured has not assigned any interest in the
policies except for the interest of mortgagees and loss payees. The insured
authorizes AFCO to insert or correct on this agreement, if omitted or incorrect,
the insurer's name, the policy numbers, and the due date of the first
installment.
AFCO is permitted to correct any obvious errors. In the event of any change or
insertion, AFCO will give the insured written notice of those changes or
corrections made in accordance with this provision.
(6) REPRESENTATION OF SOLVENCY: The insured represents that the insured is not
insolvent or presently the subject of any insolvency proceeding.
(7) ADDITIONAL PREMIUMS: The money paid by AFCO is only for the premium as
determined at the time the insurance policy is issued. The insured agrees to pay
the company any additional premiums which become due for any reason. AFCO may
assign the company any rights it has against the insured for premiums due the
company in excess of the premiums returned to AFCO.
(8) SPECIAL INSURANCE POLICIES: If the insurance policy issued to the insured is
auditable or is a reporting form policy or is subject to retrospective rating,
then the insured promises to pay to the insurance company the earned premium
computed in accordance with the policy provisions which is in excess of the
amount of premium advanced by AFCO which the insurance company retains.
(9) NAMED INSURED: If the insurance policy provides that the first named insured
in the policy shall be responsible for payment of premiums and shall act on
behalf of all other insureds with respect to any actions relating to the policy,
then the same shall apply to this agreement. If such is not the case, then all
insureds' names must be shown on this agreement unless a separate agreement
specifies one insured to act in all matters for the others.
(10) FINANCE CHARGE: The finance charge shown in Block D begins to accrue as of
the earliest policy effective date unless otherwise indicated in the Schedule of
Policies.
(11) AGREEMENT BECOMES A CONTRACT: This agreement becomes a binding contract
when AFCO mails a written acceptance to the insured.
(12) DEFAULT CHARGES: If the insured is in default for a period of 5 days or
more, the insured will pay to AFCO a default charge of 5% of any delinquent
installment subject to a minimum default charge of $1.00.
(13) DISHONORED CHECK: If an insured's check is dishonored for any reason and if
permitted by law, the insured will pay to AFCO a fee for expenses in processing
that check not to exceed the amount permitted by law.
(14) CANCELLATION: AFCO may cancel the insurance policies after giving 10 days'
written notice of AFCO's intent to cancel the existing contract unless the
default is cured prior to the date stated in the notice and the unpaid balance
due to AFCO shall be immediately payable by the insured if any of the following
occur: a) the insured does not pay any installment according to the terms of
this agreement; b) the insured does not comply with any of the terms of this
agreement; c) the insured voluntarily or involuntarily becomes the subject of
any type of insolvency proceedings excepting those under the Federal Bankruptcy
laws; d) the insured stops doing business or ceases to be qualified to do
business. AFCO at its option may enforce payment of this debt without recourse
to the security given to AFCO. If cancellation occurs, the borrower agrees to
pay a finance charge on the balance due at the contract rate of interest until
that balance is paid in full or until such other date as required by law.
(15) CANCELLATION CHARGES: If AFCO cancels any insurance policy in accordance
with the terms of this agreement, then the insured will pay AFCO a cancellation
charge of $15.00.
(16) MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to AFCO
after AFCO's notice of cancellation of the insurance policy has been mailed may
be credited to the insured's account without affecting the acceleration of this
agreement and without any liability or obligation on AFCO's part to request
reinstatement of a cancelled insurance policy. Any money AFCO receives from an
insurance company shall be credited to the amount due AFCO with any surplus
being paid over to whomever is entitled to the money. No refund of less than
$1.00 shall be made. In the event that AFCO does request, on the insured's
behalf, a reinstatement of the policy, such request does not guarantee that
coverage under the policy will be reinstated or continued.
(17) ATTORNEY FEES-COLLECTION EXPENSE: If, for collection, this agreement is
placed in the hands of an attorney who is not a salaried employee of AFCO, then
the insured agrees to pay statutory attorneys' fees and statutory court costs.
(18) REFUND CREDITS: The insured will receive a refund credit of the finance
charge calculated according to the rule of 78s if the account is voluntarily
prepaid in full prior to the last installment due date. AFCO may retain an
additional service charge of $1.00 which shall not be refundable.
(19) INSURANCE AGENT OR BROKER: The insurance agent or broker named in this
agreement is the insured's agent, not AFCO's, and AFCO is not legally bound by
anything the agent or broker represents to the insured orally or in writing.
(20) NOT A CONDITION OF OBTAINING INSURANCE: This agreement is not required as a
condition of the insured obtaining insurance coverage.
(21) SUCCESSORS AND ASSIGNS: All legal rights given to AFCO shall benefit AFCO's
successors and assigns. The insured will not assign the policies without AFCO's
written consent except for the interest of mortgagees and loss payees.
(22) LIMITATION OF LIABILITY: The insured agrees that AFCO's liability for
breach of any of the terms of this agreement or the wrongful exercise of any of
its powers shall be limited to the amount of the principal balance outstanding
except in the event of gross negligence or willful misconduct.
(23) ENTIRE DOCUMENT-GOVERNING LAW: This document is the entire agreement
between AFCO and the insured and can only be changed in writing and signed by
both parties except as stated in paragraph (5). The laws of the State of
Wisconsin will govern this agreement.
CPFA-1W(7/95)
<PAGE>
California
AFCO FILE NO. 973 9105 Premium Finance Agreement (CHECK APPROPRIATE BOX)
[ ] PERSONAL
[ ] COMMERCIAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Agent (Name and Address) Insured (Name and Address as shown on the policy
A)Total Premiums B)Down Payment C)Amount Financed D)Finance Charge E)Total Payments
F) Annual Percentage Rate No. of Payments Amount of Payments First Installment Due Installment Due Dates
SCHEDULE OF POLICIES
Policy Prefix and Effective Date of Name of Insurance Company and Name and Address Type of Months Premium $
Number Policy/Inst. of General or Policy Issuing Agent or Intermediary Coverage Covered
</TABLE>
SECURITY AGREEMENT
(1) DEFINITIONS: The above named insured (the "insured") is the debtor. Afco
Acceptance Corp. ("Afco") is the lender to whom the debt is owed. Singular words
shall mean plural and vice versa as may be required in order to give the
agreement meaning. "insurance company or company", "insurance policy or policy"
and "premium" refer to those items listed under "Schedule of Policies".
(2) PROMISE OF REPAYMENT: The insured requests Afco to pay the premiums on the
policies shown above. The insured promises to pay to Afco at its office the
amount stated in Block E above, according to the Payment Schedule shown above
subject to the rest of the terms of this contract.
INSURED AGREES TO THE
PROVISIONS ABOVE AND ON THE REVERSE SIDE
----------------------------------------
Date___________ ______________________________________________________________
______________________________________________________________
SIGNATURE OF INSURED(S) OR DULY AUTHORIZED AGENT OF INSURED(S)
PRODUCER'S REPRESENTATIONS
--------------------------
The undersigned warrants and agrees:
(1) the insured has received a copy of this agreement, and the Required Federal
Truth-in-Lending Disclosures for Personal Lines Insurance, if applicable, (2)
the policies are in full force and effect and the information in the schedule of
policies and the premiums are correct, (3) the insured has authorized this
transaction and recognizes the security interest assigned herein, (4) to hold in
trust for Afco any payments made or credited to the insured through or to the
undersigned, directly, indirectly, actually or constructively by any of the
insurance companies and to pay the monies to Afco upon demand to satisfy the
then outstanding indebtedness of the insured and that any lien the undersigned
now has or hereafter may acquire on any premium arising out of the above listed
insurance policies is subordinated to Afco's lien or security interest therein,
(5) there are no exceptions to the policies financed other than those indicated
and the policies comply with Afco's eligibility requirements. (6) No Audit or
Reporting Form Policies, policies subject to Retrospective Rating or to minimum
earned premiums are included except as indicated and that the Deposit or
Provisional Premiums are not less than anticipated premiums to be earned for the
full term of policies of policy is subject to minimium earned premium, it is
$__________.
(7) The policies can be cancelled by the insured or the company on 10 days
notice and the unearned premiums will be computed on the standard short rate or
pro rata table except as indicted. (8) The undersigned represents that a
proceeding in bankruptcy, receivership or insolvency has not been instituted by
or against the named insured or if the name insured is the subject of such a
proceeding, it is noted on the premium finance agreement in the space in which
the insured's name and address is placed. Indicate Policy & Prefix
Number of exceptions
________________________
_______________________________________
Date_____________ SIGNATURE OF AGENT OR BROKER
FOR INFORMATION CONTACT THE DEPARTMENT OF CORPORATIONS, STATE OF CALIFORNIA
<PAGE>
REMAINING PROVISIONS OF SECURITY AGREEMENT
------------------------------------------
3. SECURITY INTEREST: The insured assigns to Afco as security for the total
amount payable in this Agreement any and all unearned premiums and dividends
which may become payable under the insurance policies and loss payments which
reduce the unearned premiums, subject to any mortgagee or loss payee interests.
The insured gives to Afco a security interest in all items mentioned in this
paragraph.
4. DEFAULT CHARGES: If the insured is more than 10 days late in making an
installment payment to Afco, then the insured will pay to Afco in addition to
the installment, a default charge of 5% of the unpaid balance of the delinquent
installment but will be at least $1.
5. FINANCE CHARGE: The finance charge shown in Box D begins to accrue as of the
earliest policy effective date.
6. THIS AGREEMENT BECOMES A CONTRACT: This Agreement becomes a binding contract
when Afco mails a written acceptance to the insured.
7. WARRANTY OF ACCURACY: The insured warrants to Afco that the insurance
policies listed in the above schedule have been issued to the insured and are in
full force and effect and that the insured has not assigned any interest in the
policies except for the interest of mortgagees and loss payees.
8. REPRESENTATION OF SOLVENCY: The insured represents that it is not insolvent
or presently the subject of any insolvency proceeding.
9. CANCELLATION: Afco may cancel the insurance policies and the unpaid balance
due to Afco shall be immediately payable by the insured if any of the following
occur: (a) The insured does not pay any installment according to the terms of
this Agreement; (b) The insured does not comply with any of the terms of this
Agreement; (c) The insured or the insurer voluntarily or involuntarily becomes
the subject of a bankruptcy, receivership or any other kind of insolvency
proceeding; (d) If the insured is a business and stops doing business or ceases
to be qualified to do business. Afco at its option may enforce payment of this
debt without recourse to the security given to Afco.
10. POWER OF ATTORNEY-LIMIT OF LIABILITY: The insured irrevocably appoints Afco
its Attorney-In-Fact with full authority to cancel the insurance policies,
receive all sums assigned to Afco or in which it has granted Afco a security
interest and Afco may execute and deliver on the insured's behalf all documents,
instruments of payment, forms and notices of any kind relating to the insurance
policies in furtherance of this Agreement. Afco's liability to any person or
corporation on the exercise of its authority to cancel the insurance policies is
limited to the amount of the principal balance, except if Afco willfully fails
to mail the notices required by law.
11. MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to Afco after
Afco's Notice of Cancellation of the insurance policies has been mailed may be
credited to the insured's account without affecting the acceleration of this
Agreement and without any liability or obligation on Afco's part to request the
reinstatement of the cancelled insurance policies. Any money Afco receives from
an insurance company shall be credited to the amount due Afco with any surplus
being paid over to whomever is entitled to the money. No refund of less than
$1.00 shall be made. If there is a balance due after Afco receives the unearned
premiums, dividends or loss payments from the insurance company then the insured
will pay the balance to Afco with interest at the rate shown in this contract.
12. REFUND CREDITS: The insured will receive a refund credit of part of the
finance charge if the insured voluntarily prepays the outstanding debt in full
before the last installment due date according to Section 18629 of the Financial
Code. The insured will also receive a refund credit of part of the finance
charge if the maturity of the loan is accelerated for any reason according to
Section 18642 of the Financial Code. The methods for computing these refund
credits are stated below.
(a) Voluntary Prepayment-
(i) If prepayment in full is made during the first three months and 15
days after the earliest insurance policy effective date as shown on
the front of the contract, Afco will compute a finance charge by
multiplying the agreed rate of charge as stated at the end of this
Agreement by the unpaid principal balances for the number of days
from the earliest policy effective date to the date of prepayment in
full. Afco will apply each payment made by the insured first to
finance charge and then to principal. Afco will then subtract this
actual finance charge from the finance charge shown in Box D of the
contract to obtain the refund credit.
(ii) If prepayment in full is made more than three months and 15 days
after the earliest insurance policy effective date, the refund
credit shall be computed by the Rule of 78s method.
(b) Acceleration of Maturity -
If payment of the unpaid balance of the loan to Afco is accelerated
for any reason, Afco shall make the same refund or credit as would
be required if this loan contract was paid in full on the date of
acceleration. Paragraph 12(a) states the method of computing the
refund or credit. The unpaid balance remaining after subtracting
the refund or credit shall be treated as the unpaid principal
balance. The insured agrees to pay to Afco on the unpaid principal
balance interest computed at the agreed rate of charge stated at the
end of this Agreement until Afco is actually paid in full.
13. INSURANCE AGENT OR BROKER: The insurance agent or broker named on this
Agreement is the insured's agent, not Afco's and Afco is not legally bound by
anything the agent or broker represents to the insured, orally or in writing.
14. SPECIAL INSURANCE POLICIES: If the insurance policy issued to the insured is
auditable or is a reporting form policy or subject to retrospective rating, then
the insured promises to pay the insurance company the earned premium computed in
accordance with the policy provisions which is in excess of the amount of
premium advanced by Afco which the insurance company retains.
15. COLLECTION EXPENSES FOR DELINQUENT ACCOUNTS: If this Agreement has a
delinquent balance of at least $300, the insured will pay to Afco, Afco's actual
collections costs incurred in collecting the delinquent balance. The total
amount of collection costs shall not exceed 10% of the delinquent balance. This
paragraph shall apply only if Afco collects the delinquent balance without
obtaining a court judgment.
16. ATTORNEY FEES: If Afco obtains a court judgment against the insured for a
delinquent balance of at least $300, the insured agrees to pay to Afco court
costs and reasonable attorney's fees as allowed by the court in the judgment.
17. SUCCESSORS AND ASSIGNS: All legal rights given to Afco shall benefit
Afco's successors and assigns. The insured will not assign the policies
without Afco's written consent except for the interest of mortgagees and
loss payees.
18. MISSING INFORMATION: If the policy has not been issued at the time of
signing this Agreement, then the insured agrees the name of the insurance
company, and the policy numbers of the insurance policies may be left blank and
may be subsequently inserted in this Agreement. Afco will notify the insured of
this information on its written Notice of Acceptance.
19. ADDITIONAL PREMIUMS: The money paid by Afco is only for the premium as
determined at the time the insurance policy is issued. Afco's payment shall not
be applied by the insurance company to pay for any additional premiums owned by
the insured as a result of any type of misclassification of this risk. The
insured agrees to pay the company any additional premiums which become due for
any reason. Afco may assign to the company any rights it has against the insured
for premiums due the company in excess of the premiums returned to Afco.
20. AGENT'S WARRANTIES: To convince Afco to enter this Agreement and accept the
security underlying this Agreement, the person executing this Agreement, if not
the insured, warrants severally and as the duly authorized agent of the insured:
that he is the duly authorized agent of the insured appointed specifically to
enter into this transaction on the insured's behalf; that he can perform any act
the insured could or should perform with respect to this transaction; that he
will hold in trust for Afco any payments made or credited to the insured through
the undersigned or to the undersigned, directly, indirectly, actually or
constructively, by any of the insurance companies and that he will pay the
monies to Afco upon demand to satisfy the then outstanding indebtedness of the
insured.
21. DISHONORED CHECK: If an insured's check is dishonored for any reason, the
insured will pay to Afco the expense incurred in processing that check not to
exceed $15.
AGREED RATE OF CHARGE: The rate of charge for a loan not exceeding $2,499.99
computed from the effective date of the insurance coverage shall not exceed
(a) 2% per month on the part of the unpaid principal balance not exceeding
$1,000;
1% per month on any remainder of such unpaid balance in excess
of $1,000; or
(b) 1.6% per month of the unpaid principal balance.
All other rates of charge shall be agreed upon by the parties to the
contract. All contracts shall be subject to a minimum finance charge of $25.00.
(1/95)
<PAGE>
AFCO PREMIUM FINANCE AGREEMENT --Florida [ ] PERSONAL
MAILING ADDRESS: P.O. BOX 141858 (2600 DOUGLAS ROAD) [ ] COMMERCIAL
CORAL GABLES, FLORIDA 33114/TEL. NO.(305)448-5055/ (CHECK APPROPRIATE BOX)
1-800-288-5054
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AGENT PRODUCER CODE NO. INSURED
(NAME AND PLACE OF BUSINESS) (NAME AND RESIDENCE OR BUSINESS ADDRESS)
A TOTAL PREMIUMS
$
B DOWN PAYMENT
$ ZIP CODE___________ ZIP CODE___________
C AMOUNT FINANCED PAYMENT SCHEDULE
(A minus B) NUMBER OF PAYMENTS AMOUNT OF PAYMENTS WHEN PAYMENTS ARE DUE
FIRST INSTALLMENT DUE INSTALLMENT DUE DATES
$ $
D FINANCE CHARGE SCHEDULE OF POLICIES
$ EFFECTIVE DATE NAME OF INSURANCE COMPANY AND NAME TYPE MONTHS
POLICY PREFIX OF POLICY/ AND ADDRESS OF GENERAL OR POLICY OF COVERED PREMIUM
AND NUMBER ANNUAL ISSUING AGENT COVER BY
INSTALLMENT PREMIUM
E DOCUMENTARY
STAMP TAX $
$
F TOTAL OF PAYMENTS
(C + D + E)
$
G ANNUAL
PERCENTAGE RATE
%
TOTAL PREMIUMS must agree with Block "A" Above TOTAL $
</TABLE>
SECURITY AGREEMENT
1. DEFINITIONS: The above named insured ("the insured") is the debtor. Afco
Credit Corporation ("Afco") is the lender to whom the debt is owed. Singular
words shall mean plural and vice versa as may be required in order to give the
Agreement meaning, "insurance company or company", "insurance policy or policy"
and "premium" refer to those items listed under "Schedule of Policies".
NOTICE: 1. DO NOT SIGN THIS AGREEMENT BEFORE YOU READ IT OR IF IT CONTAINS ANY
BLANK SPACE. 2. YOU ARE ENTITLED TO A COMPLETELY FILLED-IN COPY OF THIS
AGREEMENT. 3. UNDER THE LAW, YOU HAVE THE RIGHT TO PAY OFF IN ADVANCE
THE FULL AMOUNT DUE AND UNDER CERTAIN CONDITIONS TO OBTAIN A PARTIAL
REFUND OF THE SERVICE CHARGE.
THE INSURED AGREES TO THE
PROVISIONS ABOVE AND ON THE REVERSE SIDE
________________________________________
______________________________________________________
Date_______________ ______________________________________________________
SIGNATURE OF INSURED(S)
OR DULY AUTHORIZED AGENT OR INSURED(S)
PRODUCER'S REPRESENTATIONS
--------------------------
The undersigned warrants and agrees:
(1) the insured has received a copy of this Agreement, and the Required Federal
Truth-in-Lending Disclosures for Personal Lines Insurance, if applicable, (2)
the policies are in full force and effect and the information in the schedule of
policies and the premiums are correct, (3) the insured has authorized this
transaction and recognizes the security interest assigned herein, (4) to hold in
trust for Afco any payments made or credited to the insured through or to the
undersigned, directly, indirectly, actually or constructively by any of the
insurance companies and to pay the monies to Afco upon demand to satisfy the
then outstanding indebtedness of the insured and that any lien the undersigned
now has or hereafter may acquire on any return premium arising out of the above
listed insurance policies is subordinated to Afco's lien or security interest
therein, (5) there are no exceptions to the policies financed other than those
indicated and the policies comply with Afco's eligibility requirements, (6) No
Audit or Reporting Form Policies, policies subject to Retrospective Rating or to
minimum earned premiums are included except as indicated and that the Deposit or
Provisional Premiums are not less than anticipated premiums to be earned for the
full term of the policies, if policy is subject to minimum earned premium, it is
$___________. (7) The policies can be cancelled by the insured or the company on
10 days notice and the unearned premiums will be computed on the standard short
rate or pro rata table except as indicated. (8) The undersigned represents that
a proceeding in bankruptcy, receivership or insolvency has not been instituted
by or against the name insured or if the named insured is the subject of such a
proceeding, it is noted on the premium finance agreement in the space in which
the insured's name and address is placed.
Indicate Policy & Prefix
Number of exceptions
-----------------------
Date______________ ________________________________________
SIGNATURE OF AGENT OR BROKER
2M (12/93) copyright 1993 Afco Credit Corporation
<PAGE>
REMAINING PROVISIONS OF SECURITY AGREEMENT
------------------------------------------
2. PROMISE OF REPAYMENT: The insured requests Afco to pay the premiums on the
policies shown above. The insured promises to pay to Afco at its office the
amount stated in Block F above, according to the Payment Schedule shown above
subject to the rest of the terms of this contract.
3. SECURITY INTEREST: The insured assigns to Afco as security for the total
amount payable in this Agreement any and all unearned premiums and dividends
which may become payable under the insurance policies and loss payments which
reduce the unearned premiums, subject to any mortgagee or loss payee interests.
The insured gives to Afco a security interest in all items mentioned in this
paragraph.
4. DEFAULT CHARGES: If the insured is more than 5 days late in making an
installment payment to Afco, then the insured will pay to Afco, in addition to
the delinquent installment, a default charge of 5% of the unpaid balance of the
delinquent installment or $10, whichever is greater. If the loan is primarily
for personal, family or household purposes, the default charge shall not exceed
$10.
5. FINANCE CHARGE: The finance charge shown in Box D begins to accrue as of the
earliest policy effective date.
6. THIS AGREEMENT BECOMES A CONTRACT: This Agreement becomes a binding contract
when Afco mails a written acceptance to the insured.
7. WARRANTY OF ACCURACY: The insured warrants to Afco that the insurance
policies listed in the schedule have been issued to the insured and are in full
force and effect and that the insured has not assigned any interest in the
policies except for the interest of mortgagees and loss payees.
8. REPRESENTATION OF SOLVENCY: The insured represents that the insured is not
insolvent or presently the subject of any insolvency proceeding.
9. CANCELLATION: Afco may cancel the insurance policies financed herein and the
unpaid balance due to Afco shall be immediately payable by the insured if, upon
10 days written notice to the insured, the insured does not pay any installment
according to the terms of this Agreement. Afco, at its option, may enforce
payment of this debt without recourse to the security given to Afco.
10. POWER OF ATTORNEY: The insured appoints Afco its Attorney-in-Fact with full
authority to cancel the insurance policies financed herein for nonpayment of
premium.
11. MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to Afco after
Afco's Notice of Cancellation of the insurance policies has been mailed may be
credited to the insured's account without affecting the acceleration of this
Agreement and without any liability or obligation on Afco's part to request the
reinstatement of the cancelled insurance policies. Any money Afco receives from
an insurance company shall be credited to the amount due Afco with any surplus
being paid over the insured or the insured's agent for the benefit of the
insured. No refund of less than $1.00 shall be made. If there is a balance due
after Afco receives the unearned premiums, dividends or loss payments from the
insurance company then the insured will pay the balance to Afco with interest at
the rate shown in this contract.
12. REFUNDS: The insured will receive a refund of the finance charge if the
account is prepaid in full prior to last installment due date. The refund shall
be computed according to the Rule of 78s subject to a $20 nonrefundable charge.
If the refund is less than $1, no refund shall be made.
13. INSURANCE AGENT OR BROKER: The insurance agent or broker named on this
Agreement is the insured's agent, not Afco's and Afco is not legally bound by
anything the agent or broker represents to the insured, orally or in writing.
14. SPECIAL INSURANCE POLICIES: If the insurance policy issued to the insured is
auditable or is a reporting form policy or subject to retrospective rating, then
the insured promises to pay the insurance company the earned premium computed in
accordance with the policy provisions which is in excess of the amount of
premium advanced by Afco which the insurance company retains.
15. CANCELLATION CHARGES: If Afco cancels the insurance policies, then the
insured will pay Afco a cancellation charge equal to the difference between $10
and the default charge.
16. ATTORNEY FEES: If, for collection, this Agreement is placed in the hands of
an attorney who is not a salaried employee of Afco, then the insured agrees to
pay the attorney fees but no more than 20% of the amount due and payable under
this Agreement.
17. SUCCESSORS AND ASSIGNS: All legal rights given to Afco shall benefit Afco's
successors and assigns. The insured agrees not to assign the policy without
Afco's written consent except for the interest of mortgagees and loss payees.
18. MISSING INFORMATION: If the policy has not been issued at the time of
signing this Agreement, then the insured agrees the name of the insurance
company, and the policy numbers of the insurance policies may be left blank and
may be subsequently inserted in this Agreement. Afco will notify the insured of
this information on its written Notice of Acceptance.
19. ADDITIONAL PREMIUMS: The money paid by Afco is only for the premium as
determined at the time the insurance policy is issued. Afco's payment shall not
be applied by the insurance company to pay for any additional premiums owed by
the insured as a result of any type of misclassification of the risk. The
insured agrees to pay the company any additional premiums which become due for
any reason. Afco may assign to the company any rights it has against the insured
for premiums due the company in excess of the premiums returned to Afco.
20. AGENT'S WARRANTIES: To convince Afco to enter this Agreement and accept the
security underlying this Agreement, the person executing this Agreement, if not
the insured, warrants severally and as the duly authorized agent of the insured:
that he is the duly authorized agent of the insured appointed specifically to
enter into this transaction on the insured's behalf; that he can perform any act
the insured could or should perform with respect to this transaction; that he
will hold in trust for Afco any payments made or credited to the insured through
the undersigned or to the undersigned, directly, indirectly, actually or
constructively, by any of the insurance companies and that he will pay the
monies to Afco upon demand to satisfy the then outstanding indebtedness of the
insured.
21. LAW GOVERNING THIS AGREEMENT: The insured agrees that this Agreement shall
be governed by the laws of the State of Florida.
22. DISHONORED CHECK: If an insured's check is returned because of insufficient
funds to pay it, Afco may impose a charge of $10.
23. ENDORSEMENTS: The insured agrees that Afco may endorse his or her name on
any check or draft for all monies that may become due from the insuring company
and apply the same as payment of this Agreement returning any excess to his or
her agent, provided that if such excess is in an amount less than $1 no refund
shall be made.
2M-BACK (12/93)
<PAGE>
AFCO PREMIUM FINANCE AGREEMENT -- KENTUCKY [ ] PERSONAL
[ ] COMMERCIAL
(CHECK APPROPRIATE BOX)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AGENT PRODUCER CODE NO. INSURED
(NAME AND PLACE OF BUSINESS) (NAME AND RESIDENCE OR BUSINESS ADDRESS)
A TOTAL PREMIUMS
$
B DOWN PAYMENT
$ ZIP CODE___________ ZIP CODE___________
C AMOUNT FINANCED PAYMENT SCHEDULE
(A minus B) NUMBER OF PAYMENTS AMOUNT OF PAYMENTS WHEN PAYMENTS ARE DUE
FIRST INSTALLMENT DUE INSTALLMENT DUE DATES
$ $
D FINANCE CHARGE SCHEDULE OF POLICIES
$ EFFECTIVE DATE NAME OF INSURANCE COMPANY AND NAME TYPE MONTHS
POLICY PREFIX OF POLICY/ AND ADDRESS OF GENERAL OR POLICY OF COVERED PREMIUM
AND NUMBER ANNUAL ISSUING AGENT COVER BY
INSTALLMENT PREMIUM
E TOTAL OF PAYMENTS
(C + D) $
$
F ANNUAL
PERCENTAGE RATE
%
TOTAL PREMIUMS must agree with Block "A" Above TOTAL $
</TABLE>
SECURITY AGREEMENT
1. DEFINITIONS: The above named insured ("the insured") is the debtor. Afco
Credit Corporation ("Afco") is the lender to whom the debt is owed. Singular
words shall mean plural and vice versa as may be required in order to give the
Agreement meaning. "insurance company or company", "insurance policy or policy"
and "premium" refer to those items listed under "Schedule of Policies".
2. PROMISE OF REPAYMENT: The insured requests Afco to pay the premiums on the
policies shown above. The insured promises to pay to Afco at its office the
amount stated in Block E above, according to the Payment Schedule shown above
subject to the rest of the terms of this contract.
3. SECURITY INTEREST: The insured assigns to Afco as security for the total
amount payable in this Agreement any and all unearned premiums and dividends
which may become payable under the insurance policies and loss payments which
reduce the unearned premiums, subject to any mortgagee or loss payee interests.
The insured gives to Afco a security interest in all items mentioned in this
paragraph.
THE INSURED AGREES TO THE
PROVISIONS ABOVE AND ON THE REVERSE SIDE
----------------------------------------
NOTICE: READ BOTH SIDES OF THIS AGREEMENT BEFORE SIGNING
______________________________________________________________
DATE__________ SIGNATURE OF INSURED(S) OR DULY AUTHORIZED AGENT OF INSURED(S)
PRODUCER'S REPRESENTATIONS
The undersigned warrants and agrees:
(1) the insured has received a copy of this agreement, and the Required Federal
Truth-in-Lending Disclosures for Personal Lines Insurance, if applicable, (2)
the policies are in full force and effect and the information in the schedule
of policies and the premiums are correct, (3) the insured has authorized
this transaction and recognizes the security interest assigned herein, (4)
to hold in trust for Afco any payments made or credited to the insured through
or to the undersigned, directly, indirectly, actually or constructively by any
of the insurance companies and to pay the monies to Afco upon demand to satisfy
the then outstanding indebtedness of the insured and that any lien the
undersigned now has or hereafter may acquire on any return premium arising out
of the above listed insurance policies is subordinated to Afco's lien or
security interest therein, (5) there are no exceptions to the policies financed
other than those indicated and the policies comply with Afco's eligibility
requirements (6) No Audit or Reporting Form Policies, policies subject to
Retrospective Rating or to minimum earned premiums are included except as
indicated and that the Deposit or Provisional Premiums are not less than
anticipated premiums to be earned for the full term of the policies, if policy
is subject to minimum earned premium, it is $__________.
(7) The policies can be cancelled by the insured or the company on 10 days
notice and the unearned premiums will be computed on the standard short rate or
pro rata table except as indicated.
(8) The undersigned represents that a proceeding in bankruptcy, receivership or
insolvency has not been instituted by or against the named insured or if the
named insured is the subject of such a proceeding, it is noted on the premium
finance agreement in the space in which the insured's name and address is
placed.
Indicate Policy & Prefix
Number of exceptions
___________________
____________________________
Date__________ SIGNATURE OF AGENT OR BROKER
<PAGE>
2 col (12/95) copyright 1995 Afco Credit Corporation
REMAINING PROVISIONS OF SECURITY AGREEMENT
4. DEFAULT CHARGES: if the insured is more than 5 days late in making an
installment payment to Afco, then the insured will pay to Afco, in addition
to the installment, a default charge of 5% of the unpaid balance of the
delinquent installment but at least $1. If the insured lives in Ohio or West
Virginia, the maximum default charge shall be $5.
5. FINANCE CHARGE: The finance charge shown in Box D begins to accrue as of the
earliest policy effective date.
6. THIS AGREEMENT BECOMES A CONTRACT: This Agreement becomes a binding contract
when Afco makes a written acceptance to the insured.
7. WARRANT OF ACCURACY: The insured warrants to Afco that the insurance
policies listed in the schedule have been issued to the insured and are in full
force and effect and that the insured has not assigned any interest in the
policies except for the interest of mortgagees and loss payees.
8. REPRESENTATION OF SOLVENCY: The insured represents that the insured is not
insolvent or presently the subject of any insolvency proceeding.
9. CANCELLATION: Afco may cancel the insurance policies and the unpaid balance
due to Afco shall be immediately payable by the insured if any of the following
occur:
(a) The insured does not pay any installment according to the terms of
this Agreement.
(b) The insured does not comply with any of the terms of this Agreement.
(c) The insured or the insurer voluntarily or involuntarily becomes the
subject of a bankruptcy, receivership or any other kind of insolvency
proceeding.
(d) If the insured is a business and stops doing business or ceases to be
qualified to do business.
Afco at its option may enforce payment of this debt without recourse to the
security given to Afco.
10. POWER OF ATTORNEY: The insured irrevocably appoints Afco its Attorney-In-
Fact with full authority to cancel the insurance policies, receive all sums
assigned to Afco or in which it has granted Afco a security interest and Afco
may execute and deliver on the insured's behalf all documents, instruments of
payment, forms and notices of any kind relating to the insurance policies in
furtherance of this Agreement.
11. MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to Afco after
Afco's Notice of Cancellation of the insurance policies has been mailed may be
credited to the insured's account without affecting the acceleration of this
Agreement and without any liability or obligation on Afco's part to request the
reinstatement of the cancelled insurance policies. Any money Afco receives from
an insurance company shall be credited to the amount due Afco with any surplus
being paid over to whomever is entitled to the money. No refund of less than
$1.00 shall be made. If there is a balance due after Afco receives the unearned
premiums, dividends or loss payments from the insurance company then the insured
will pay the balance to Afco with interest at the rate shown in this contract.
12. REFUND CREDIT: The insured will receive a refund credit of the finance
charge if the account is voluntarily prepaid in full prior to the last
installment due date. The refund shall be computed according to the Rule of 78s
subject to a $10 (for Kentucky insureds $15) nonrefundable charge. If the
refund credit is less than $1, no refund shall be made.
13. INSURANCE AGENT OR BROKER: The insurance agent or broker named on this
Agreement is the insured's agent, not Afco's and Afco is not legally bound by
anything the agent or broker represents to the insured, orally or in writing.
14. SPECIAL INSURANCE POLICIES: If the insurance policy issued to the insured
is auditable or is a reporting form policy or subject to retrospective rating,
then the insured promises to pay the insurance company the earned premium
computed in accordance with the policy provisions which is in excess of the
amount of premium advanced by Afco which the insurance company retains.
15. CANCELLATION CHARGES: If Afco cancels the insurance policies, then the
insured will pay Afco a cancellation charge equal to the difference between $5
and the default charge. (Not applicable to Kentucky insureds.)
16. ATTORNEY FEES: If, for collection, this Agreement is placed in the hands
of an attorney who is not a salaried employee of Afco, then the insured agrees
to pay to Afco reasonable attorney fees. (Not applicable to Kentucky insureds.)
17. SUCCESSORS AND ASSIGNS: All legal rights given to Afco shall benefit Afco's
successors and assigns. The insured agrees not to assign the policy without
Afco's written consent except for the interest of mortgagees and loss payees.
18. ADDITIONAL PREMIUMS: The money paid by Afco is only for the premium as
determined at the time the insurance policy is issued. Afco's payment shall
not be applied by the insurance company to pay for any additional premiums owed
by the insured as a result of any type of misclassification of the risk.
The insured agrees to pay the company any additional premiums which become due
for any reason. Afco may assign to the company any rights it has against the
insured for premiums due the company in excess of the premiums returned to Afco.
19. AGENT'S WARRANTIES: To convince Afco to enter this Agreement and accept the
security underlying this Agreement, the person executing this Agreement, if not
the insured, warrants severally and as the duly authorized agent of the insured:
that he is the duly authorized agent of the insured appointed specifically to
enter into this transaction on the insured's behalf; that he can perform any act
the insured could or should perform with respect directly, indirectly, actually
or constructively, by any of the insurance companies and that he will pay the
monies to Afco upon demand to satisfy the then outstanding indebtedness of the
insured.
<PAGE>
PREMIUM FINANCE AGREEMENT -- North & South Carolina
North Carolina
License No. B-30
AFCO PERSONAL
COMMERCIAL
(CHECK APPROPRIATE BOX)
401 Washington Avenue/P.O. Box 27413/Baltimore, MD 21285
Tel. No. (410) 296-5000
A TOTAL PREMIUMS Agent Producer Code No. Insured
$ (Name and (Name and Residence
Place of or Business Address)
Business)
B Down Payment
$ Zip Code ___________ Zip Code ________
<TABLE>
<CAPTION>
Payment Schedule
<S> <C> <C> <C> <C>
C Amount
Financed Number of Payments Amount of Payments When Payments are Due
(A Minus B)
$ $ First Installment Due Installment Due
Dates
</TABLE>
SCHEDULE OF POLICIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
D Finance Policy Prefix Effective Name of Insurance Type of Months Premium
Charge and Number Date of Company and Name Cover Covered $
$ Policy/ and Address of by
Annual General or Policy Prem.
Installment Issuing Agent
</TABLE>
E TOTAL
OF PAYMENTS
(C Plus D)
$
F ANNUAL
PERCENTAGE
RATE
%
TOTAL PREMIUMS must agree with Block "A" Above - Total $
SECURITY AGREEMENT
1. DEFINITIONS: The above named insured ("the insured") is the debtor. Afco
Credit Corporation ("Afco") is the lender to whom the debt is owed. Singular
words shall mean plural and vice versa as may be required in order to give the
Agreement meaning. "insurance company or company", "insurance policy or policy"
and "premium" refer to those items listed under "Schedule of Policies".
2. PROMISE OF REPAYMENT: The insured requests Afco to pay the premiums on
the policies shown above. The insured promises to pay to Afco at its office the
amount stated in Block E above, according to the Payment Schedule shown above
subject to the rest of the terms of this contract.
NOTICE: 1. DO NOT SIGN THIS AGREEMENT BEFORE YOU READ IT.
2. YOU ARE ENTITLED TO A COPY OF THIS AGREEMENT.
2. UNDER THE LAW, YOU HAVE THE RIGHT TO PAY OFF IN ADVANCE THE FULL AMOUNT DUE
AND UNDER CERTAIN CONDITIONS TO OBTAIN A PARTIAL REFUND OF THE SERVICE CHARGE.
FOR SOUTH CAROLINA ONLY THE INSURED AGREES TO THE PROVISIONS
ABOVE AND ON THE REVERSE SIDE
DATE SIGNATURE OF INSURED(S)
PRODUCER'S REPRESENTATIONS
The undersigned warrants and agrees: (1) the insured has received a copy of this
agreement, and the Required Federal Trust-in-Lending Disclosures for Personal
Lines Insurance, if applicable, (2) the policies are in full force and effect
and the information in the schedule of policies and the premiums are correct,
(3) the insured has authorized this transaction and recognizes the security
interest assigned herein, (4) to hold in trust for Afco any payments made or
credited to the insured through or to the undersigned, directly, indirectly,
actually or constructively by any of the insurance companies and to pay the
monies to Afco upon demand to satisfy the then outstanding indebtedness of the
insured and that any lien the undersigned now has or hereafter may acquire on
any return premium arising out of the above listed insurance policies is
subordinated to Afco's lien or security interest therein, (5) there are no
exceptions to the policies financed other than those indicated and the policies
comply with Afco's eligibility requirements (6) No Audit or Reporting Form
Policies, policies subject to Retrospective Rating or to minimum earned premiums
are included except as indicated and that the Deposit or Provisional Premiums
are not less than anticipated premiums to be earned for the full term of the
policies, if policy is subject to minimum earned premium, it is $ . (7) The
policies can be cancelled by the insured or the company on 10 days notice and
the unearned premiums will be computed on the standard short rate or pro rata
table except as indicated. (8) The undersigned represents that a proceeding in
bankruptcy, receivership or insolvency has not been instituted by or against the
named insured or if the named insured is the subject of such a proceeding, it is
noted on the premium finance agreement in the space in which the insured's name
and address is placed.
Indicate Policy & Prefix
Number of Execeptions
_____________________________
_____________________________
Date SIGNATURE OF AGENT OR BROKER
<PAGE>
REMAINING PROVISIONS OF SECURITY AGREEMENT
3. SECURITY INTEREST: The insured assigns to Afco as security for the total
payable in this Agreement any and all unearned premiums and dividends which may
become payable under the insurance policies and loss payments which reduce the
unearned premiums, subject to any mortgagee or loss payee interests. The
insured gives to Afco a security interest in all items mentioned in this
paragraph.
4. DEFAULT CHARGES: If the insured is more than 5 days late in making an
installment payment to Afco, then the insured will pay to Afco, in addition to
the installment, a default charge of 5% of the unpaid balance of the delinquent
installment but will be at least $1. In South Carolina, if the loan is
primarily for personal, family or household purposes, the default charge shall
not exceed $5.
5. FINANCE CHARGE: The finance charge shown in Box D begins to accrue as
of the earliest policy effective date.
6. THIS AGREEMENT BECOMES A CONTRACT: This Agreement becomes a binding
contract when Afco mails a written acceptance to the insured. The written
acceptance shall be a part of this Agreement.
7. WARRANTY OF ACCURACY: The insured warrants to Afco that the insurance
policies listed in the schedule have been issued to the insured and are in full
force and effect and that the insured has not assigned any interest in the
policies except for the interest of mortgagees and loss payees.
8. REPRESENTATION OF SOLVENCY: The insured represents that the insured is not
insolvent or presently the subject of any insolvency proceeding.
9. CANCELLATION: Afco may cancel the insurance policies and the unpaid balance
due to Afco shall be immediately payable by the insured if any of the following
occur:
(a) The insured does not pay any installment according to the terms of
this Agreement.
(b) The insured does not comply with any of the terms of this Agreement.
(c) The insured or the insurer voluntarily or involuntarily becomes the
subject of a bankruptcy, receivership or any other kind of insolvency
proceeding. (Not applicable to South Carolina insureds.)
(d) If the insured is a business and stops doing business or ceases to be
qualified to do business.
Afco at its option may enforce payment of this debt without recourse to the
security given to Afco.
10. POWER OF ATTORNEY: The insured irrevocably appoints Afco its Attorney-In-
Fact with full authority to cancel the insurance policies, receive all sums
assigned to Afco or in which it has granted Afco a security interest and Afco
may execute and deliver on the insured's behalf all documents, instruments of
payment, forms and notices of any kind relating to the insurance policies in
furtherance of this Agreement.
11. MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to Afco after
Afco's Notice of Cancellation of the insurance policies has been mailed may be
credited to the insured's account without affecting the acceleration of this
Agreement and without any liability or obligation on Afco's part to request the
reinstatement of the cancelled insurance policies. Any money Afco receives
from an insurance company shall be credited to the amount due Afco with any
surplus being paid over to whomever is entitled to the money. No refund of less
than $1 shall be made. If there is a balance due after Afco receives the
unearned premiums, dividends or loss payments from the insurance company then
the insured will pay the balance to Afco with interest at the rate shown in this
contract.
12. REFUND CREDIT: The insured will receive a refund credit of the finance
charge if the account is voluntarily prepaid in full prior to the last
installment due date. The refund shall be computed according to the Rule of 78s
(short rate basis for South Carolina insureds) subject to a $15 nonrefundable
charge. If the
refund credit is less than $1 ($3 for South Carolina insureds), no refund shall
be made.
13. INSURANCE AGENT OR BROKER: The insurance agent or broker named on this
Agreement is the insured's agent, not Afco's and Afco is not legally bound by
anything the agent or broker represents to the insured, orally or in writing.
14. SPECIAL INSURANCE POLICIES: If the insurance policy issued to the insured
is auditable or is a reporting form policy or subject to retrospective rating,
then the insured promises to pay the insurance company the earned premium
computed in accordance with the policy provisions which is in excess of the
amount of premium advanced by Afco which the insurance company retains.
15. SUCCESSORS AND ASSIGNS: All legal rights given to Afco shall benefit Afco's
successors and assigns. The insured agrees not to assign the policy without
Afco's written consent except for the interest of mortgagees and loss payees.
16. ADDITIONAL PREMIUMS: The money paid by Afco is only for the premium as
determined at the time the insurance policy is issued. Afco's payment shall
not be applied by the insurance company to pay for any additional premiums
owed by the insured as a result of any type of misclassification of the risk.
The insured agrees to pay the company any additional premiums which become due
for any reason. Afco may assign to the company any rights it has against the
insured for premiums due the company in excess of the premiums returned to Afco.
17. DISHONORED CHECK: In North Carolina, if an insured's check is dishonored
for any reason, the insured will pay to Afco the expense incurred in processing
that check not to exceed $10.
<PAGE>
PREMIUM FINANCE AGREEMENT -- Texas
AFCO PERSONAL
COMMERCIAL
(CHECK APPROPRIATE BOX)
A TOTAL PREMIUMS Agent Producer Code No. Insured
$ (Name and (Name and Residence
Place of or Business Address)
Business)
B Down Payment
$ Zip Code ___________ Zip Code ________
<TABLE>
<CAPTION>
Payment Schedule
<S> <C> <C> <C> <C>
C Amount
Financed Number of Payments Amout of Payments When Payments are Due
(A Minus B) $ First Installment Due Installment Due
$ Dates
</TABLE>
SCHEDULE OF POLICIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
D Finance Policy Prefix Effective Name of Insurance Type of Months Premium
Charge Number Date of Company and Name Cover Covered $
$ Policy/ and Address of by
Annual General or Policy Prem.
Installment Issuing Agent
</TABLE>
E TOTAL
OF PAYMENTS
(C Plus D)
$
F ANNUAL
PERCENTAGE
RATE
%
TOTAL PREMIUMS must agree with Block "A" Above - Total $
SECURITY AGREEMENT
1. DEFINITIONS: The above named insured ("the insured") is the debtor. Afco
Credit Corporation ("Afco") is the lender to whom the debt is owed. Singular
words shall mean plural and vice versa as may be required in order to give the
agreement meaning. "insurance company or company", "insurance policy or policy"
and "premium" refer to those items listed under "Schedule of Policies".
2. PROMISE OF REPAYMENT: The insured requests Afco to pay the premiums on
the policies shown above. The insured promises to pay to Afco at its office the
amount stated in Block E above, according to the Payment Schedule shown above
subject to the rest of the terms of this contract.
3. SECURITY INTEREST: The insured assigns to Afco as security for the total
amount payable in this Agreement and any and all unearned premiums and dividends
which may become payable under the insurance policies and loss payments which
reduce the unearned premiums, subject to any mortgagee or loss payee interests.
The insured gives to Afco a security interest in all items mentioned in this
paragraph.
4. DEFAULT CHARGES: If the insured is more than 10 days (5 days for
Louisiana commercial insureds) late in making an installment payment to Afco,
the the insured will pay to Afco in addition to the installment, a default
charge of 5% of the unpaid balance of the delinquent installment. (Louisiana
consumer insureds will not be charged more than $15.)
THE INSURED AGREES TO THE
PROVISIONS ABOVE AND ON THE REVERSE SIDE
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Date_____________ Signature of Insured(s) or duly authorized agent of insured(s)
PRODUCER'S REPRESENTATIONS
The undersigned warrants and agrees:
(1) the insured has received a copy of this agreement, and the Required
Federal Truth-in-Lending Disclosures for Personal Lines Insurance, if
applicable, (2) the policies are in full force and effect and the information in
the schedule of policies and the premiums are correct, (3) the insured has
authorized this transaction and recognizes the security interest assigned
herein, (4) to hold in trust for Afco any payments made or credited to the
insured through or to the undersigned directly, indirectly, actually or
constructively by any of the insurance companies and to pay the monies to Afco
upon demand to satisfy the then outstanding indebtedness of the insured and that
any lien the undersigned now has or hereafter may acquire on any return premium
arising out of the above listed insurance policies is subordinated to Afco's
lien or security interest therein, (5) there are no exceptions to the policies
financed other than those indicated and the policies comply with Afco's
eligibility requirements (6) No Audit or Reporting Form Policies, policies
subject to Retrospective Rating or to minimum earned premiums are included
except as indicated and that the Deposit or Provisional Premiums are not less
than anticipated premiums to be earned for the full term of the policies, if
policy is subject to minimum earned premium, it is $______. (7) The policies can
be cancelled by the insured or the company on 10 days notice and the unearned
prmeiums will be computed on the standard short rate or pro rata table except as
indicated. (8) The undersigned represents that a proceeding in bankruptcy
receivership or insolvency has not been instituted by or against the named
insured or if the named insured is the subject of such a proceeding, it is noted
on the premium finance agreement in the space in which the insured's name and
address is placed.
INDICATE POLICY & PREFIX
NUMER OF EXCEPTIONS
Date ______________________ ____________________________
Signature of Agent or Broker
<PAGE>
REMAINING PROVISIONS OF SECURITY AGREEMENT
5. FINANCE CHARGE: The finance charge shown in Box D begins to accrue as of
the earliest policy effective date.
6. THIS AGREEMENT BECOMES A CONTRACT: This Agreement becomes a binding
contract when Afco mails a written acceptance to the insured.
7. WARRANTY OF ACCURACY: The insured warrants to Afco that the insurance
policies listed in the above schedule have been issued to the insured and are
in full force and effect and that the insured has not assigned any interest in
the policies except for the interest of mortgagees and loss payees.
8. REPRESENTATION OF SOLVENCY: The insured represents that the insured is
not insolvent or presently the subject of any insolvency proceeding.
9. CANCELLATION: Afco may cancel the insurance policies and the unpaid
balance due to Afco shall be immediately payable by the insured if any of the
following occur:
(a) The insured does not pay any installment according to the terms
of this Agreement.
(b) The insured does not comply with any of the terms of this
Agreement.
(c) The insured or the insurer voluntarily or involuntarily becomes
the subject of a bankruptcy, receivership or any other kind of
insolvency proceeding.
(d) If the insured is a business and stops doing business or ceases
to be qualified to do business.
Afco at its option may enforce payment of this debt without recourse to the
security given to Afco.
10. POWER OF ATTORNEY: The insured irrevocably appoints Afco its
Attorney-In-Fact with full authority to cancel the insurance policies, receive
all sums assigned dto Afco or in which it has granted Afco a security interest
and Afco may execute and deliver on the insured's behalf all documents,
instruments of payment, forms and notices of any kind relating to the insurance
policies in furtherance of this Agreement.
11. MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to Afco
after Afco's Notice of Cancellation of the insurance policies has been mailed
may be credited to the insured's account without affecting the acceleration of
this Agreement and wihtout any liabilitiy or obligation on Afco's part to
request the reinstatement of the cancelled policies. Any money Afco receives
from an insurance company shall be credited to the amount due Afco with any
surplus being paid over to whomever is entitled to the money. No refund of less
than $1.00 shall be made. If there is a balance due after Afco receives the
unearned premiums, dividends or loss payments from the insurance company then
the insured will pay the balance to Afco with interest at the rate shown in this
contract.
12. REFUND CREDIT: The insured will receive a refund credit of the finance
charge if the account is voluntarily prepaid in full prior to the last
installment due date. The refund shall be computed according to the Rule of
78s. However, for Texas insureds if prepayment in full occurs before the first
installment due date, Afco may only keep a finance charge computed according to
the following formula: Number of days from inception of the policy to
prepayment in full multiplied by one month's interest computed according to the
Rule of 78s divided by 30. If the refund credit is less than $1 no refund
shall be made. Louisiana insureds are subject to a nonrefundable charge of
$10.
13. INSURANCE AGENT OR BROKER: The insurance agent or broker named on this
Agreement is the insured's agent, not Afco's and Afco is not legally bound by
anything the agent or broker represents to the insurer, orally or in writing.
14. SPECIAL INSURANCE POLICIES: If the insurance policy issued to the
insured is auditable or is a reporting form policy or subject to retrospective
rating, then the insured promises to pay the insurance company the earned
premium computed in accordance with the policy provisions which is in excess of
the amount of premium advanced by Afco which the insurance company retains.
15. CANCELLATION CHARGES: (Louisiana iinsureds only) If Afco cancels a
policy, then the insured will pay to Afco a cancellation charge of $25.
16. ATTORNEY FEES AND COURT COSTS: Louisiana insureds agree to pay 25% of
the amount due as attorney fees. Texas insureds agree that if, for collection,
this Agreement is placed in the hands of an attorney who is not a salaried
employee of Afco, then the insured agrees to pay to Afco all court costs
actually incurred and reasonable attorney fees assessed by a court.
17. SUCCESSORS AND ASSIGNS: All legal rights given to Afco shall benefit
Afco's successors and assigns. The insured agrees not to assign the policy
without Afco's written consent except for the interest of mortgages and loss
payees.
18. ADDITIONAL PREMIUMS:
(a) If an additional premium becomes due on the policy, the insured
gives Afco the right to pay the additional premium and to amend
this contract. For Texas insureds, the additional premium may be
added to this Agreement only if a Memorandum of Agreement
between the agent and insured is given to the insured before the
first installment due date of the amended Agreement.
(b) The money paid by Afco is only for the premium as determined at
the time the insurance policy is issued. Afco's payment shall not
be applied by the insurance company to pay for any additional
premiums owed by the insured as a result of any type of
misclassification of the risk. If additional premiums are not paid
by Afco, the insured agrees to pay the company any additional
premiums, which become due for any reason. Afco may assign to the
company any rights it has against the insured for premiums due the
company in excess of the premiums returned to Afco.
19. AGENT'S WARRANTIES: To convince Afco to enter this Agreement and accept
the security underlying this Agreement, the person executing this Agreement, if
not the insured, warrants severally and as the duly authorized agent of the
insured: that he is the duly authorized agent of the insured appointed
specifically to enter into this transaction on the insured's behalf; that he
can perform any act the insured could or should perform with respect to this
transaction; that he will hold in trust for Afco any payments made or credited
to the insured through the undersigned or to the undersigned directly,
indirectly, actually or
constructively, by any of the insurance companies and that he will pay the
monies to Afco upon demand to satisfy the then outstanding indebtedness of the
insured.
<PAGE>
PREMIUM FINANCE AGREEMENT
401 Washington Avenue/P.O. Box 27413/Baltimore, MD 21285
Tel. No. (410)296-5000
VAIPF / / PERSONAL
LICENSE NO. 10 / / COMMERICAL
AFCO (CHECK APPROPRIATE BOX)
A TOTAL PREMIUMS Agent Producer Code No. Insured
$ (Name and (Name and Residence
Place of or business address)
Business)
B Down Payment
$ Zip Code ___________ Zip Code ________
<TABLE>
<CAPTION>
Payment Schedule
<S> <C> <C> <C> <C>
C Amount
Financed Number of Payments Amout of Payments When Payments are Due
(A Minus B) $ First Installment Due Installment Due
$ Dates
</TABLE>
SCHEDULE OF POLICIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
D Finance Policy Prefix Effective Name of Insurance Type of Months Premium
Charge Number Date of Company and Name Cover Covered $
$ Policy/ and Address of by
Annual General or Policy Prem.
Installment Issuing Agent
</TABLE>
E TOTAL
OF PAYMENTS
(C Plus D)
$
F ANNUAL
PERCENTAGE
RATE
%
TOTAL PREMIUMS must agree with Block "A" Above - Total $
SECURITY AGREEMENT
1. DEFINITIONS: The above named insured ("the insured") is the debtor. Afco
Credit Corporation ("Afco") is the lender to whom the debt is owed. Singular
words shall mean plural and vice versa as may be required in order to give the
agreement meaning. "insurance company or company", "insurance policy or policy"
and "premium" refer to those items listed under "Schedule of Policies".
2. PROMISE OF REPAYMENT: The insured requests Afco to pay the premiums on
the policies shown above. The insured promises to pay to Afco at its office the
amount stated in Block E above, according to the Payment Schedule shown above
subject to the rest of the terms of this contract.
3. POWER OF ATTORNEY: The insured irrevocably appoints Afco its Attorney-
In-Fact with full authority to cancel the insurance policies, receive all sums
assigned to Afco or in which it has granted Afco a security interest and Afco
may execute and deliver on the insured's behalf all documents, instruments of
payment, forms and notices of any kind relating to the insurance policies in
furtherance of this Agreement.
4. DEFAULT CHARGES: If the insured is more than 7 days late in making an
installment payment to Afco, then the insured will pay to Afco, in addition to
the installment, a default charge of 5% of the unpaid balance of the delinquent
installment.
THE INSURED AGREES TO THE
PROVISIONS ABOVE AND ON THE REVERSE SIDE
-------------------------------------------------------------------
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SIGNATURE OF INSURED(S)
Date________
PRODUCER'S REPRESENTATIONS
The undersigned warrants and agrees:
(1) the insured has received a copy of this agreement, and the Required
Federal Truth-in-Lending Disclosures for Personal Lines Insurance, if
applicable, (2) the policies are in full force and effect and the information in
the schedule of policies and the premiums are correct, (3) the insured has
authorized this transaction and recognizes the security interest assigned
herein, (4) to hold in trust for Afco any payments made or credited to the
insured through or to the undersigned directly, indirectly, actually or
constructively by any of the insurance companies and to pay the monies to Afco
upon demand to satisfy the then outstanding indebtedness of the insured and that
any lien the undersigned now has or hereafter may acquire on any return premium
arising out of the above listed insurance policies is subordinated to Afco's
lien or security interest therein, (5) there are no exceptions to the policies
financed other than those indicated and the policies comply with Afco's
eligibility requirements (6) No Audit or Reporting Form Policies, policies
subject to Retrospective Rating or to minimum earned premiums are included
except as indicated and that the Deposit or Provisional Premiums are not less
than anticipated premiums to be earned for the full term of the policies, if
policy is subject to minimum earned premium, it is $______. (7) The policies can
be cancelled by the insured or the company on 10 days notice and the unearned
prmeiums will be computed on the standard short rate or pro rata table except as
indicated. (8) The undersigned represents that a proceeding in bankruptcy
receivership or insolvency has not been instituted by or against the named
insured or if the named insured is the subject of such a proceeding, it is noted
on the premium finance agreement in the space in which the insured's name and
address is placed.
INDICATE POLICY & PREFIX
NUMER OF EXCEPTIONS
Date ______________________ ____________________________
Signature of Agent or Broker
<PAGE>
REMAINING PROVISIONS OF SECURITY AGREEMENT
5. SECURITY INTEREST: The insured assigned to Afco as security for the
total
amount payable in this Agreement any and all unearned premiums and dividends
which may become payable under the insurance policies. The insured gives to
Afco a security interest in all items mentioned in this paragraph.
6. FINANCE CHARGE: The finance charge shown in Box D begins to accrue as
of the earliest policy effective date.
7. THIS AGREEMENT BECOMES A CONTRACT: This Agreement becomes a binding
contract when Afco accepts it and mails a written acceptance to the insured.
8. WARRANTY OF ACCURACY: The insured warrants to Afco that the insurance
policies listed in the above schedule have been issued to the insured and are
in full force and effect and that the insured has not assigned any interest in
the policies except for the interest of mortgagees and loss payees.
9. REPRESENTATION OF SOLVENCY: The insured represents that the insured is
not insolvent or presently the subject of any insolvency proceeding.
10. CANCELLATION: Afco may cancel the insurance policies and the unpaid
balance due to Afco shall be immediately payable by the insured if the insured
does not pay any installment according to the terms of this Agreement, or upon
the transfer or assignment of the scheduled policies without the consent of
Afco. Afco at its option may enforce payment of this debt without recourse to
the security given to Afco.
11. MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to Afco
after Afco's Notice of Cancellation of the insurance policies has been mailed
may be credited to the insured's account without affecting the acceleration of
this Agreement and without any liability or obligation on Afco's part to request
the reinstatement of the cancelled insurance policies. Any money Afco receives
from an insurance company shall be credited to the amount due Afco with any
surplus being paid over to whomever is entitled to the money. If there is a
balance due after Afco reveives the unearned premiums, dividends or loss
payments from the insurance company then the insured will pay the balance to
Afco with interest at the rate shown in this contract.
12. REFUND CREDIT: The insured will receive a refund credit of the finance
charge if the account is voluntarily prepaid in full prior to the last
installment due date. The refund shall be computed according to the Rule of 78s
subject to a $15.00 nonrefundable charge.
13. INSURANCE AGENT OR BROKER: The insurance agent or broker named on this
Agreement is the insured's agent, not Afco's and Afco is not legally bound by
anything the agent or broker represents to the insured, orally or in writing.
14. SPECIAL INSURANCE POLICIES: If the insurance policy issued to the
insured is auditable or is a reporting form policy or subject to retrospective
rating, then the insured promises to pay the insurance company the earned
premium computed in accordance with the policy provisions which is in excess
of the amount of premium advanced by Afco which the insurance company retains.
15. RETURNED CHECK CHARGE: Afco may charge and collect a fee, not to exceed
$15.00, for each check returned to Afco because the drawer had no account or
insufficient funds in the payor bank.
16. ATTORNEY FEES: If, for collection, this Agreement is placed in the
hands of an attorney who is not a salaried employee of Afco, then the insured
agrees to pay to Afco a reasonable attorney fee as assessed by a court in its
judgment.
17. SUCCESSOR AND ASSIGNS: All legal rights given to Afco shall benefit
Afco's successors and assigns. The insured agrees not to assign the policy
without Afco's written consent except for the interest of mortgagees and loss
payees.
18. ADDITIONAL PREMIUMS: The money paid by Afco is only for the premium as
determined at the time the insurance policy is issued. Afco's payment shall
not be applied by the insurance company to pay for any additional premiums
owed by the insured as a result of any type of misclassification of the risk.
The insured agrees to pay the company any additional premiums which become due
for any reason. Afco may assign to the company any rights it has against the
insured for premiums due the company in excess of the premiums returned to
Afco.
