As filed with the Securities and Exchange Commission on November 13, 1996
Registration No. 333-12843
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
AMENDMENT NO. 1
TO
Form S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------------------
NationsFinancial Auto Owner Trust 1996-1
(Issuer of the Securities)
NationsFinancial Funding Corporation
(Seller)
-----------------------------
Delaware
(State or other jurisdiction of incorporation or organization)
-----------------------------
Applied for
(I.R.S. Employer Identification Number)
-----------------------------
2 Concourse Parkway, NE
Suite 745
Atlanta, Georgia 30328
(770) 394-1900
(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive office)
John B. Stockton, Esq.
Senior Vice President
NationsCredit Commercial Corporation
One Canterbury Green
Stamford, Connecticut 06901
(203) 352-4134
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Reed D. Auerbach, Esq. Robert W. Long, Jr.
Stroock & Stroock & Lavan NationsBank Corporation
Seven Hanover Square 100 North Tryon Street
New York, New York 10004-2696 Charlotte, North Carolina 28255
--------------------------------------
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
|-|
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act 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. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================================
<S> <C> <C> <C> <C>
Proposed
Amount Maximum Proposed Maximum Amount of
Title of Each Class of Securities to be Aggregate Price Aggregate Registration
Being Registered Registered(1) per Unit(2) Offering Price Fee
- ---------------------------------------------------------------------------------------------------------------------------
Asset Backed Notes; Asset Backed $1,000,000 100% $1,000,000 $344.83
Certificates
===========================================================================================================================
</TABLE>
(1) An indeterminate amount of Asset Backed Notes and Asset Backed Certificates
(together, the "Securities") are also being registered for the purpose of
market-making transactions by an affiliate of the Registrant.
(2) Estimated solely for purposes of calculating the registration fee.
-----------------------------
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 (i) a Prospectus relating to a
public offering by NationsFinancial Auto Owner Trust 1996-1 (the "Trust") of
$__________ aggregate principal amount of Class A-1 ___% Asset Backed Notes,
$________ aggregate principal amount of Class A-2 Floating Rate Asset Backed
Notes, $_______ aggregate principal amount of Class A-3 ___% Asset Backed Notes
and $__________ aggregate principal amount of ___% Asset Backed Certificates
(collectively, the "Securities"); and (ii) certain pages of a second Prospectus
to be used in connection with offers and sales relating to market-making
transactions in the Securities by an affiliate of the Registrant. The Prospectus
relating to the Securities follows immediately after this Explanatory Note.
Following such Prospectus are alternate pages of the market-making Prospectus
relating to the Securities. All other pages of the public offering Prospectus
for the Securities are also to be used for the market-making Prospectus.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1996
$------------
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
Class A-1 % Asset Backed Notes
Class A-2 Floating Rate Asset Backed Notes
$___________ Class A-3 % Asset Backed Notes
___________ % Asset Backed Certificates
NationsFinancial Funding Corporation
Seller
SunStar Acceptance Corporation
Servicer
The NationsFinancial Auto Owner Trust 1996-1 (the "Trust") will be
formed pursuant to a Trust Agreement to be entered into between NationsFinancial
Funding Corporation, as seller (the "Seller"), and ____________, as Owner
Trustee, and will issue $_______________ aggregate principal amount of Class A-1
% Asset Backed Notes (the "Class A-1 Notes"), $________________ aggregate
principal amount of Class A-2 Floating Rate Asset Backed Notes (the "Class A-2
Notes") and $______________ aggregate principal amount of Class A-3 % Asset
Backed Notes (the "Class A-3 Notes" and, together with the Class A-1 Notes and
the Class A-2 Notes, the "Notes"). The Notes will be issued pursuant to an
Indenture, dated as of November 30, 1996 (the "Indenture"), between the Trust
and __________________, as Indenture Trustee and as Indenture Collateral Agent
(the "Indenture Trustee" and the "Indenture Collateral Agent"). The Trust also
will issue $______________ aggregate principal amount of % Asset Backed
Certificates (the "Certificates" and, together with the Notes, the
"Securities").
Distributions of interest on the Certificates will be subordinated in
priority of payment to interest on and principal of the Notes. No principal will
be paid on the Certificates until all of the Notes have been paid in full.
The assets of the Trust (the "Trust Property") will include a pool of
non-prime retail motor vehicle installment sales contracts (the "Receivables")
secured by new and used automobiles, light trucks and vans financed thereby (the
"Financed Vehicles"), certain amounts received under each Receivable after
November 30, 1996 (the "Cutoff Date"), security interests in the Financed
Vehicles, the Certificate Policy (as defined herein) and certain other property,
as more fully described herein.
(Cover continued on next page)
For a discussion of certain factors which should be considered by
prospective purchasers of the Securities, see "Risk Factors" at page 16 herein.
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS
IN, AND ARE NOT GUARANTEED OR INSURED BY, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, ANY GOVERNMENTAL AGENCY, THE SELLER, THE SERVICER OR NATIONSBANK
CORPORATION OR ANY OF THEIR AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public (1) Discount Trust(1)(2)
<S> <C> <C> <C>
Per Class A-1 Note......................... % % %
Per Class A-2 Note......................... % % %
Per Class A-3 Note......................... % % %
Per Certificate............................ % % %
Total(3)................................... $ $ $
</TABLE>
- ------------------
(1) Plus interest at the applicable Interest Rates from ______________, 1996.
(2) Before deduction of expenses payable by the Seller, estimated to be
$______________.
(3) Excludes certain Certificates not offered hereby. See "Summary -- The
Certificates."
The Notes and the Certificates are offered by the Underwriter when, as
and if issued by the Trust, delivered to and accepted by the Underwriter, and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Securities in book-entry form will be made through the
facilities of The Depository Trust Company ("DTC") on the Same Day Funds
Settlement System on or about December __, 1996.
NationsBanc Capital Markets, Inc.
The date of this Prospectus is ________ , 1996.
<PAGE>
(Continued from preceding page)
The Notes will be secured by the assets of the Trust pursuant to the
Indenture. Interest on the Class A-1 and Class A-3 Notes will accrue at the per
annum interest rates specified above. The per annum rate of interest on the
Class A-2 Notes for each monthly interest period will equal LIBOR (as defined
herein) plus 0. %, subject to a maximum rate equal to ___% per annum. Interest
on the Notes will generally be payable on the fifteenth day of each month (each,
a "Distribution Date"), commencing in January 1997. Principal on the Notes will
be payable on each Distribution Date to the extent described herein, except that
no principal will be paid on a Class of Notes until each Class of Notes having a
lower numerical Class designation has been paid in full.
The Certificates represent fractional undivided interests in the Trust.
Interest, to the extent of the Certificate Rate of % per annum, will be
distributed to the Certificateholders on each Distribution Date. The Final
Scheduled Distribution Date for the Class A-1 Notes will be ______________,
199_, for the Class A-2 Notes will be the _____________ 200_ Distribution Date,
and for the Class A-3 Notes will be the ______________ 200_ Distribution Date.
The Final Scheduled Distribution Date for the Certificates will be the
________________ 200_ Distribution Date. However, payment in full of a Class of
Notes or the Certificates may occur earlier or later than such dates as
described herein. In addition, the Class A-3 Notes will be subject to redemption
in whole, but not in part, and the Certificates will be subject to prepayment in
whole, but not in part, on any Distribution Date on which the Servicer exercises
its option to purchase the remaining Receivables. The Servicer may exercise its
option to purchase all the remaining Receivables only when the aggregate
principal balance of the Receivables shall have declined to 5% or less of the
aggregate principal balance of the Receivables as of the Cutoff Date.
Full and timely payment on each Distribution Date of the distributions to
be made on the Notes in accordance with the original terms of the Notes (the
"Guaranteed Note Distributions") and the distributions to be made on the
Certificates in accordance with the original terms of the Certificates (the
"Guaranteed Certificate Distributions") is unconditionally and irrevocably
guaranteed pursuant to financial guaranty insurance policies (the "Policies") to
be issued by
FSA
There currently is no secondary market for the Notes or the Certificates.
The Underwriter expects to make a market in the Securities but has no obligation
to do so. There is no assurance that any such market will develop or continue or
that it will provide Securityholders with sufficient liquidity of investment.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER- ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES AND THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
AVAILABLE INFORMATION
The Seller, as sponsor of the Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended, with respect to the Securities offered
pursuant to this Prospectus. For further information, reference is made to the
Registration Statement which is available for inspection without charge at the
office of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission at Seven
World Trade Center, 13th Floor, New York, New York 10048 and at the Northwestern
Atrium Center, 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 at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, the Registration Statement may be
accessed electronically at the Commission's site on the World Wide Web located
at http://www.sec.gov.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are
issued, unaudited monthly and annual reports containing information concerning
the Receivables will be sent on behalf of the Trust to Cede & Co., as registered
holder of the Notes and the Certificates and the nominee of DTC. See
"Description of the Purchase Agreement and the Trust Documents -- Statements to
Securityholders" and "Description of the Securities -- Book-Entry Registration."
Such reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. None of the Seller, the Servicer
or the Insurer intends to send any of its financial reports to Securityholders.
The Servicer, on behalf of the Trust, will file with the Commission periodic
reports concerning the Trust to the extent required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The consolidated financial statements of Financial Security Assurance
Inc. (the "Insurer") and Subsidiaries included in, or as exhibits to, the
following documents which have been filed with the Commission by Financial
Security Assurance Holdings Ltd. ("Holdings"), are hereby incorporated by
reference into this Prospectus and made a part hereof:
(a) Annual Report on Form 10-K for the year ended December 31, 1995, and
(b) Quarterly Reports on Form 10-Q for the periods ended March 31, 1996,
June 30, 1996 and September 30, 1996.
All financial statements of the Insurer and Subsidiaries included in
documents filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents.
In addition to the documents described above, all documents filed by
the Servicer on behalf of the Trust and each filing of the consolidated
financial statements of Financial Security and Subsidiaries included in, or as
exhibits to, documents filed by Holdings with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained herein or in a document all or any portion of which is deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom this
Prospectus is delivered, on the written or verbal request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits). Requests for such copies should be directed to Donald Combs,
President, and Chief Operating Officer, SunStar Acceptance Corporation, 2
Concourse Parkway, NE, Suite 745, Atlanta, Georgia 30328 (telephone (770)
394-1900).
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
ascribed to such terms on the pages of the Prospectus indicated in the "Index of
Terms", found on page __.
Issuer........................ NationsFinancial Auto Owner Trust 1996-1 (the
"Trust" or the "Issuer"), a Delaware business
trust to be formed pursuant to a Trust
Agreement, dated as of November 30, 1996
(the "Trust Agreement"), between the Seller
and the Owner Trustee.
Seller........................ NationsFinancial Funding Corporation (the
"Seller"), a Delaware corporation and a
wholly-owned subsidiary of SunStar Acceptance
Corporation. See "The Seller."
Servicer...................... SunStar Acceptance Corporation (in its
individual capacity, "SunStar" and, as
servicer, the "Servicer"), a Delaware
corporation and a wholly-owned subsidiary
of NationsBank Corporation ("NationsBank").
See "SunStar Acceptance Corporation".
Insurer....................... Financial Security Assurance Inc. (the
"Insurer"), a New York financial guaranty
insurance company. See "The Insurer."
Indenture Trustee............. _____________________ (the "Indenture
Trustee"). See "The Notes -- The Indenture
Trustee."
Owner Trustee................. _____________________ (the "Owner Trustee").
See "The Trust -- The Owner Trustee."
Cutoff Date................... November 30, 1996.
Closing Date.................. December __, 1996.
The Notes..................... The Trust will issue Class A-1 % Asset Backed
Notes (the "Class A-1 Notes") in the aggregate
original principal amount of
$_____________, Class A-2 Floating Rate Asset
Backed Notes (the "Class A-2 Notes") in the
aggregate original principal amount
of $____________, and Class A-3 % Asset
Backed Notes (the "Class A-3 Notes") in the
aggregate original principal amount of
$___________. The Class A-1 Notes, the Class
A-2 Notes and the Class A-3 Notes (collectively,
the "Notes") will be issued pursuant
to an Indenture, dated as of November 30, 1996
(the "Indenture"), between the Issuer, the
Indenture Trustee and _________________________,
as Indenture Collateral Agent
(the "Indenture Collateral Agent") for the
benefit of the Insurer and the Indenture Trustee
on behalf of holders of record of the Notes
(the "Noteholders"). The Notes will be offered
for purchase in denominations of $1,000 and
integral multiples thereof in book-entry form
only. Persons acquiring beneficial interests in
the Notes will hold their interests through DTC.
See "Description of the Securities -- Book-Entry
Registration."
<PAGE>
The Notes will be secured
pursuant to the Indenture
by the assets of the Trust
(other than funds deposited
in an account maintained by
the Owner Trustee for the
benefit of the
Certificateholders (the
"Certificate Distribution
Account") and the financial
guaranty insurance policy
issued by the Insurer to
the Owner Trustee for the
benefit of the
Certificateholders (the
"Certificate Policy")).
The Certificates.............. The Trust will issue % Asset Backed
Certificates (the "Certificates") with an
aggregate initial principal balance of
$______________ (the "Initial Certificate
Balance"). The Certificates will represent
fractional undivided interests in the Trust
and will be issued pursuant to the Trust
Agreement. The Certificates will be offered for
purchase in denominations of $1,000 and
integral multiples thereof in book-entry form
only (other than the Certificates sold to the
Affiliated Purchaser, as described in
"The Trust -- General"). See "Description of
the Securities -- Book-Entry Registration."
Trust Property.................Each Note will represent an obligation of, and
each Certificate will represent a fractional
undivided interest in, the Trust. The assets of
the Trust (the "Trust Property") will consist of
the following: (a) a pool of Receivables (as
defined below) secured by new and used
automobiles, light trucks and vans financed
thereby (the "Financed Vehicles"), (b) all
monies received after the Cutoff Date and, with
respect to Receivables under which payments
allocable to principal are determined in
accordance with the actuarial method (the
"Precomputed Receivables"), monies received
thereunder on or prior to the Cutoff Date that
relate to scheduled payments due after
the Cutoff Date, (c) the security interests in
the Financed Vehicles granted by purchasers of
the Financed Vehicles or persons owing
payments under the Receivables (the "Obligors")
pursuant to the Receivables and any other
interest of the Seller in such Financed
Vehicles, (d) the related Receivables Files (as
defined below), (e) any proceeds with respect to
the Receivables from claims on any
physical damage, credit life and disability
insurance policies covering the Financed
Vehicles or Obligors and any proceeds from
the liquidation of the Receivables, (f) any
proceeds from the exercise of rights against the
dealers who sold the Financed
Vehicles and originated the respective
Receivables (the "Dealers")
under agreements between SunStar or an affiliate
and such Dealers (the "Dealer Agreements"), (g)
such amounts as from time to time may be held in
the Collection Account (as defined below) and the
Certificate Distribution Account, (h) all rights
under any Service Contracts (as defined below)
on the related Financed Vehicles, (i)
the Certificate Policy, (j) all of the Seller's
rights and benefits under the Purchase Agreement
(as defined below), and (k) the proceeds of
any and all of the foregoing. The Receivables
will be purchased by the Seller from SunStar
pursuant to a purchase agreement (the
"Purchase Agreement") between the Seller and
SunStar on or prior to the date of issuance of
the Securities. "Receivables Files" means
generally the original Receivables, records of
information supplied
<PAGE>
by the Obligors in the
original credit
applications, the original
certificates of title and
any other documents kept on
file by the Servicer with
respect to the Receivables.
"Service Contracts" means
agreements financed under
the related Receivables
that provide for the repair
of the related Financial
Vehicles.
Receivables....................The Receivables consist of non-prime retail
motor vehicle installment sales contracts
("Contracts") originated by Dealers and
then acquired by SunStar or an affiliate and
conveyed by SunStar to the Trust on the Closing
Date. Non-prime retail motor vehicle
installment sales contracts are contracts with
obligors or borrowers with less than perfect
credit due to various factors, including,
among other things, the manner in which such
individuals have handled previous credit,
limited prior credit history, prior
declarations of personal bankruptcy and/or
limited financial resources. The Receivables do
not include amounts (including
interest) owing under a Contract on account of
collateral protection insurance ("CPI") placed
on a Financed Vehicle prior to, on or after
the Cutoff Date ("CPI Funds"). See "SunStar
Acceptance Corporation -- General."
The Receivables have, as of
the Cutoff Date, a weighted
average annual percentage
rate ("APR") of
approximately _____%, a
weighted average original
term of _______ months and
a weighted average
remaining term of _______
months. The Receivables
have an aggregate principal
balance of $_______________
as of the Cutoff Date (the
"Original Pool Balance").
Each of the Receivables
will have a remaining term
of not more than 59 months
and not less than 3 months
as of the Cutoff Date. See
"The Receivables."
Terms of the Notes.............The principal terms of the Notes will be as
described below:
A. Distribution Dates........Payments of interest and principal on the Notes
will be made on the fifteenth day of each month
or, if the fifteenth day is not a Business
Day (as defined below), on the next following
Business Day (each, a "Distribution Date")
commencing January 1997. Payments will
be made to the Noteholders as of the Business
Day immediately preceding such Distribution Date
(a "Record Date"). A "Business
Day" is a day other than a Saturday, Sunday or
other day on which commercial banks located in
the states of Texas, Delaware or New
York are authorized or obligated to be closed.
B. Interest Rates............The Class A-1 Notes and the Class A-3 Notes will
bear interest at the respective fixed per annum
rates set forth on the cover page
hereof. The Class A-2 Notes will bear interest
at a floating rate equal to the London interbank
offered rates for one-month U.S.
dollar deposits ("LIBOR") plus 0. %, subject
to a maximum rate equal to __% per annum. Each
such interest rate for a Class of
Notes is referred to as the "Interest Rate."
C. Interest..................Interest on the principal amount of the Notes of
each Class outstanding immediately prior to a
Distribution Date will accrue at
<PAGE>
the applicable Interest
Rate from and including the
most recent Distribution
Date on which interest has
been paid (or, in the case
of the first Distribution
Date, from and including
the Closing Date) to, but
excluding, the following
Distribution Date (each, an
"Interest Period").
Interest on the Notes for
any Distribution Date due
but not paid on such
Distribution Date will be
due on the next
Distribution Date together
with, to the extent
permitted by law, interest
on such amount at the
applicable Interest Rate.
The amount of interest
distributable on the Notes
on each Distribution Date
will equal interest accrued
during the related Interest
Period. Interest on the
Class A-1 Notes and the
Class A-2 Notes will be
calculated on the basis of
a 360-day year and the
actual number of days
elapsed in the applicable
Interest Period. Interest
on the Class A-3 Notes will
be calculated on the basis
of a 360-day year
consisting of twelve 30-day
months. See "Description of
the Securities -- Payments
of Interest."
D. Principal.................Principal of the Notes will be payable on each
Distribution Date in an amount equal to the
Noteholders' Principal Distributable Amount
for the calendar month (the "Monthly Period")
preceding such Distribution Date, except that no
principal will be paid on a Class of
Notes until each Class of Notes having a lower
numerical Class designation has been paid in
full. The "Noteholders' Principal
Distributable Amount" will equal the sum of (x)
the Noteholders' Percentage (as defined below)
of the Principal Distributable
Amount and (y) any unpaid portion of the amount
described in clause (x) with respect to a prior
Distribution Date. The "Principal
Distributable Amount" with respect to any
Distribution Date will be an amount equal to
the sum of the following amounts with respect
to the related Monthly Period, computed, with
respect to Receivables under which payments
allocable to principal are
determined in accordance with the simple
interest method (the
"Simple Interest Receivables"), in accordance
with the simple interest method, and, with
respect to Precomputed Receivables, in
accordance with the actuarial method: (i) that
portion of all collections on Receivables
allocable to principal, including full and,
with respect to Simple Interest Receivables,
partial principal prepayments, received during
such Monthly Period with respect to
such Monthly Period, (ii) the principal balance
of each Receivable that was repurchased by the
Seller or the Servicer as of the last day
of such Monthly Period, and (iii) the principal
balance of each Receivable that became a
Liquidated Receivable (as defined below)
during such Monthly Period. See "Description of
the Purchase Agreement and the Trust Documents
-- Distributions". The
"Noteholders' Percentage" means (i) for each
Distribution Date prior to the Distribution Date
on which the Class A-3 Notes are
paid in full, 100%, (ii) on the Distribution
Date on which the Class
A-3 Notes are paid in full, the percentage
equivalent of a fraction, the numerator of which
is the outstanding principal amount of the
Class A-3 Notes immediately prior to such
Distribution Date, and the denominator of which
is the Principal Distributable Amount for
such Distribution Date, and (iii) for any
Distribution Date
<PAGE>
thereafter, zero.
"Liquidated Receivable"
means generally a
Receivable as to which, as
of the last day of the
related Monthly Period, the
Servicer has determined
that all amounts it expects
to recover have been
received, such Receivable
is 180 days or more
delinquent, proceeds from
the sale of the related
Financed Vehicle have been
received or the scheduled
payments to be made on such
Receivable have been
restructured by court
order, as further defined
under "Description of the
Purchase Agreement and
Trust Documents --
Distributions."
E. Optional Redemption.......The Class A-3 Notes, to the extent still
outstanding, may be redeemed in whole, but not
in part, on any Distribution Date on
which the Servicer exercises its option to
purchase all of the remaining Receivables,
which, subject to certain provisions in the
Sale and Servicing Agreement, can occur only
after the aggregate principal balance of the
Receivables declines to 5% or less of the
Original Pool Balance, at a redemption price
equal to the unpaid principal amount of the
Notes of such Class plus accrued and
unpaid interest thereon. See "Description of
the Securities -- Optional Redemption."
F. Mandatory Redemption.....The Notes may be accelerated and become subject
to immediate payment at par upon the occurrence
of an Event of Default under
the Indenture. So long as no Insurer Default
(as defined herein) shall have occurred and be
continuing, an Event of Default under
the Indenture will occur only upon delivery by
the Insurer to the Indenture Trustee of notice
of the occurrence of certain events of
default under the Insurance and Indemnity
Agreement, dated as of November 30, 1996 (the
"Insurance Agreement"), among the
Insurer, the Trust, the Seller and SunStar. In
the case of such an Event of Default, the Notes
will automatically be accelerated and
subject to immediate payment at par. See
"Description of the Securities -- The Indenture
-- Events of Default" herein. The
financial guaranty insurance policy issued by
the Insurer to the Indenture Trustee for the
benefit of the Noteholders (the "Note
Policy") does not guarantee payment of any
amounts that become due on an accelerated basis,
unless the Insurer elects, in its sole
discretion, to pay such amounts in whole or in
part. See "The
Policies -- Note Policy."
G. Class A-1 Final
Scheduled Distribution
Date....................Notwithstanding anything to the contrary
contained herein, on ________, 1997 (the "Class
A-1 Final Scheduled Distribution
Date") holders of record as of the Business Day
preceding such date shall be entitled to receive
from funds available therefor interest on
the outstanding principal amount of the Class
A-1 Notes immediately prior to such date at a
rate of % per annum for the
period (the "Final Class A-1 Interest Period")
from and including the most recent Distribution
Date on which interest has been paid
on the Class A-1 Notes to but excluding the
Class A-1 Final Scheduled Distribution Date
(together with interest due but not paid
<PAGE>
on a prior Distribution
Date and, to the extent
permitted by law, interest
on such amount at a rate of
% per annum) plus the
unpaid principal amount of
the Class A-1 Notes.
Interest will be calculated
on the basis of a 360-day
year and the actual number
of days elapsed in the
Final Class A-1 Interest
Period.
Terms of the
Certificates..................The principal terms of the Certificates will
be as described below:
A. Distribution Dates........Distributions with respect to the Certificates
will be made on each
Distribution Date,
commencing January 1997.
Distributions will be made
to holders of record of the
Certificates (the
"Certificateholders" and,
together with the
Noteholders, the
"Securityholders") as of
the related Record Date.
B. Certificate Rate.......... % per annum payable monthly at one-twelfth
of the annual rate,
calculated on the basis of a 360-day year
consisting of twelve
30-day months.
C. Subordination of
Certificates.............The Certificates will not receive any
distribution with respect to a
Distribution Date until the full amount of the
sum of the Noteholders' Principal Distributable
Amount and the Noteholders'
Interest Distributable Amount (the "Noteholders'
Distributable Amount") with respect to such
Distribution Date has been
deposited in an account established and
maintained in the name of
the Indenture Collateral Agent for the benefit
of the Indenture Trustee on behalf of the
Noteholders (the "Note Distribution
Account"). The "Noteholders' Interest
Distributable Amount"
means generally, with respect to a Class of
Notes, the product of
one-twelfth of the Interest Rate for such Class
and the outstanding
principal amount of the Notes of such Class
immediately preceding
the related Distribution Date, as further
defined under "Description
of the Purchase Agreement and Trust Documents
-- Distributions."
D. Interest..................On each Distribution Date, the Owner Trustee
will distribute to
Certificateholders their pro rata share of
interest distributable with
respect to the Certificates. The amount of
interest distributable on
the Certificates on each Distribution Date will
equal interest accrued during the related
Interest Period at the Certificate Rate on
the Certificate Balance immediately prior to
such Distribution Date.
"Certificate Balance"
means the Initial
Certificate Balance reduced
by all amounts allocable to
principal previously
distributed to
Certificateholders.
Interest on the
Certificates for any
Distribution Date due but
not paid on such
Distribution Date will be
due on the next
Distribution Date together
with, to the extent
permitted by law, interest
on such amount at
one-twelfth of the
Certificate Rate.
Distributions of interest
on the Certificates are
subordinate to payments of
interest and principal on
the Notes, as described
under "Risk Factors --
Subordination of
Certificates." See
"Description of the
Securities -- Distributions
of Interest."
<PAGE>
E. Principal On each
Distribution Date on or
after the date on which the
Class A-3 Notes have been
paid in full, principal of
the Certificates will be
payable in an amount equal
to the Certificateholders'
Principal Distributable
Amount for the Monthly
Period preceding such
Distribution Date. The
"Certificateholders'
Principal Distributable
Amount" will equal the sum
of (x) 100% minus the
Noteholders' Percentage of
the Principal Distributable
Amount and (y) any unpaid
portion of the amount
described in clause (x)
with respect to a prior
Distribution Date;
provided, however, that the
Certificateholders'
Principal Distributable
Amount on the Distribution
Date on which the Class A-3
Notes are paid in full will
be reduced by the amount of
principal necessary to pay
the Class A- 3 Notes in
full. See "Description of
the Purchase Agreement and
Trust Documents --
Distributions."
The remaining Certificate
Balance, if any, will be
payable in full on the
Final Scheduled
Distribution Date for the
Certificates.
F. Optional Prepayment.......If the Servicer exercises its option to purchase
the remaining Receivables as described above,
the Certificateholders shall receive
an amount equal to the remaining Certificate
Balance together with
accrued interest at the Certificate Rate, and
the Certificates will be
retired. See "Description of the Securities --
Optional Prepayment."
Spread Account.................On the Closing Date, the Seller will make an
initial deposit of an
amount to be agreed upon by the Seller and the
Insurer to an account (the "Spread Account")
which will be established with the
Indenture Collateral Agent for the benefit of
the Indenture Trustee,
on behalf of the Noteholders, the Owner Trustee,
on behalf of the
Certificateholders, and the Insurer pursuant to
a certain Spread
Account Agreement, dated as of November 30, 1996
(the "Spread Account Agreement"). The Spread
Account will not be an asset of
the Trust. The amount initially deposited in
the Spread Account is referred to as the "Spread
Account Initial Deposit." On each
Distribution Date, additional amounts may be
required to be deposited into the Spread Account
from payments on the Receivables as described
under "Description of the Purchase
Agreement and the Trust Documents --
Distributions." Amounts, if
any, on deposit in the Spread Account will be
available to the extent provided in the Spread
Account Agreement to fund any
Deficiency Claim Amount (as defined below) or
Class A-1 Deficiency Claim Amount (as defined
below) otherwise required to
be made on a Distribution Date or the Class A-1
Final Scheduled Distribution Date, as
applicable. The aggregate amount required to
be on deposit at any time in the Spread Account
(the "Specified Spread Account Requirement")
will be determined in accordance
with the Insurance Agreement and the Spread
Account Agreement. The Specified Spread
Account Requirement may
increase or decrease over
time as a result of floors,
caps and triggers set forth
in the Insurance Agreement
or the Spread Account
Agreement. Amounts in the
Spread Account on any
Distribution Date (after
giving effect to all
distributions made on such
Distribution Date, as
<PAGE>
reconciled on such
Distribution Date) in
excess of the Specified
Spread Account Requirement
for such Distribution Date
will be released to the
Seller. Amounts on deposit
or to be deposited in the
Spread Account may be
distributed to persons
other than the Insurer or
the Securityholders without
the consent of the
Securityholders.
"Deficiency Claim Amount"
means generally a
deficiency with respect to
the Available Funds (as
defined below) available
for payment of the fees of
the Servicer, the Indenture
Trustee and the Owner
Trustee and of interest on
and principal of the
Securities on the related
Distribution Date, as
further defined under
"Description of the
Purchase Agreement and the
Trust Documents --
Distributions." "Class A-1
Deficiency Claim Amount"
means generally a
deficiency with respect to
the Available Funds
available for payment of
interest on and principal
of the Class A-1 Notes on
the Class A-1 Final
Scheduled Distribution
Date, as further defined
under "Description of the
Purchase Agreement and the
Trust Documents --
Distributions."
In addition, the Seller and
the Insurer may amend the
Spread Account Agreement
(and any provisions in the
Insurance Agreement
relating to the Spread
Account) in any respect
(including, without
limitation, reducing or
eliminating the Specified
Spread Account Requirement
and/or reducing or
eliminating the funding
requirements of the Spread
Account or permitting such
funds to be used for the
benefit of persons other
than Securityholders)
without the consent of, or
notice to, the Indenture
Trustee, the Owner Trustee
or the Securityholders.
Notwithstanding any
reduction in or elimination
of the funding requirements
of the Spread Account or
the depletion thereof, the
Insurer will be obligated
on each Distribution Date
to fund the full amount of
each Guaranteed Note
Distribution and each
Guaranteed Certificate
Distribution otherwise
required to be made on such
Distribution Date.
The Policies.....................On the Closing Date, the Insurer will issue
the Note Policy to the
Indenture Trustee and the Certificate Policy
to the Owner Trustee
pursuant to the Insurance Agreement. Pursuant
to the Note Policy,
the Insurer will unconditionally and
irrevocably guarantee to the
Noteholders payment of the Guaranteed Note
Distributions for each
Distribution Date. Pursuant to the
Certificate Policy, the Insurer
will unconditionally and irrevocably guarantee
to the Certificateholders payment of the
Guaranteed Certificate
Distributions for each Distribution Date
(each such distribution
under the Policies, a "Guaranteed
Distribution"). See "The
Policies" and "Description of the Purchase
Agreement and the Trust
Documents -- Distributions."
Collection Account...............The Servicer will establish one or more
accounts in the name of the
Indenture Collateral Agent
(the "Collection Account")
for the benefit of the
Indenture Trustee, on
behalf of the Noteholders,
the Owner Trustee, on
behalf of the
Certificateholders, and the
Insurer.
All payments from Obligors that are received
by the Servicer on
<PAGE>
behalf of the Trust will be
deposited in the Collection
Account no later than two
Business Days after receipt
thereof except under
certain conditions
described herein. Pursuant
to the Sale and Servicing
Agreement, the Indenture
Trustee will, on each
Distribution Date,
distribute the following
amounts with respect to
such Distribution Date to
the following (in the
priority indicated): (i)
from the Distribution
Amount (as defined below),
to the Owner Trustee and
the Indenture Trustee, any
accrued and unpaid
Trustees' fees and expenses
and any accrued and unpaid
fees and expenses of the
Indenture Collateral Agent
(in each case, to the
extent such fees have not
been previously paid by the
Servicer), (ii) from the
Distribution Amount, to the
Servicer, the Servicing Fee
(as defined below) for the
related Monthly Period and
any overdue Servicing Fees,
(iii) from the Distribution
Amount, into the Note
Distribution Account, the
Noteholders' Interest
Distributable Amount, (iv)
from the Distribution
Amount, into the Note
Distribution Account, the
Noteholders' Principal
Distributable Amount, (v)
from the Distribution
Amount, to the Owner
Trustee for deposit into
the Certificate
Distribution Account, the
Certificateholders'
Interest Distributable
Amount and, on and after
the Distribution Date on
which the Class A-3 Notes
have been paid in full, the
Certificateholders'
Principal Distributable
Amount, (vi) from the
Available Funds (as defined
below), to the Insurer,
amounts owing and not paid
to it under the Insurance
Agreement, (vii) from the
Available Funds, to the
Indenture Collateral Agent,
amounts for deposit in the
Spread Account, up to the
Specified Spread Account
Requirement for such
Distribution Date, and
(viii) from the Available
Funds, the remaining
balance, if any, 99% to the
Seller and 1% to the
Affiliated Purchaser.
"Available Funds" means
generally, with respect to
a Distribution Date, the
sum of all funds collected
on the Receivables for the
related Monthly Period, and
"Distribution Amount" means
generally the sum of any
Available Funds and any
Deficiency Claim Amounts
for the related
Monthly Period, each as
further defined under
"Description of the
Purchase Agreement and
Trust Documents --
Distributions." "Servicing
Fee" means generally the
servicing fee paid to the
ervicer for the related
onthly Period, as further
efined under "Description
f the Purchase Agreements
nd Trust Documents --
ervicing Compensation and
rustees' Fees." See
Description of the
urchase Agreement and the
rust Documents --
Distributions."
Tax Status.......................In the opinion of Stroock & Stroock & Lavan,
special federal tax
counsel to the Trust, for federal income tax
purposes, the Notes will
be characterized as debt, and the Trust will
not be characterized as
an association (or a publicly traded
partnership) taxable as a
corporation. Each Noteholder, by the
acceptance of a Note, will
agree to treat the Notes as debt. Each
Certificateholder, by the
acceptance of a Certificate, will agree to
treat the Trust as a
partnership in which the Certificateholders
are partners for federal
income tax purposes. See "Federal Income Tax
Consequences" for
additional information concerning the
application of federal tax
laws with respect to the Notes and the
Certificates.
<PAGE>
ERISA Considerations.............Subject to the conditions and considerations
discussed under
"ERISA Considerations," the Notes are
eligible for purchase by
pension, profit-sharing or other employee
benefit plans as well as
individual retirement accounts and certain
types of Keogh Plans
(each, a "Benefit Plan"). See "ERISA
Considerations."
The Certificates may not be
acquired (directly or
indirectly) by or on behalf
of any Benefit Plan or any
entity (including an
insurance company general
account) whose underlying
assets include plan assets
of a Benefit Plan by reason
of a plan's investment in
the entity. See "ERISA
Considerations."
Legal Investment.................The Class A-1 Notes will be eligible
securities for purchase by
money market funds under Rule 2a-7 under the
Investment Company Act of 1940, as amended.
Ratings..........................It is a condition to issuance that the Class
A-1 Notes be rated A-1+
by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
("S&P"), and P-1 by Moody's
Investors Service, Inc. ("Moody's" and
together with S&P, the
"Rating Agencies"), and that the Class A-2
Notes, the Class A-3
Notes and the Certificates be rated AAA by
S&P and Aaa by Moody's. The ratings by the
Rating Agencies of the Securities will
be based primarily on the Policies. A rating
is not a
recommendation to purchase, hold or sell
Notes or Certificates.
The ratings of the Notes and the Certificates
address the likelihood
of the timely payment of interest of and the
ultimate payment of
principal on the Securities pursuant to their
terms. There is no
assurance that the ratings initially assigned
to the Notes and the
Certificates will not subsequently be lowered
or withdrawn by the
Rating Agencies. See "Risk Factors -
Limitations on Credit Ratings
on Securities."
<PAGE>
RISK FACTORS
Prospective Noteholders and Certificateholders should consider the
following risk factors in connection with the purchase of the Notes or the
Certificates.
LIMITED LIQUIDITY OF SECURITIES
There is currently no secondary market for the Securities. The
Underwriter currently intends to make a market in the Securities, but it has no
obligation to do so. There can be no assurance that a secondary market for the
Securities will develop or, if such a market does develop, that it will provide
Securityholders with liquidity of investment or that it will continue for the
life of the Securities.
REINVESTMENT RISKS FROM PREPAYMENTS; AFFECT ON YIELD OF SECURITIES
The weighted average life of the Securities will be reduced by full and
partial prepayments on the Receivables. The Receivables are prepayable at any
time without penalty. Prepayments (or, for this purpose, equivalent payments to
the Trust) may result from payments by Obligors, liquidations due to default,
the receipt of proceeds from physical damage or credit insurance, repurchases by
the Seller or SunStar as a result of certain uncured breaches of the warranties
made by either with respect to the Receivables, purchases by the Servicer as a
result of certain uncured breaches of the covenants made by it in the Sale and
Servicing Agreement with respect to the Receivables, or the Servicer exercising
its option to purchase all of the remaining Receivables when the Pool Balance is
less than 5% of the Original Pool Balance.
The Servicer has limited historical experience with respect to
prepayments, has not prepared data on prepayment rates and is not aware of
publicly available industry statistics that set forth principal prepayment
experience for retail installment sales contracts similar to the Receivables.
The rate of prepayments on the Receivables may be influenced by a variety of
economic and social factors, including changes in interest rates, general or
regional economic conditions, the conditions of the resale market for motor
vehicles and the fact that the Obligor is generally not permitted to sell or
transfer the Financed Vehicle securing a Receivable without the consent of the
Seller. The rate of prepayment on the Receivables may also be influenced by the
structure of the loan. The Seller has no basis on which to assess the specific
effects of the foregoing factors (or the magnitude of such effects) on the rate
of prepayment on the portfolio of Financed Vehicles generally or on the
Receivables. For these reasons, neither the Servicer nor the Seller can make any
prediction as to the actual prepayment rates that will be experienced on the
Receivables.
The amounts paid to Securityholders with respect to any Distribution
Date will include all prepayments on the Receivables received thereon during the
related Monthly Period. As a result, the Securities may be paid in full prior to
their respective Final Scheduled Distribution Dates. The Securityholders will
bear all reinvestment risk resulting from the timing of payments of principal on
the Securities. See "Weighted Average Life."
RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED VEHICLES
As part of the sale and assignment of Receivables to the Trust,
security interests in the related Financed Vehicles will be assigned by the
Seller to the Trust. In most states, such an assignment is an effective
conveyance of a security interest without amendment of any such security
interest noted on a vehicle's certificate of title, and the assignee succeeds
thereby to the assignor's rights as secured party. Such notation of a secured
party's security interest is generally effected in such states by depositing
with the applicable state motor vehicle registrar or similar state authority,
the vehicle's certificate of title, an application containing the name and
address of such secured party, and the necessary registration fees.
Because of the administrative burden and expense (estimated by SunStar to
be in excess of $446,000; excluding associated labor costs) that would be
entailed in endorsing the certificate of title of each Financed Vehicle to
reflect the Trust's interest therein and delivering each such certificate of
title to the Indenture Trustee for filing (and the payment of related filing
fees), the certificates of title for the Financed Vehicles related to the Trust
will not be endorsed to identify the Owner Trustee as the secured party, and
will not be deposited with the motor vehicle registrar or other state
authorities in any state. In the absence of such action, the Owner Trustee or
the Indenture Trustee, as the case may be, may not have a perfected security
interest in the Financed Vehicles related to the Trust in certain states and, in
the event that another person obtains a perfected
<PAGE>
security interest in such a
Financed Vehicle subsequent to the transfer of the Receivables to the Trust,
such person might acquire rights in such Financed Vehicle prior to the rights of
the Trust. The Seller believes that it is customary for certificates of title or
ownership to not be endorsed or amended in connection with asset securitizations
of the type contemplated hereby. The Seller historically has not purchased pools
of automobile retail installment sale contracts similar to the Receivables for
its own account. In the event that the Seller were to purchase such a pool of
installment sales contracts, the Seller believes that, because of the associated
administrative burden and expense, the Seller would not generally require that
the certificates of title or ownership covering the related financed vehicles be
endorsed or amended to reflect that security interests in the related financed
vehicles have been assigned to the Seller.
The Seller will covenant to repurchase any Receivable if, on the date
of transfer of a Receivable to the Trust, a valid, subsisting and enforceable
first priority security interest shall not have been perfected in favor of
SunStar or an affiliate, which shall have been assigned to the Trust, in the
related Financed Vehicle. The Servicer will covenant to repurchase any
Receivable if, after the transfer of such Receivable to the Trust, a valid,
subsisting and enforceable first priority interest in the name of the Servicer
or an affiliate is not maintained on behalf of the Trust in the related Financed
Vehicle. If the Trust does not have a perfected security interest in a Financed
Vehicle, its ability to realize collections on such Financed Vehicle in the
event of a default may be adversely affected. To the extent the security
interest is perfected, the Trust will have a prior claim over subsequent
purchasers of such Financed Vehicles and holders of subsequently perfected
security interests. However, as against liens for repairs of Financed Vehicles
or for taxes unpaid by an Obligor under a Receivable, or through fraud or
negligence, the Trust could lose the priority of its security interest or its
security interest in a Financed Vehicle. Neither the Seller nor SunStar will
have any obligation to repurchase a Receivable as to which any of the
aforementioned occurrences result in the Trust's losing the priority of its
security interest or its security interest in such Financed Vehicle after the
date such security interest was conveyed to the Trust. Federal and state
consumer protection laws impose requirements upon creditors in connection with
extensions of credit and collections of retail installment loans and certain of
these laws make an assignee of such a loan (such as the Trust) liable to the
related borrower for any violation by the lender. The Seller will be obligated
to repurchase any Receivable which fails to comply with such requirements. See
"Certain Legal Aspects of the Receivables -- Security Interests in Vehicles."
INSOLVENCY RISK OF SUNSTAR AND THE SELLER
SunStar will intend that any transfer of Receivables to the Seller
constitute a sale, rather than a pledge of the Receivables to secure
indebtedness of SunStar. However, if SunStar were to become a debtor under the
federal bankruptcy code or similar applicable state laws (collectively, the
"Insolvency Laws"), a creditor or trustee in bankruptcy thereof, or SunStar as
debtor-in-possession, might argue that such sale of Receivables was a pledge of
Receivables rather than a sale and/or that the assets and liabilities of the
Seller should be consolidated with the assets and liabilities of SunStar. This
position, if presented to or accepted by a court, could result in a delay in or
reduction of distributions to Securityholders. In addition, a delay in or
reduction of distributions to Securityholders could result if the Seller were to
become a debtor under any Insolvency Law and a creditor or trustee-in-bankruptcy
of such debtor or such debtor itself were to take the position that the sale of
Receivables to the Trust should instead be treated as a pledge of such
Receivables to secure a borrowing of such debtor. In addition, if the transfer
of any Receivables is recharacterized as a pledge, a tax lien, other
governmental lien, or other lien created by operation of law on the property of
the Servicer, the holder of such lien may have priority over the Trust's
interest in such Receivables.
In addition, in a case recently decided by the United States Court of
Appeals for the Tenth Circuit, Octagon Gas System, Inc. v. Rimmer, such Circuit
Court found that "accounts," a defined term under the Uniform Commercial Code,
sold prior to a bankruptcy should be treated as part of the bankruptcy estate of
the seller of such accounts. If SunStar, an affiliate of SunStar which
transferred Receivables to SunStar, or the Seller were to become a debtor in a
bankruptcy proceeding and a court applied the reasoning of the Circuit Court
reflected in the case described above, delays in payments to Securityholders
could occur or reductions in the amounts of such payments could result.
INSOLVENCY RISK OF THE AFFILIATED PURCHASER
The Trust Agreement provides that, in the event that the Affiliated
Purchaser becomes insolvent, or is terminated or dissolved (an "Insolvency
Event") and the Owner Trustee is unable to obtain an opinion of counsel
satisfactory to the Insurer to the effect that the Trust will not thereafter be
an association (or publicly traded partnership) taxable as a corporation for
<PAGE>
federal income tax purposes, the Trust will terminate in 90 days and effect
redemption of the Notes and prepayment of the Certificates following the
winding-up of the affairs of the Trust, unless within such 90 days the Holders
of a majority of the remaining principal balance of the Certificates agree in
writing to continue the business of the Trust and the Owner Trustee is able to
obtain the opinion of counsel described above. See "Description of the Purchase
Agreement and the Trust Documents -- Termination." If such an opinion of counsel
or consent of Certificateholders cannot be obtained following an Insolvency
Event with respect to the Affiliated Purchaser, the Receivables will be sold,
disposed of or otherwise liquidated. If the proceeds from the liquidation of the
Receivables and any amounts on deposit in the Collection Account are not
sufficient to pay the Notes and the Certificates in full, and the Insurer is
insolvent, the Certificateholders and, to the extent any shortfalls exceed the
initial principal amount of the Certificates, Noteholders will incur a loss. See
"Certain Legal Aspects of the Receivables -- Insolvency Matters."
LIMITED ASSETS
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables, the Spread
Account and the Policies. The Notes represent obligations solely of, and the
Certificates represent interests solely in, the Trust, and neither the Notes nor
the Certificates are insured or guaranteed by the Seller, the Servicer, the
Owner Trustee or the Indenture Trustee. Consequently, holders of the Notes and
the Certificates must rely for repayment upon payments on the Receivables and,
if and to the extent available, amounts on deposit in the Spread Account and
payments of claims made under the Policies. Amounts on deposit or to be
deposited in the Spread Account may be distributed to persons other than
Securityholders. Similarly, although the Policies will be available on each
Distribution Date to cover shortfalls in distributions of the Noteholders'
Distributable Amount and the Certificateholders' Distributable Amount on such
Distribution Date, if the Insurer defaults in its obligations under the
applicable Policy, the Trust will depend on current distributions on the
Receivables and amounts, if any, available therefor in the Spread Account to
make payments on the Notes and the Certificates. Distributions with respect to
Certificates are subordinated in priority of payment to distributions on the
Notes, and should the Insurer fail to make any Guaranteed Distributions, the
Certificateholders and, to the extent Realized Losses exceed the initial
principal amount of the Certificates, Noteholders will suffer a loss. See "The
Insurer" and "The Policies."
SUBORDINATION OF CERTIFICATES
Distributions of interest and principal on the Certificates will be
subordinated in priority of payment to interest and principal due on the Notes.
Consequently, the Certificateholders will not receive any distributions with
respect to a Monthly Period until the full amount of interest and principal
payable on the Notes on such Distribution Date has been deposited in the Note
Distribution Account. The Certificateholders will not receive any distributions
of principal before the Distribution Date on which the Class A-3 Notes have been
paid in full.
If the Notes are accelerated following an Event of Default under the
Indenture, the Notes must be paid in full prior to the distribution of any
amounts on the Certificates.
INCREASED DEFAULT RISK OF OBLIGORS FOR NON-PRIME RECEIVABLES
The underwriting standards applied by SunStar and its affiliates may
not be as stringent as those of other financial institutions or the finance
companies of motor vehicle manufacturers, since SunStar actively solicits
dealers to purchase and purchases primarily non-prime retail motor vehicle
installment sales contracts which may not meet the credit standards of prime
lenders. Although SunStar believes that it carefully reviews and evaluates each
credit before acceptance, no assurance can be given that the standards employed
by SunStar will be sufficient to protect the Securityholders from loss due to
default by the Obligors if the Insurer fails to satisfy its obligations under
the Policies.
Because of the greater credit risk associated with non-prime retail
motor vehicle installment sales contracts, the interest rates charged on such
contracts are generally higher than those rates charged on prime retail motor
vehicle installment sales contracts. The range of APRs of the Receivables is set
forth below under "The Receivables." There can be no assurance, however, that
the interest rates on the Receivables will be sufficient to cover losses on the
Receivables. See "SunStar Acceptance Corporation -- General."
<PAGE>
SOCIAL AND ECONOMIC FACTORS AFFECTING THE RECEIVABLES
Economic conditions in states where Obligors reside may affect the
delinquency, loan loss and repossession experience of the Trust with respect to
the related Receivables. In addition, the performance by Obligors may be
affected by a variety of social and economic factors. Social factors include,
but are not limited to, the ability of Obligors to refinance the Financed
Vehicles under more favorable terms. Economic factors include, but are not
limited to, interest rates, unemployment levels, the rate of inflation and
consumer perception of economic conditions, generally. However, the Seller is
unable to determine and has no basis to predict whether or to what extent social
and economic factors will affect the performance by any Obligors. See "SunStar
Acceptance Corporation."
COMMINGLING RISK
While SunStar or an entity (a) into which SunStar is merged or
consolidated, (b) which may result from any merger or consolidation to which
SunStar is a party, (c) which succeeds to the properties and assets of the
Servicer substantially as a whole or (d) more than 50% of the voting stock of
which is owned by NationsBank or its successor, which entity has executed an
agreement of assumption to perform the obligations of the Servicer under the
Agreement, is the Servicer, the Servicer may commingle collections held by it
and may use such funds for its own purposes prior to the business day preceding
each Distribution Date provided that all of the following conditions are
satisfied: (i) there exists no Servicer Default (as described below), (ii) if
the Servicer does not have a short term debt rating or deposit rating, as
applicable, of at least A-1 from S&P and P-1 from Moody's, a guaranty, letter of
credit, surety bond or other similar instrument is issued covering collections
held by SunStar or such successor servicer, which is acceptable to the Rating
Agencies and is issued by an entity which has a short term debt or deposit
rating of at least A-1 from S&P and P-1 from Moody's, and (iii) the Servicer,
the Indenture Trustee, the Seller or the Issuer shall not have received notice
from S&P or Moody's that failure to separate such funds will result in a
reduction or withdrawal of the then current rating on the Notes or Certificates
by either S&P or Moody's. If all the conditions contained in the preceding
sentence are not met, the Servicer will deposit all payments on Receivables
(from whatever source) and all proceeds of Receivables collected during each
Collection Period into the Collection Account not later than the second business
day after receipt. In the event that the Servicer commingles collections,
Securityholders will be subject to risk of loss of such collections, including
as a result of the bankruptcy or insolvency of the Servicer. It is anticipated
that on the Closing Date NationsBank will furnish a guaranty that will permit
SunStar to commingle funds.
RISKS OF SECURITYHOLDERS UPON SERVICER DEFAULT
In the event a Servicer Default occurs, the Insurer (so long as no
Insurer Default has occurred and is continuing), Indenture Trustee or the
Noteholders may remove the Servicer without the consent of the Owner Trustee or
any of the Certificateholders. The Owner Trustee and the Certificateholders will
not have the ability to remove the Servicer if a Servicer Default occurs. In
addition, the Insurer (so long as no Insurer Default has occurred and is
continuing), and the Noteholders, in the event of an Insurer Default, have the
ability, with certain specified exceptions, to waive defaults by the Servicer,
including defaults that could materially and adversely affect the
Certificateholders. See "Description of the Securities -- The Indenture."
INSURER'S RIGHT TO PREPAY SECURITIES UPON EVENT OF DEFAULT UNDER INDENTURE
So long as no Insurer Default shall have occurred and be continuing,
neither the Indenture Trustee nor the Noteholders may declare an Event of
Default under the Indenture. So long as an Insurer Default shall not have
occurred and be continuing, an Event of Default will occur only upon delivery by
the Insurer to the Indenture Trustee of notice of the occurrence of certain
events of default under the Insurance Agreement. Upon the occurrence of an Event
of Default under the Indenture (so long as an Insurer Default shall not have
occurred and be continuing), the Insurer will have the right, but not the
obligation, to cause the liquidation, in whole or in part, of the Trust
Property, which will result in redemption, in whole or in part, of the Notes,
and prepayment, in whole or in part, of the Certificates. Following the
occurrence of an Event of Default, the Indenture Trustee and the Owner Trustee
will continue to submit claims under the Policies as necessary to enable the
Trust to continue to make payments of the Noteholders' Distributable Amount and
the Certificateholders' Distributable Amount on each Distribution Date. However,
following the occurrence of an Event of Default, the Insurer may elect to pay
all or any portion of the outstanding amount of the Notes, plus accrued interest
thereon, and may elect to cause the prepayment, in whole or in part, of the
Certificates.
<PAGE>
LIMITATIONS ON CREDIT RATINGS OF SECURITIES
A rating is not a recommendation to purchase, hold or sell Notes or
Certificates. The ratings of the Notes and Certificates address the likelihood
of the timely payment of interest of and the ultimate payment of principal on
the Securities pursuant to their terms. There is no assurance that a rating will
remain in effect for any given period of time or that a rating will not be
lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future so warrant. In the event that any ratings initially
assigned to the Notes and the Certificates were subsequently lowered or
withdrawn for any reason, including by reason of a downgrading of the
claims-paying ability of the Insurer, no person or entity will be obligated to
provide any additional credit enhancement with respect to the Notes or the
Certificates. Any reduction or withdrawal of a rating may have an adverse effect
on the liquidity and market price of the Notes and the Certificates.
BOOK-ENTRY REGISTRATION; BENEFICIAL OWNERS NOT RECOGNIZED BY TRUST
Each class of Securities will be initially represented by one or more
certificates registered in the name of Cede & Co. ("Cede"), as nominee for The
Depository Trust Company ("DTC") and will not be registered in the names of the
holders of the Securities or their nominees. Because of this, unless and until
Definitive Securities for such class are issued, holders of Securities will not
be recognized by the Trustee or the Indenture Trustee as "Certificateholders,"
"Noteholders" or "Securityholders," as the case may be (as such terms are used
herein or in the Indenture and Trust Agreement, as applicable). Hence, until
Definitive Securities are issued, holders of Securities will only be able to
exercise the rights of Securityholders indirectly through DTC and its
participating organizations. See "Description of the Securities -- Book-Entry
Registration."
USE OF PROCEEDS
The net proceeds to be received by the Trust from the sale of the
Securities will be used to pay to the Seller, and in turn, SunStar, the purchase
price for the Receivables, and to make the initial deposits into the Spread
Account. The net proceeds to be received by SunStar will be used for general
corporate purposes.
THE TRUST
GENERAL
The Issuer, NationsFinancial Auto Owner Trust 1996-1, is a business
trust to be formed under the laws of the State of Delaware pursuant to the Trust
Agreement for the transactions described in this Prospectus. After its
formation, the Trust will not engage in any activity other than (i) acquiring,
holding and managing the Receivables and the other assets of the Trust and
proceeds therefrom, (ii) issuing the Notes and the Certificates, (iii) making
payments on the Notes and the Certificates and (iv) engaging in other activities
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
The Trust will initially be capitalized with equity equal to
$_________. Certificates with an aggregate original Certificate Balance of
$___________ will be sold to an entity affiliated with NationsBank (the
"Affiliated Purchaser"), and Certificates representing the remainder of the
Certificate Balance will be sold to third party investors that are expected to
be unaffiliated with the Seller, the Servicer or their affiliates. The equity of
the Trust, together with the proceeds of the initial sale of the Notes, will be
used by the Trust to purchase the Receivables from the Seller pursuant to the
Sale and Servicing Agreement and to fund the deposit of the Spread Account
Initial Deposit into the Spread Account.
The Trust's principal offices are in Wilmington, Delaware, in care of
_________________, as Owner Trustee, at the address listed below under "-- The
Owner Trustee."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of
the Cutoff Date, as if the issuance and sale of the Notes and Certificates had
taken place on such date:
<PAGE>
Class A-1 Notes............................$
Class A-2 Notes............................$
Class A-3 Notes............................$
Certificates...............................$
-------
Total..................................$
========
THE OWNER TRUSTEE
___________________ is the Owner Trustee under the Trust Agreement, is
a ________ banking corporation and its principal offices are located at
__________________________________. The Seller, the Servicer and their
respective affiliates may maintain commercial banking relations with the Owner
Trustee and its affiliates. The Owner Trustee will perform limited
administrative functions under the Trust Agreement, including making
distributions from the Certificate Distribution Account. The Owner Trustee's
liability in connection with the issuance and sale of the Certificates and the
Notes is limited solely to the express obligations of the Owner Trustee set
forth in the Trust Agreement and the Sale and Servicing Agreement.
THE TRUST PROPERTY
The Trust Property will consist of the following: (a) a pool of
Receivables secured by new and used vehicles, light trucks and vans financed
thereby; (b) all monies received thereunder after the Cutoff Date and, with
respect to Precomputed Receivables, monies received thereunder on or prior to
the Cutoff Date that relate to Scheduled Payments due after the Cutoff Date; (c)
such amounts as from time to time may be held in the Collection Account and the
Certificate Distribution Account; (d) the security interests in the Financed
Vehicles granted by Obligors pursuant to the Receivables and any other interest
of the Seller in such Financed Vehicles; (e) any proceeds from the exercise of
rights against Dealers under Dealer Agreements; (f) any proceeds with respect to
Receivables from claims on any physical damage, credit life and disability
insurance policies covering the Financed Vehicles or the Obligors and any
proceeds from the liquidation of the Receivables; (g) the rights and benefits of
the Seller under the Purchase Agreement; (h) the Receivables Files; (i) the
Certificate Policy; (j) all rights under any Service Contracts on the related
Financed Vehicles; and (k) the proceeds of any and all of the foregoing. The
Receivables do not include amounts (including interest) owing under a Contract
on account of collateral protection insurance ("CPI") placed on a Financed
Vehicle prior to, on or after the Cutoff Date ("CPI Funds").
The Receivables were originated by Dealers and sold to SunStar or an
affiliate and evidence financing made available to the Obligors. Although
SunStar's rights under the Dealer Agreements have not been assigned to the
Trust, and the Trust will not have any rights against any Dealer, SunStar will
assign to the Seller, and the Seller will assign to the Trust, the proceeds from
any Receivable repurchased by a Dealer as a result of a breach of a
representation or warranty in the related Dealer Agreement.
The "Pool Balance" as of any date of determination represents the
aggregate Principal Balance of the Receivables at the end of the preceding
Monthly Period, after giving effect to all payments received from Obligors and
any Purchase Amounts to be remitted by SunStar or the Seller, as the case may
be, for such Monthly Period and all losses realized on Receivables liquidated
during such Monthly Period. The Pool Balance on the Cutoff Date (the "Original
Pool Balance") will be approximately $____________.
Each Certificate will represent a fractional undivided interest in the
Trust Property. Pursuant to the Indenture, the Trust will grant a security
interest in the Trust Property (other than the Certificate Distribution Account
and Certificate Policy) in favor of the Indenture Collateral Agent for the
benefit of the Indenture Trustee on behalf of the Noteholders and for the
benefit of the Insurer in support of the obligations owing to it under the
Insurance Agreement. Any proceeds of such security interest in the Trust
Property would be distributed according to the Indenture, as described below
under "Description of the Purchase Agreement and the Trust Documents --
Distributions." The Insurer would be entitled to such distributions only after
payment of amounts owing to, among others, holders of the Notes and
Certificates.
<PAGE>
NATIONSBANK CORPORATION
GENERAL
SunStar is a subsidiary of NationsBank Corporation. NationsBank is a
bank holding company established as a North Carolina corporation in 1968 and is
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
with its principal assets being the stock of its subsidiaries. Through its
banking subsidiaries and its various non-banking subsidiaries, NationsBank
provides banking and banking related services primarily throughout the Southeast
and Mid-Atlantic states and Texas. The principal executive offices of
NationsBank are located at NationsBank Corporate Center, 100 North Tryon Street,
Charlotte, North Carolina 28255. Its telephone number is (704) 386-5000.
OPERATIONS
NationsBank provides a diversified range of banking and certain
non-banking financial services and products through its various subsidiaries.
NationsBank manages its business activities through three major internal
management groups or business units: the General Bank, the Global Finance Unit
and the Financial Services Unit. SunStar is a part of the Financial Services
Unit, which also includes NationsCredit Corporation and its subsidiaries.
THE SELLER
The Seller, a wholly-owned subsidiary of SunStar, was incorporated in
the State of Delaware in September 1996. The Seller was organized for limited
purposes, which include purchasing receivables from SunStar and transferring
such receivables to third parties and any activities incidental to and necessary
or convenient for the accomplishment of such purposes. The principal executive
offices of the Seller are located at North Tower Suite 1301, 222 West Las
Colinas Boulevard, Irving, Texas 75039. The telephone number of such offices is
(972) 402-3500.
The Seller has taken and will take steps in structuring the
transactions contemplated hereby that are intended to make it unlikely that the
voluntary or involuntary application for relief by SunStar under any Insolvency
Law will result in the consolidation of the assets and liabilities of the Seller
with those of SunStar. These steps include the creation of the Seller as a
separate, limited-purpose subsidiary pursuant to its Certificate of
Incorporation containing certain limitations (including restrictions on the
nature of the Seller's business and a restriction on the Seller's ability to
commence a voluntary case or proceeding under any Insolvency Law without the
unanimous affirmative vote of all of its directors). The Seller's Certificate of
Incorporation include a provision that requires the Seller to have at least one
director who qualifies under the Certificate of Incorporation as an "Independent
Director."
If, notwithstanding the foregoing measures, a court concluded that the
assets and liabilities of the Seller should be consolidated with the assets and
liabilities of SunStar in the event of the application of any Insolvency Law to
SunStar or a filing were made under any Insolvency Law by or against the Seller,
or if an attempt were made to litigate any of the foregoing issues, delays in
the distributions on the Securities (and possible reductions in the amount of
such distributions) could occur.
The Seller will also take certain steps in structuring the transactions
contemplated hereby to help ensure that an Insolvency Event with respect to the
Affiliated Purchaser will not occur. These steps include the creation of the
Affiliated Purchaser as a separate, limited purpose corporation pursuant to
articles of incorporation containing certain limitations (including restrictions
on the nature of the Affiliated Purchaser's business and a restriction on the
Affiliated Purchaser's ability to commence a voluntary case or proceeding under
any Insolvency Law without the prior affirmative unanimous vote of its
directors). However, there can be no assurance that the activities of the
Affiliated Purchaser would not result in an Insolvency Event.
<PAGE>
SUNSTAR ACCEPTANCE CORPORATION
SunStar was incorporated in September 1992 under the name Saturn
Financial Services, Inc. as a wholly-owned subsidiary of U S WEST Financial
Services, Inc. SunStar became a wholly-owned indirect subsidiary of
NationsCredit Commercial Corporation ("NationsCredit Commercial"), a
wholly-owned subsidiary of NationsBank, in December 1993 through NationsCredit
Commercial's purchase of substantially all of the assets of U S WEST Financial
Services, Inc. SunStar began conducting business under its current name in
September 1994 and became a direct subsidiary of NationsBank in August 1996.
SunStar has two wholly-owned subsidiaries, SunStar Acceptance
Corporation (Hawaii) and SunStar Acceptance Corporation (California), through
which it conducts a portion of its business. References to SunStar in the
following description of SunStar's activities also include reference to both
such subsidiaries.
SunStar's executive offices are located at 2 Concourse Parkway, NE,
Suite 745, Atlanta, Georgia 30328.
GENERAL
SunStar is engaged in the indirect financing (i.e. the purchase of
retail motor vehicle installment sales contracts from automotive dealers) of new
and used automobiles, vans and light duty trucks purchased by individuals with
non-prime credit.
The non-prime market segment of the automotive lending industry is
comprised of individuals who are deemed to be higher than average credit risks
due to various factors including, among other things, the manner in which they
have handled previous credit, limited prior credit history, prior declarations
of personal bankruptcy and/or limited financial resources. Due to the risk
profile of borrowers in the non-prime market, contracts acquired by companies
providing financing to such borrowers have higher annual percentage rates than
those that would be charged to more credit-worthy borrowers. Commensurate with
the higher annual percentage rate on non-prime contracts is the increased risk
and probability that an obligor will default on his or her obligations under a
contract. Furthermore, lenders to such obligors may experience an increased
frequency of delinquent payments than they would to obligors with a better
credit history or who are otherwise perceived to be a lower credit risk. The
range of APRs and other portfolio statistics for the Receivables are described
under "The Receivables."
SunStar acquires retail installment sales contracts through a network
of approximately 126 branch offices located in the following 26 jurisdictions:
Alabama, Arizona, California, Florida, Georgia, Hawaii, Illinois, Indiana,
Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Nevada, New
Jersey, New York, Ohio, Oregon, South Carolina, Tennessee, Texas, Virginia,
Washington, Wisconsin and the U.S. Territory of Guam. SunStar's dealer network
is composed of approximately 4,000 franchised new car dealers and 400
independent used car dealers. Each branch is responsible for soliciting and
maintaining dealer relationships, as well as originating, servicing and
collecting retail motor vehicle installment sales contracts.
<PAGE>
ORIGINATION OF RECEIVABLES
Dealer Relationships. SunStar has targeted its financing program to
franchised new car dealerships and selected independent used car dealerships
(collectively, "Dealers") in selected markets. Markets are chosen by SunStar's
central management based on the population of an area, maximum interest rates
permitted by state law, collection regulations as they pertain to consumer
finance and management's past operating experience in the state.
In most instances, Dealers are solicited, and relationships with
Dealers are maintained, by SunStar's local branches. By maintaining local Dealer
relationships, SunStar is able to customize its programs to Dealer needs,
promptly respond to Dealer requests and develop working relationships with
Dealers to enhance the level of service provided by SunStar.
Each prospective new Dealer relationship is evaluated at SunStar's
headquarters after completion and review of a completed dealer application and
branch evaluation of the Dealer. Once approved, the Dealer and SunStar usually
enter into a non-exclusive Dealer Agreement. SunStar's Dealer Agreements
generally provide that contracts are sold by the Dealer to SunStar "without
recourse" to the Dealer, except in limited circumstances including, among
others, that (i) the financed vehicle is not properly registered showing SunStar
as lienholder; (ii) unless otherwise specified in the related retail motor
vehicle installment sales contract, the full down payment specified in the
contract was not received by the Dealer in cash; (iii) certain representations
and warranties by the Dealer regarding the contract, the financed vehicle, the
contract process and manner of sale are breached or untrue; and (iv) the Dealer
has failed to comply with applicable law.
Subsequent to execution of a Dealer Agreement, each Dealer relationship
is evaluated on a monthly basis through standardized reports which track
delinquency and loss rates on a Dealer-by-Dealer basis. SunStar controls its
Dealer relationships by providing economic disincentives to those Dealers that
provide low levels of customer service or whose originations perform below
acceptable levels.
Credit Application Process. SunStar has developed procedures and
controls for investigating, verifying and analyzing credit applications at the
branch level. For applications that are exceptions to SunStar policies, the
branch level analysis will be augmented and reviewed by centralized underwriters
at SunStar's executive offices in Atlanta, Georgia. The credit approval process
identifies applicants who satisfy SunStar's risk profile and have an acceptable
probability of repaying the contract.
All loan applications are faxed from the Dealer to the local SunStar
branch for evaluation and processing. For each applicant, SunStar obtains a
credit bureau report and attempts to verify the information contained in the
application. SunStar's evaluation of the credit application will commence at the
branch and under certain circumstances be sent to SunStar's central underwriting
department. Each branch manager is assigned an approval limit by central
management based on the manager's experience level and historical loan
performance. The approval authority will specify maximum loan amounts and
minimum FICO scores required for the applicant to be approved by the branch
manager. All applications for amounts in excess of a branch manager's approval
authority or exceptions to policy will be centrally underwritten at SunStar's
Atlanta headquarters. Based upon SunStar's underwriting policies, the
underwriter will decide to approve the application, approve the application
subject to a specified set of terms or reject the application. The underwriter's
decision will be conveyed to the dealer by fax from the branch.
Underwriting Standards. Each application is evaluated using uniform
underwriting guidelines developed by SunStar, although such guidelines may vary
based upon the credit quality of the applicant. Management is continually
evaluating the criteria to ensure that the company is sufficiently assessing the
applicant's payment characteristics and the adequacy of the Financed Vehicle as
collateral. Among the criteria considered in evaluating the individual
applications are (i) stability of the applicant with regard to length of
employment and length of residency, (ii) minimum monthly income requirements,
(iii) the applicant's payment history based upon information provided by various
credit reporting agencies with respect to past and present debt, (iv) a debt
ratio/income test which is a monthly measurement of the monthly debt service
requirements of an applicant, including the contract being applied for, as a
percent of monthly gross income, (v) a payment ratio test which measures the
vehicle contract payment as a percent of gross monthly income, and (vi) the
principal amount of the contract taking into account the age, type and market
value of the Financed Vehicle. During the period in which the Receivables were
originated, the general policies of SunStar included (i) requiring minimum
length of employment of 2 years and minimum length of residency in the service
area of 3 years, (ii) requiring
<PAGE>
minimum monthly income ranging from a net
monthly income of $1,000 to net monthly income of $1,250, (iii) requiring net
disposable monthly income (adjusted for the number of dependents) to exceed
total monthly income by a minimum of 15%, and (iv) limiting advances on vehicles
to 105% of manufacturer's invoice on new vehicles and 110% of wholesale value on
used vehicles, excluding taxes, title, license fees, credit insurance, and
mechanical service contracts.
Underwriting Compliance. In order to ensure consistent loan
underwriting in the branches and to reinforce the importance of adhering to
underwriting policies, each week all booked contract files are forwarded from
the branches to a central compliance unit. The contracts are reviewed and all
exceptions to underwriting policies are noted. Employees in branches with
significant exceptions may receive additional training, be given certain
compliance goals to reach or be dismissed if improvement does not occur.
Loan Terms. All contracts purchased by SunStar are fully amortizing and
provide for level monthly payments over the term of the contracts which is not
to exceed 60 months. Interest accrual methods are based on the laws of the state
in which the contract was originated.
SunStar requires that the obligor maintain appropriate physical damage
insurance on the vehicle with SunStar listed as the loss payee. In the event
that the obligor fails to maintain such insurance, SunStar will purchase
collateral protection insurance ("CPI") on behalf of the obligor and the premium
for the CPI plus interest will be added to the amount owed by the obligor.
SunStar has engaged American Bankers Insurance Company to track the maintenance
of insurance policies and provide collateral protection insurance. The premium
amount of any CPI added to any contract as of the Cutoff Date will not be
included in the amount securitized.
CONTRACT VERIFICATION AND FUNDING
Prior to funding a contract, a SunStar branch employee contacts the
borrower to confirm delivery of the automobile being purchased and certain terms
and conditions of the retail installment sales contract. In addition, prior to
funding, the branch will verify the existence of property and casualty insurance
on the vehicle, inform the obligor of the first payment due date and SunStar's
collection policies and obtain a copy of the registration application showing
SunStar's security interest in the financed vehicle. Once such verification is
complete, the branch will remit the appropriate amount to the Dealer.
SERVICING OF RECEIVABLES
SunStar issues a monthly billing statement to each obligor ten days
prior to the next due date on his or her contract. Borrowers are instructed to
remit payments to a centralized lockbox, but payments will also be accepted at
the branch which services the contract. Partial payments of less than 75% of the
scheduled payment are usually returned to the borrower to emphasize the
importance of meeting the required payment schedule.
SunStar services its receivables, prior to repossession or charge-off,
on a decentralized basis, with the branch that originated a contract responsible
for customer service and collection activity. However, once a contract is
repossessed or otherwise charged-off, one of two centralized units will become
involved. The centralized remarketing unit oversees the remarketing of
repossessed collateral to obtain the most profitable method of disposition of
the collateral. The asset management unit is responsible for collecting
deficiency balances and other charged off contracts.
DELINQUENCIES, CHARGE-OFF POLICIES AND NET LOSSES
SunStar measures delinquency on a contractual basis which classifies
the accounts into 30, 60 and 90+ categories based on monthly payment cycles
elapsed from the last day of the end of the month in which a scheduled payment
is due under the retail motor vehicle installment sales contract (the "due
date"). Installment payments must be within $0.99 of the scheduled payment due,
after application of any portion of such installment payment necessary to
satisfy any prior shortfalls, for a contract to be re-aged.
Collection activities with respect to delinquent retail motor vehicle
installment sales contracts generally begin one day after the due date for
payment defaults, with a phone call to the delinquent borrower. If needed, a
branch employee will follow up on a regular basis with a delinquent borrower
until payment is received.
<PAGE>
Under certain circumstances, SunStar will grant obligors a deferral
when a one-time event has caused the obligor to default on a scheduled payment.
SunStar only permits a deferral if a customer has made a minimum of six
scheduled payments, is less than 60 days past (measured as of the last day of
the month is which a scheduled payment was due), and has paid a deferral fee. In
either case, the total number of deferrals allowed over the life of any loan is
limited to one deferral for each year of the term of the contract with a maximum
of five deferrals over the life of the contract, provided that such deferrals
need not be granted in each year but may be aggregated over the life of the
contract.
SunStar's collectors are assigned to specific delinquent accounts and
attempt to contact the delinquent borrower by telephone, letter, or field
contact based on the duration of the delinquency and history of the account.
SunStar's current charge-off policy charges accounts off monthly if:
(i) no full payment in has been received in six months (on a recency basis)
(primarily used to capture skip pays or accounts involved in litigation); (ii)
if a deficiency balance remains after repossession and liquidation of the
vehicle; and/or (iii) SunStar believes the account has little or no collection
potential.
Repossession procedures typically begin when a retail motor vehicle
installment sales contract becomes thirty (30) days delinquent. SunStar
endeavors to repossess collateral no later than 60 days following the missed
payment due date if branch personnel feel that future payments are unlikely.
Repossessions are referred to independent, licensed, insured and bonded
repossession agencies. Sale procedures for repossessed collateral are conducted
by a centralized remarketing department, which determines the sale channel that
will provide the maximum value for the collateral. After making such
determination, the remarketing department will direct the delivery of the
collateral to the desired outlet and ensure successful completion of the sale.
THE RECEIVABLES
GENERAL
The Receivables were purchased by SunStar or an affiliate in the
ordinary course of business from Dealers. The Receivables consist of non-prime
retail motor vehicle installment sales contracts. Non-prime retail motor vehicle
installment sales contracts are contracts with individuals with less than
perfect credit due to various factors, including, among other things, the manner
in which such individuals have handled previous credit, limited prior credit
history, prior declarations of personal bankruptcy and/or limited financial
resources. The Receivables do not include amounts (including interest) owing
under a Contract on account of CPI Funds. See "Risk Factors --Increased Default
Risk of Obligors on Non-Prime Receivables," "SunStar -- General" and "-- Credit
Evaluation Procedures."
ELIGIBILITY CRITERIA
The Seller will warrant in the Sale and Servicing Agreement that, among
other things, each of the Receivables to be held by the Trust (i) will be
originated in the United States; (ii) will be secured by security interests in
the respective new or used automobile, light truck or van which was purchased
thereunder; (iii) will provide for level monthly payments which fully amortize
the Amount Financed over the original term (provided that the last payment may
be different from the level monthly payment); (iv) will provide for allocation
of payments between principal and interest by the simple interest method, the
Rule of 78s Method (as defined below) or the actuarial method; (v) has an APR of
at least 15% and not more than 30%; (vi) has an original term to maturity of not
more than 60 months; (vii) as of the Cutoff Date, had the most recent Scheduled
Payment made by or on behalf of the Obligor or not contractually delinquent more
than 30 days; (viii) had no related Financed Vehicle repossessed without
reinstatement as of the Cutoff Date; and (ix) as of the Cutoff Date the related
Obligor is not the subject of any pending bankruptcy proceeding. For purposes of
clause (vii), a payment delinquency with respect to a Receivable is considered
to have commenced on the last day of the end of the month in which a Scheduled
Payment has not been made. No selection procedures believed to be adverse to the
Securityholders have been utilized in selecting the Receivables from qualifying
non-prime retail motor vehicle installment sales contracts owned by SunStar.
<PAGE>
"Precomputed Receivables" consist of receivables that provide for
allocation of payments according to either (i) the actuarial method ("Actuarial
Receivables") or (ii) the sum of the month's digits or any equivalent method
commonly referred to as the "Rule of 78s method" ("Rule of 78s Receivables"). An
Actuarial Receivable provides for amortization of the loan over a series of
fixed level payment monthly installments. Each monthly installment, including
the monthly installment representing the final payment on the Receivable,
consists of an amount of interest equal to 1/12 of the Annual Percentage Rate
("APR") of the loan multiplied by the unpaid principal balance of the loan, and
an amount of principal equal to the remainder of the monthly payment. A Rule of
78s Receivable provides for the payment by the borrower 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 stated APR for the term of the receivable. 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 78s method.
"Simple Interest Receivables" consist of receivables that provide for
the amortization of the amount financed under each receivable over a series of
fixed level monthly payments except that the last payment may be a different
amount. However, unlike the monthly payment under an Actuarial Receivable or
Rule of 78s Receivable, each monthly payment consists of an installment of
interest which is calculated on the basis of the outstanding principal balance
of the receivable multiplied by the stated APR and further multiplied by the
period elapsed (as a fraction of a calendar year) since the preceding payment of
interest was made. As payments are received under a Simple Interest Receivable,
the amount received is applied first to interest accrued to the date of payment
and the balance is applied to reduce the unpaid principal balance. Accordingly,
if an obligor pays a fixed monthly installment before its scheduled due date,
the portion of the payment allocable to interest for the period since the
preceding payment was made will be less than it would have been had the payment
been made as scheduled, and the portion of the payment applied to reduce the
unpaid principal balance will be correspondingly greater, thereby having the
effect of a prepayment. Conversely, if an obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
In the event of the prepayment in full (voluntarily or by acceleration)
of a Rule of 78s Receivable, under the terms of the retail motor vehicle
installment sales contract, a "refund" or "rebate" will be made from the
Servicer out of the Supplemental Servicing Fee to the borrower of the portion of
the total amount of payments then due and payable under such retail motor
vehicle installment sales contract allocable to "unearned" add-on interest,
calculated in accordance with a method equivalent to the Rule of 78s unless
otherwise provided by law. If a Simple Interest Receivable is prepaid, rather
than receive a rebate, the borrower is required to pay interest only to the date
of prepayment. The amount of a rebate under a Rule of 78s Receivable generally
will be less than the amount of a rebate on an Actuarial Receivable and
generally will be less than the remaining scheduled payments of interest that
would have been due under a Simple Interest Receivable for which all payments
were made on schedule.
The Trust will account for the Rule of 78s Receivables as if such
Receivables were Actuarial Receivables. Amounts received upon prepayment in full
of a Rule of 78s Receivable in excess of the then outstanding Principal Balance
of such Receivable and accrued interest thereon (calculated pursuant to the
actuarial method) will not be paid to Noteholders or passed through to
Certificateholders but will be paid to the Servicer as additional servicing
compensations.
<PAGE>
COMPOSITION
The statistical information presented in this Prospectus, including the
summary statistical information set forth below, is based on the Receivables as
of November 30, 1996 (the "Cutoff Date").
Composition of the Receivables as of the Cutoff Date
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Average Aggregate Principal Number of Weighted Average Weighted Average Average Principal
APR of Receivables Balance Receivables Remaining Term Original Term Balance
</TABLE>
The geographic distribution, the distribution of Receivables which are
Precomputed Receivables and Simple Interest Receivables, the distribution of the
Receivables secured by new and used vehicles, the distribution by remaining
principal balance, the distribution by APR and the distribution by remaining
term, in each case of the Receivables as of the Cutoff Date, are set forth
below. (Percentages may not add to 100% due to rounding.)
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
State(1) Number of Aggregate Percentage
Receivables Principal of Aggregate
Balance Principal Balance
Arizona..................
California...............
Florida..................
Georgia..................
Illinois.................
Indiana..................
Kentucky.................
Louisiana................
Maryland.................
Michigan.................
Missouri.................
Nevada...................
New Jersey...............
New York.................
Ohio.....................
Oregon...................
Pennsylvania.............
South Carolina...........
Tennessee................
Texas....................
Virginia.................
Washington...............
Wisconsin................
Total............
- --------------------
(1) Based on [billing] addresses of the Obligors as of the Cutoff Date.
<PAGE>
DISTRIBUTION BY INTEREST ALLOCATION METHOD OF THE RECEIVABLES AS OF THE
CUTOFF DATE
Interest Allocation Method Number of Aggregate Percentage of
Receivables Principal Aggregate
Balance Principal
Balance
Precomputed Receivables .......
Simple Interest Receivables....
Total..................
DISTRIBUTION OF THE RECEIVABLES BY NEW AND USED FINANCED VEHICLES
AS OF THE CUTOFF DATE
Collateral Type Number of Aggregate Percentage of
Receivables Principal Aggregate
Balance Principal
Balance
New ...........................
Used...........................
Total..................
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE RECEIVABLES AS
OF THE CUTOFF DATE
Range of Remaining Number of Aggregate Percentage
Principal Balance Receivables Principal of Aggregate
Balance Principal
Balance
$ 0,000.00 to $ 2,499.99...........
$ 2,500.00 to $ 4,999.99...........
$ 5,000.00 to $ 7,499.99...........
$ 7,500.00 to $ 9,999.99...........
$10,000.00 to $12,499.99...........
$12,500.00 to $14,999.99...........
$15,000.00 to $17,499.99...........
$17,500.00 to $19,999.99...........
$20,000.00 to $22,499.99...........
$22,500.00 to $24,999.99...........
$25,000.00 to $27,499.99...........
$27,500.00 to $29,999.99...........
$30,000.00 to $39,999.99...........
Total......................
<PAGE>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES AS OF THE CUTOFF DATE
Range of Annual Number of Aggregate Percentage of
Percentage Rate Receivables Principal Aggregate Principal
Balance Balance
9.000% to 9.999%.........
10.000% to 10.999%.........
11.000% to 11.999%.........
12.000% to 12.999%.........
13.000% to 13.999%.........
14.000% to 14.999%.........
15.000% to 15.999%.........
16.000% to 16.999%.........
17.000% to 17.999%.........
18.000% to 18.999%.........
19.000% to 19.999%.........
20.000% to 20.999%.........
21.000% to 21.999%.........
22.000% to 22.999%.........
23.000% to 23.999%.........
Total.................
DISTRIBUTION BY YEAR OF ORIGINATION OF THE RECEIVABLES
Year of Origination Number of Aggregate Percentage of
Receivables Principal Aggregate
Balance Principal
Balance
1993........................
1994........................
1995........................
1996........................
Total...............
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUTOFF DATE
Range of Remaining Terms Number of Aggregate Percentage
Receivables Principal of Aggregate
Balance Principal Balance
3 to 11 Months...............
12 to 17 Months...............
18 to 23 Months...............
24 to 29 Months...............
30 to 35 Months...............
36 to 41 Months...............
42 to 47 Months...............
48 to 53 Months...............
54 to 59 Months...............
60 Months.....................
Total ................
<PAGE>
DELINQUENCY AND LOSS EXPERIENCE
SunStar began operations in February 1993. Since its inception, SunStar has
approved contracts based on the guidelines outlined under "Underwriting
Standards" herein. As the Company has grown, however, the implementation and
enforcement of these guidelines has changed to reflect the Company's
development. In mid-1994 and early 1995, SunStar employed pricing and
underwriting standards which were less stringent than those employed thereafter.
Prior to mid-1994 and after early 1995, SunStar implemented more conservative
pricing and tighter evaluations of exceptions to the underwriting policy. In
March 1995, SunStar further tightened review of exceptions to underwriting
policy by establishing a Central Underwriting Unit which provided for consistent
review of all exceptions to underwriting policy. Again, in early 1996, SunStar
tightened its underwriting standards by instituting a credit bureau reporting
system, and in August 1996 SunStar adopted a formal set of underwriting
guidelines to be uniformly applied by each SunStar branch. The table below sets
forth the delinquency and loss experience as of the end of each of the periods
indicated. The information set forth in the following table may be affected by
the size, rapid growth and relative lack of seasoning of the Receivables.
Accordingly, no assurances can be given that the delinquency and loss experience
presented in the table below will be indicative of such experience on the
Receivables.
<TABLE>
<CAPTION>
SUNSTAR HISTORICAL DELINQUENCY AND LOSS EXPERIENCE
- -----------------------------------------------------------------------------------------------------------------------------------
For the eight months ended For the eight months ended Year Ended December 31,
August 31, 1996(4) August 31, 1995(4) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Receivables Amount
Outstanding(1) $882,043,854 $557,112,389 $664,916,507 $243,861,289 $44,525,812
Average Receivables
Amount Outstanding 795,678,243 386,855,792 462,140,615 129,539,103 17,196,181
Number of Loans
Outstanding 75,553 45,874 54,441 21,932 4,569
YTD Average Number of
Loans
Outstanding(2) 66,227 32,941 38,724 12,300 1,768
Number of Repossessions 7,039 2,212 4,383 1,060 n/a
Receivables Amount of
Repossessions 62,052,100 17,524,907 36,464,781 7,097,587 n/a
Number of Repossessions as
% of Average Number of
Loans 15.94% 10.07% 11.32% 8.62% n/a
Receivables Amount of
Repossessions
as % of Average Receivables
Outstanding 11.70% 6.80% 7.89% 5.48% n/a
Number of Charge-offs 7,711 2,037 4,650 764 43
Receivables Amount of
Charge-offs(3) 42,091,068 9,372,043 22,904,272 2,660,011 113,917
Number of Charge-offs as
% of Average Number of
Loans 17.46% 9.28% 12.01% 6.21% 2.43%
Receivables Amount of
Charge-offs
as % of Average Receivables
Outstanding 7.93% 3.63% 4.96% 2.05% 0.66%
Recoveries, including inventory 4,486,206 1,210,276 2,232,593 190,283 -
Net Losses 37,604,862 8,161,767 20,671,679 2,469,728 113,917
Net Losses as % of Average
Receivables
Outstanding 7.09% 3.16% 4.47% 1.91% 0.66%
Net Delinquencies
30-59 days 22,207,386 10,440,776 17,153,635 4,311,074 725,033
60-89 days 9,313,549 5,031,828 6,356,315 1,296,442 218,115
90+ days 12,124,786 5,255,269 8,361,398 1,973,500 177,254
---------- --------- --------- --------- -------
Total 43,645,721 20,727,873 31,871,348 7,581,016 1,120,401
Total Delinquencies as a %
Receivables
Outstanding 4.95% 3.72% 4.79% 3.11% 2.52%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Receivables amount outstanding is equal to the sum of the remaining payments
(including add-ons) less unearned finance charges.
(2)Average number of loans outstanding is equal to the sum of the year to date
monthly loans outstanding divided by the number of months plus one.
(3)Includes May 1996 Bulk Purchase which will not be included in the
securitization. The bulk purchase had 678 charged-off accounts for a total of
$1,435,349 through August 1996.
(4)Percentages relating to charge-offs and recoveries are annualized.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF DELINQUENCY AND LOSS EXPERIENCE
Net credit losses increased from 3.63% for the eight months ended
August 31, 1995 to 7.93% for the eight months ended August 31, 1996. This
increase was due to the aging of a large number of contracts in SunStar's
portfolio into their peak loss periods and, in the economy generally, higher
levels of consumer debt and an increased incidence of consumer bankruptcy. In
addition, the increase was, in part, attributable to an accounting change
implemented in July 1996 which accelerated the recognition of credit losses
attributable to deficiency balances when compared to SunStar's prior accounting
policy. Net credit losses as a percentage of average receivables also increased
due to a substantial reduction in the growth rate of SunStar which resulted from
stricter implementation of the Company's underwriting policies during 1996. As a
result, loss rates experienced in 1995 are based on a higher proportion of newly
originated receivables which would not have yet experienced their peak loss
periods.
Current delinquency rates increased from 3.72% at August 31, 1995 to
4.95% at August 31, 1996. This increase is also attributable to both the
reduction in the growth rate of SunStar's portfolio and general weakness in
consumer credit performance.
<PAGE>
THE INSURER
The following information has been obtained from Financial Security
Assurance Inc. (hereinafter in this section, "Financial Security") and has not
been verified by the Seller or the Underwriter. No representations or warranty
is made by the Seller or the Underwriter with respect thereto.
GENERAL
Financial Security is a monoline insurance company incorporated in 1984
under the laws of the State of New York. Financial Security is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities -- thereby enhancing the credit rating of those securities
- -- in consideration for the payment of a premium to the insurer. Financial
Security and its subsidiaries principally insure asset-backed, collateralized
and municipal securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or other
assets having an ascertainable cash flow or market value. Collateralized
securities include public utility first mortgage bonds and sale/leaseback
obligation bonds. Municipal securities consist largely of general obligation
bonds, special revenue bonds and other special obligations of state and local
governments. Financial Security insures both newly issued securities sold in the
primary market and outstanding securities sold in the secondary market that
satisfy Financial Security's underwriting criteria.
Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder of Holdings is obligated to pay any debt of Financial Security or
any claim under any insurance policy issued by Financial Security or to make any
additional contribution to the capital of Financial Security.
The principal executive offices of Financial Security are located at
350 Park Avenue, New York, New York 10022, and its telephone number at that
location is (212) 826-0100.
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written or reinsured from third parties by Financial Security
or any of its domestic operating insurance company subsidiaries are reinsured
among such companies on an agreed-upon percentage substantially proportional to
their respective capital, surplus and reserves, subject to
<PAGE>
applicable statutory risk limitations. In addition, Financial Security reinsures
a portion of its liabilities under certain of its financial guaranty insurance
policies with other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy.
RATING OF CLAIMS-PAYING ABILITY
Financial Security's claims-paying ability is rated Aaa by Moody's and
AAA by S&P, Nippon Investors Service Inc. and Standard & Poor's (Australia) Pty.
Ltd. Such ratings reflect only the views of the respective rating agencies, are
not recommendations to buy, sell or hold securities and are subject to revision
or withdrawal at any time by such rating agencies.
See "Risk Factors - Limitations on Credit Ratings on Securities" herein.
CAPITALIZATION
The following table sets forth the capitalization of Financial Security
and its wholly owned subsidiaries on the basis of generally accepted accounting
principles as of June 30, 1996 (in thousands):
June 30, 1996
(unaudited)
Deferred Premium Revenue
(net of prepaid reinsurance premiums)................$ 351,180
Shareholder's Equity:
Common Stock........................................ 15,000
Additional Paid-In Capital.......................... 681,470
Unrealized Gain on Investments (net of deferred
income taxes)....................................... (5,685)
Accumulated Earnings................................. 94,287
------
Total Shareholder's Equity............................. 785,072
-------
Total Unearned Premium Reserve
and Shareholder's Equity..............................$1,136,252
For further information concerning Financial Security, see the
Consolidated Financial Statements of Financial Security and Subsidiaries, and
the notes thereto, incorporated by reference herein. Copies of the statutory
quarterly and annual statements filed with the State of New York Insurance
Department by Financial Security are available upon request to the State of New
York Insurance Department.
INSURANCE REGULATION
Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial guaranty
insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York Insurance Law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes contingency, loss and unearned
premium reserve requirements for each such insurer, and limits the size of
individual transactions ("single risks") and the volume of transactions
("aggregate risks") that may be underwritten by each such insurer. Other
provisions of the New York Insurance Law, applicable to non-life insurance
companies such as Financial Security,
<PAGE>
regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers,
consolidations, acquisitions or sales of assets and incurrence of liabilities
for borrowings.
The Policies are not covered by the Property/Casualty Insurance
Security Fund specified in Article 76 of the New York Insurance Law.
<PAGE>
DESCRIPTION OF THE SECURITIES
THE NOTES
The Notes will be issued pursuant to the terms of the Indenture, a form
of which has been filed as an exhibit to the Registration Statement. The
following summary describes certain terms of the Notes and the Indenture. The
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Notes and the Indenture.
The Notes will be offered for purchase in denominations of $1,000 and
integral multiples thereof in book-entry form only. Persons acquiring beneficial
interests in the Notes will hold their interests through DTC.
PAYMENTS OF INTEREST
Interest on the principal amount of each Class of Notes will accrue at
the applicable Interest Rate and will be payable to the Noteholders of such
Class monthly on each Distribution Date, commencing January 1997. Interest will
accrue from and including the most recent Distribution Date on which interest
has been paid (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding the following Distribution Date
(each, an "Interest Period"). Interest on the Class A-1 Notes and the Class A-2
Notes will be calculated on the basis of a 360-day year and the actual number of
days elapsed in the related Interest Period. Interest on the Class A-3 Notes
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. Interest accrued as of any Distribution Date but not paid on such
Distribution Date will be due on the next Distribution Date, together with, to
the extent permitted by law, interest on such amount at the applicable Interest
Rate. In the event that the interest rate for the Class A-2 Notes for any
Interest Period calculated without giving effect to the maximum rate would
exceed the interest rate for such Interest Period after giving effect to the
maximum rate, the amount of such excess will not be due as additional interest
to the Class A-2 Noteholders on the related Distribution Date nor will it be
carried forward and payable as additional interest to the Class A-2 Noteholders
on any subsequent Distribution Date.
Interest payments on the Notes will be made from the Distribution Amount (as
defined herein) after payment of accrued and unpaid trustees' fees and other
administrative fees of the Trust and payment of the Servicing Fee. See
"Description of the Purchase Agreement and the Trust Documents --
Distributions."
Interest on the Class A-2 Notes will accrue during each Interest Period
at a rate per annum equal to the sum of LIBOR plus 0. %, subject to a maximum
rate equal to ___% per annum.
DETERMINATION OF LIBOR
Pursuant to the Indenture, the Indenture Trustee will determine LIBOR
for purposes of calculating the Interest Rate for the Class A-2 Notes for each
given Interest Period on the second business day prior to the commencement of
each Interest Period (each, a "LIBOR Determination Date"). For purposes of
calculating LIBOR, a business day means a Business Day and a day on which
banking institutions in the City of London, England are not required or
authorized by law to be closed.
"LIBOR" means, with respect to any Interest Period, the London interbank
offered rate for deposits in U.S. dollars having a maturity of one month
commencing on the related LIBOR Determination Date (the "Index Maturity") which
appears on Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR
Determination Date. If such rate does not appear on the Telerate Page 3750, the
rate for that day will be determined on the basis of the rates at which deposits
in U.S. dollars, having the Index Maturity and in a principal amount of not less
than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the London interbank market by
the Reference Banks.
<PAGE>
The Indenture Trustee will request the principal London
office of each of such Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for that day will be the
arithmetic mean, rounded upward, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward, of
all such quotations. If fewer than two such quotations are provided, the rate
for that day will be the arithmetic mean, rounded upward, if necessary, to the
nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward, of the offered per annum rates that one or more leading
banks in New York City, selected by the Indenture Trustee, are quoting as of
approximately 11:00 a.m., New York City time, on such LIBOR Determination Date
to leading European banks for United States dollar deposits for the Index
Maturity; provided that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, LIBOR in effect for the applicable Interest Period
will be LIBOR in effect for the previous Interest Period.
"Telerate Page 3750" means the display page 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 Indenture Trustee.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution
Date in an amount equal to the Noteholders' Principal Distributable Amount for
the calendar month (the "Monthly Period") preceding such Distribution Date.
The Noteholders' Principal Distributable Amount will equal the sum of (x) the
Noteholders' Percentage of the Principal Distributable Amount and (y) any unpaid
portion of the amount described in clause (x) with respect to a prior
Distribution Date. The "Principal Distributable Amount" with respect to any
Distribution Date will be an amount equal to the sum of the following amounts:
(i) the principal portion (calculated in the case of Precomputed Receivables on
the basis of the actuarial method and in the case of Simple Interest Receivables
on the basis of the simple interest method) of all Collected Funds received
during the immediately preceding Monthly Period (other than Liquidated
Receivables and Purchased Receivables), (ii) the Principal Balance of all
Receivables that became Liquidated Receivables during the related Monthly Period
(other than Purchased Receivables), (iii) the principal portion of the Purchase
Amounts received with respect to all Receivables that became Purchased
Receivables during the related Monthly Period, and (iv) following the
acceleration of the Notes pursuant to the Indenture, the amount of money or
property collected pursuant to the Indenture since the preceding Determination
Date by the Indenture Trustee for distribution pursuant to the Indenture.
Principal payments on the Notes will be made from the Distribution Amount after
payment of accrued and unpaid trustees' fees and other administrative fees of
the Trust, payment of the Servicing Fee and after distribution of the
Noteholders' Interest Distributable Amount. See "Description of the Purchase
Agreement and the Trust Documents -- Distributions" herein.
The Noteholders' Percentage will be (i) for each Distribution Date
prior to the Distribution Date on which the Class A-3 Notes is reduced to zero,
100%, (ii) on the Distribution Date on which the principal amount of the Class
A-3 Notes is reduced to zero, the percentage equivalent of a fraction, the
numerator of which is the principal amount of the Class A-3 Notes immediately
prior to such Distribution Date, and the denominator of which is the Principal
Distributable Amount for such Distribution Date, and (iii) for any Distribution
Date thereafter, 0%. Principal payments on the Notes will be applied on each
Distribution Date sequentially, to the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes, in that order, until the respective principal amount of
each such Class of Notes has been paid in full so that no principal will be paid
on a Class of Notes until the principal of all Classes of Notes having a lower
numerical Class designation has been paid in full. In addition, the outstanding
principal amount of the Notes of any Class, to the extent not previously paid,
will be payable on the respective Final Scheduled Distribution Date for such
Class. The actual date on which the aggregate outstanding principal amount of
any Class of Notes is paid may be earlier than the Final Scheduled Distribution
Date for such Class, depending on a variety of factors.
OPTIONAL REDEMPTION
The Class A-3 Notes, to the extent still outstanding, may be redeemed in
whole, but not in part, on any Distribution Date on which the Servicer exercises
its option to purchase the Receivables. The Servicer may purchase the
Receivables on the Distribution Date on which the Pool Balance has declined to
5% or less of the Original Pool Balance, and on each
<PAGE>
Distribution Date
thereafter. Such redemption will effect early retirement of the Notes of such
Class. The redemption price will be equal to the unpaid principal amount of the
Notes of such Class, plus accrued and unpaid interest thereon (the "Redemption
Price").
CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE
Notwithstanding anything to the contrary contained herein, on _____ __,
1997 (the "Class A-1 Final Scheduled Distribution Date") holders of record as of
the Business Day preceding such date shall be entitled to receive from funds
available therefor interest on the outstanding principal amount of the Class A-1
Notes immediately prior to such date at a rate of % per annum for the period
(the "Final Class A-1 Interest Period") from and including the most recent
Distribution Date on which interest has been paid on the Class A-1 Notes to but
excluding the Class A-1 Final Scheduled Distribution Date (together with
interest due but not paid on a prior Distribution Date and, to the extent
permitted by law, interest on such amount at %) plus the unpaid principal amount
of the Class A-1 Notes. Interest will be calculated on the basis of a 360-day
year and the actual number of days elapsed in the Final Class A-1 Interest
Period.
THE INDENTURE
Modification of Indenture Without Noteholder Consent. Without the
consent of the Noteholders, but with the consent of the Insurer (so long as no
Insurer Default has occurred and is continuing) and with notice to the Rating
Agencies, the Indenture Trustee and the Owner Trustee may enter into one or more
supplemental indentures for any of the following purposes: (i) to correct or
amplify the description of the collateral or add additional collateral; (ii) to
evidence and provide for the assumption of the Note and the Indenture
obligations by a permitted successor to the Trust; (iii) to add additional
covenants for the benefit of the Noteholders, or to surrender any rights or
power conferred upon the Trust: (iv) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee; (v) to cure any ambiguity
or correct or supplement any provision in the Indenture or in any supplemental
indenture; (vi) to evidence and provide for the acceptance of the appointment of
a successor Indenture Trustee or to add to or change any of the provisions of
the Indenture as shall be necessary and permitted to facilitate the
administration by more than one trustee; (vii) to modify, eliminate or add to
the provisions of the Indenture in order to comply with the Trust Indenture Act
of 1939, as amended; and (viii) to add any provisions to, change in any manner,
or eliminate any of the provisions of, the Indenture or modify in any manner the
rights of Noteholders under such Indenture; provided that any action specified
in this clause (viii) shall not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of any Noteholder.
Modifications of Indenture With Noteholder Consent. With the consent of
the holders representing a majority of the aggregate principal balance of the
outstanding related Notes (a "Note Majority"), with the consent of the Insurer
(so long as no Insurer Default has occurred and is continuing) and with notice
to the Rating Agencies, the Indenture Trustee and the Owner Trustee may execute
a supplemental indenture to add provisions to change in any manner or eliminate
any provisions of, the Indenture, or modify in any manner the rights of the
Noteholders.
Without the consent of the Insurer (so long as no Insurer Default has
occurred and is continuing) and the holder of each outstanding related Note
affected thereby, however, no supplemental indenture may: (i) change the due
date of any installment of principal of or interest on any Note or reduce the
principal amount thereof, the interest rate thereon or the redemption price with
respect thereto, change the provisions of the Indenture relating to the
application of collections on or the proceeds of the sale of, the collateral for
the Notes to payment of principal of or interest on the Notes or change any
place of payment where or the coin or currency in which any Note or any interest
thereon is payable, (ii) impair the right to institute suit for the enforcement
of certain provisions of the Indenture regarding payment, (iii) reduce the
percentage of the aggregate principal amount of the outstanding Notes the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the Indenture or of certain defaults thereunder and
their consequences as provided for in the Indenture, (iv) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the Trust, the
Seller, an affiliate of either of them or any obligor on the Notes, (v) reduce
the percentage of the aggregate outstanding amount of the Notes the consent of
the holders of which is required to direct the Indenture Trustee on behalf of
the Trust to sell or liquidate the Receivables if the proceeds of such sale
would be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes, (vi) decrease the percentage of the aggregate
principal amount of the Notes required to amend the sections of the Indenture
which specify the applicable percentage of aggregate principal amount of the
Notes necessary to amend the Indenture or certain other related agreements,
(vii) modify any of the provisions of the Indenture in such manner as to affect
the calculation of the amount of any payment of interest on any Distribution
Date or principal due on any Note on any Distribution Date (including the
calculation of any of the individual components of such calculation) or to
affect the rights of the Noteholders to the benefit of any provision for the
mandatory redemption of the Notes contained in the Indenture or (viii) permit
the creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in the Indenture, terminate the lien of the
Indenture on any such collateral or deprive the holder of any Note of the
security provided by the lien of the Indenture.
Events of Default; Rights Upon Event of Default. Unless an Insurer
Default shall have occurred and be continuing, "Events of Default" under the
Indenture will consist of those events defined in the Insurance Agreement as
Insurance Agreement Indenture Cross Defaults, and will constitute an Event of
Default under the Indenture only if the Insurer shall have delivered to the
Indenture Trustee, and not rescinded, a written notice specifying that any such
Insurance Agreement Indenture Cross Default constitutes an Event of Default
under the Indenture. "Insurance Agreement Indenture Cross Defaults" consist of:
(i) a demand for payment being made under either of the Policies; (ii) certain
events of bankruptcy, insolvency, receivership or liquidation of the Trust;
(iii) the Trust becoming taxable as an association (or publicly traded
partnership) taxable as a corporation for federal or state income tax purposes;
(iv) on any Distribution Date, the sum of the Available Funds with respect to
such Distribution Date plus the amount (if any) on deposit in the Spread Account
being less than the sum of the amounts described in clauses 1-6 under
"Description of the Purchase Agreement and the Trust Documents -- Distributions"
herein; and (v) any failure to observe or perform in any material respect any
other covenants or agreements in the Indenture, or any representation or
warranty of the Trust made in the Indenture or in any certificate or other
writing delivered pursuant thereto or in connection therewith proving to have
been incorrect in any material respect when made, and such failure continuing or
not being cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect not having been eliminated or
otherwise cured, for 30 days after the giving of written notice of such failure
or incorrect representation or warranty to the Trust and the Indenture Trustee
by the Insurer.
If an Insurer Default has occurred and is continuing, "Events of
Default" under the Indenture will consist of: (i) a default for five days or
more after receipt of notice thereof in the payment of any interest on any Note
after the same becomes due and payable; (ii) a default in the payment of the
principal or of any installment of the principal of any Note when the same
becomes due and payable on the related Final Scheduled Distribution Date; (iii)
a default in the observance or performance of any covenant or agreement of the
Trust made in the Indenture and the continuation of any such default for a
period of 30 days after notice thereof is given to the Trust by the Indenture
Trustee or to the Trust and the Indenture Trustee by the holders of at least 25%
in aggregate principal amount of the related Notes then outstanding (or for such
longer period, not in excess of 90 days, as may be reasonably necessary to
remedy such default; provided that such default is capable of remedy within 90
days or less and the Servicer on behalf of the Owner Trustee delivers an
officer's certificate to the Indenture Trustee to the effect that the Trust has
commenced, or will promptly commence and diligently pursue, all reasonable
efforts to remedy such default); (iv) any representation or warranty made by the
Trust in the Indenture or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in a material respect as of the time
made, and such breach not having been cured within 30 days after notice thereof
is given to the Trust by the Indenture Trustee or to the Trust and the Indenture
Trustee by the holders of a least 25% in aggregate principal amount of the Notes
then outstanding (or for such longer period, not in excess of 90 days as may be
reasonably necessary to remedy such default; provided that such default is
capable of remedy within 90 days or less and the Servicer on behalf of the Owner
Trustee delivers an officer's certificate to the Indenture Trustee to the effect
that the Trust has commenced, or will promptly commence and diligently pursue,
all reasonable efforts to remedy such default) or (v) certain events of
bankruptcy, insolvency, receivership or liquidation of the Trust. However, the
amount of principal due and payable on each class of Notes on any Payment Date
(prior to the final scheduled Payment Date of such class) will generally be
determined by the amount available to be deposited in the Note Distribution
Account for such Payment Date. Therefore, the failure to pay principal on a
class of Notes will not result in the occurrence of an Event of Default until
the final scheduled Payment Date for such class of Notes.
Upon the occurrence of an Event of Default, so long as an Insurer Default
shall not have occurred and be continuing, the Insurer will have the right, but
not the obligation, to cause the Indenture Collateral Agent to liquidate the
Trust Property in whole or in part, on any date or dates following the
acceleration of the Notes due to such Event of Default as the Insurer, in its
sole discretion, shall elect, and to deliver the proceeds of such liquidation to
the Indenture Trustee for distribution in
<PAGE>
accordance with the terms of the
Indenture. The Insurer may not, however, cause the Indenture Collateral Agent to
liquidate the Trust Property in whole or in part if the proceeds of such
liquidation would not be sufficient to pay all outstanding principal of and
accrued interest on the Notes, unless such Event of Default arose from a claim
being made on the Note Policy or from certain events of bankruptcy, insolvency,
receivership or liquidation of the Trust. Following the occurrence of any Event
of Default, the Indenture Trustee and the Owner Trustee will continue to submit
claims under the Policies for any shortfalls in the Guaranteed Note
Distributions on the Notes and the Guaranteed Certificate Distributions on the
Certificates. Following any Event of Default under the Indenture, the Insurer
may elect to pay all or any portion of the outstanding amount of the Notes, plus
accrued interest thereon. See "The Policies" herein.
If an Event of Default should occur and be continuing with respect to
the Notes during the continuance of an Insurer Default, the Indenture Trustee or
a Note Majority may declare the principal of the Notes to be immediately due and
payable. Such declaration may be rescinded by a Note Majority if (i) the Trust
has paid to the Indenture Trustee a sum sufficient to pay all amounts then due
with respect to the Notes (without giving effect to such acceleration) and
certain amounts payable to the Indenture Trustee and (ii) all Events of Default
(other than nonpayment of the principal of the Notes due solely as a result of
such acceleration) have been cured or waived.
If the Notes have been declared due and payable following an Event of
Default with respect thereto during the continuance of an Insurer Default, the
Indenture Trustee may institute proceedings to collect amounts due or foreclose
on Trust Property, exercise remedies as a secured party, sell the related
Receivables or elect to have the Trust maintain possession of such Receivables
and continue to apply collections on such Receivables as if there had been no
declaration of acceleration. In such event, there may be delays in payments to
the Noteholders and the Certificateholders. During the continuance of an Insurer
Default, the Indenture Trustee, however, will be prohibited from selling the
related Receivables following an Event of Default, other than a default in the
payment of any principal or a default for five days or more in the payment of
any interest on any Note, unless (i) the holders of all the outstanding related
Notes consent to such sale; (ii) the proceeds of such sale are sufficient to pay
in full the principal of and the accrued interest on such outstanding Notes at
the date of such sale; or (iii) the Indenture Trustee determines that the
proceeds of the Receivables would not be sufficient on an ongoing basis to make
all payments on the Notes as such payments would have become due if such
obligations had not been declared due and payable, and the Indenture Trustee
provides prior written notice to the Rating Agencies and obtains the consent of
the holders representing 66-2/3% of the aggregate principal balance of the
outstanding related Notes. In the event the Notes are accelerated and the
Receivables are sold, no distributions will be made on the Certificates until
all of the interest on and principal of the Notes has been paid in full. In such
event, all the funds, if any, on deposit in the Spread Account will be available
to first pay interest on and principal of the Notes.
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee, if an Event of Default occurs and is continuing with
respect to the Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of such Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, a Note Majority will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee and a Note Majority may, in certain cases,
waive any default with respect thereto, except a default in the payment of
principal or interest or a default in respect of a covenant or provision of the
Indenture that cannot be modified without the waiver or consent of all of the
holders of such outstanding Notes.
No holder of a Note will have the right to institute any proceeding
with respect to the Indenture unless (i) such holder previously has given to the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
holders of not less than 25% in principal amount of the outstanding Notes have
made written request of the Indenture Trustee to institute such proceeding in
its own name as Indenture Trustee, (iii) such holder or holders have offered the
Indenture Trustee reasonable indemnity, (iv) the Indenture Trustee has for 60
days after receipt of notice thereof failed to institute such proceeding, (v) no
direction inconsistent with such written request has been given to the Indenture
Trustee during such 60-day period by the holders of a majority in principal
amount of such outstanding Notes, and (vi) an Insurer Default has occurred and
is continuing.
<PAGE>
If an Event of Default occurs and is continuing and if it is known to
the Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice
of the Event of Default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the Noteholders.
In addition, the Indenture Trustee and the Noteholders, by accepting
the Notes, will covenant that they will not at any time institute against the
Trust, the Seller and the Affiliated Purchaser any bankruptcy, reorganization or
other proceeding under any federal or state bankruptcy or similar law.
No recourse by any holder of a Note or Certificate may be taken,
directly or indirectly, with respect to the obligations of the Trust, the
Seller, the Servicer, the Affiliated Purchaser, the Owner Trustee or the
Indenture Trustee on the Notes or under the Indenture or any certificate or
other writing delivered in connection therewith, against (i) the Seller, the
Servicer, the Affiliated Purchaser, the Indenture Trustee or the Owner Trustee
in its individual capacity or (ii) any partner, owner, beneficiary, agent,
officer, director, employee or agent of the Seller, the Servicer, the Trust, the
Affiliated Purchaser, the Owner Trustee or the Indenture Trustee or of any
successor or assignee of the Seller, the Servicer, the Affiliated Purchaser, the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee will have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Certain Covenants. The Indenture will provide that the Trust may not
consolidate with or merge into any other entity, unless (i) the entity formed by
or surviving such consolidation or merger is organized under the laws of the
United States, any state or the District of Columbia, (ii) such entity expressly
assumes the Trust's obligation to make due and punctual payments upon the Notes
and the performance or observance of every agreement and covenant of the Trust
under the Indenture, (iii) no Default or Event of Default shall have occurred
and be continuing immediately after such merger or consolidation, (iv) none of
the Rating Agencies, after 10 days' prior notice, shall have notified the
Seller, the Servicer, the Insurer or the Trust in writing that such transaction
will result in a reduction or withdrawal of the then current ratings of the
Notes, (v) the Insurer has consented to such merger or consolidation and no
Insurer Default has occurred and is continuing, (vi) the Trust has received an
opinion of counsel to the effect that such transaction would have no material
adverse Federal or state tax consequence to the Trust or to any
Certificateholder or Noteholder, (vii) any action necessary to maintain the lien
and security interest created by the Indenture has been taken and (viii) the
Trust has delivered to the Indenture Trustee an officer's certificate of the
Trust and an opinion of counsel each stating that such transaction and the
supplemental indenture executed in connection with such transaction comply with
the Indenture and that all conditions precedent relating to the transaction have
been complied with (including any filing required by the Exchange Act).
The Trust may not convey or transfer all or substantially all its
properties or assets to any other entity, unless (i) the entity that acquires
the assets of the Trust (A) agrees that all right, title and interest conveyed
or transferred shall be subject and subordinate to the rights of Noteholders,
(B) unless otherwise agreed, expressly agrees to indemnify, defend and hold
harmless the Trust against and from any loss, liability or expense arising under
or related to the Indenture and the Notes, (C) expressly agrees to make all
filings with the Commission (and any other appropriate entity) required by the
Exchange Act in connection with the Notes and (D) is organized under the laws of
the United States or any state; and (ii) the criteria specified in clauses (ii)
through (vii) of the preceding paragraph have been complied with.
The Trust will not, among other things, (i) except as expressly permitted
by the Indenture, the Purchase Agreement, the Trust Documents or certain other
documents (collectively, the "Basic Documents"), sell, transfer, exchange or
otherwise dispose of any of the assets of the Trust, (ii) claim any credit on or
make any deduction from the principal and interest payable in respect of the
Notes (other than amounts withheld under the Internal Revenue Code of 1986, as
amended, or applicable state law) or assert any claim against any present or
former holder of such Notes because of the payment of taxes levied or assessed
upon the collateral for the Notes, (iii) except as contemplated by the Basic
Documents, dissolve or liquidate in whole or in part, (iv) permit the validity
or effectiveness of the Indenture to be impaired or permit any person to be
released from any covenants or obligations with respect to the Notes, (v) permit
any lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden the
collateral for the Notes or any part
<PAGE>
thereof, or any interest therein or
proceeds thereof except as expressly permitted by the Basic Documents or (vi)
permit the lien of the Indenture not to constitute a valid first priority
security interest in the collateral for the Receivables.
The Trust will not incur, assume or guarantee any indebtedness other
than indebtedness incurred pursuant to the Notes and the Indenture or otherwise
in accordance with the Basic Documents.
Annual Compliance Statement. The Trust will be required to file
annually with the Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be
required to mail each year to all Noteholders a brief report relating to, among
other things, its eligibility and qualification to continue as Indenture Trustee
under the Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the Trust to
the Indenture Trustee in its individual capacity, the property and funds
physically held by the Indenture Trustee as such and any action taken by it that
materially affects the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. The Indenture will be
discharged with respect to the collateral securing the Notes upon the delivery
to the related Indenture Trustee for cancellation of all Notes or, with certain
limitations, upon deposit with the Indenture Trustee of funds sufficient for the
payment in full of all of such Notes.
Trust Indenture Act. The Indenture will comply with applicable provisions
of the Trust Indenture Act of 1939, as amended.
THE INDENTURE TRUSTEE
The Indenture Trustee is ______________________, a national banking
association. The Indenture Trustee may resign at any time, in which event the
Seller will be obligated to appoint a successor trustee eligible under the
Indenture which shall be acceptable to the Insurer so long as no Insurer Default
has occurred and is continuing. The Seller may also remove the Indenture
Trustee, with the consent of the Insurer if the Indenture Trustee ceases to be
eligible to continue as such under the Indenture or if the Indenture Trustee
becomes insolvent. In such circumstances, the Seller will be obligated to
appoint a successor trustee eligible under the Indenture which shall be
acceptable to the Insurer so long as no Insurer Default has occurred and is
continuing. Any resignation or removal of the Indenture Trustee and appointment
of a successor trustee will be subject to any conditions or approvals, including
the approval of the Insurer and will not become effective until acceptance of
the appointment by a successor trustee.
THE CERTIFICATES
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. The following summary describes certain terms of the Certificates and
the Trust Agreement. The summary does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement.
The Certificates will be offered for purchase in denominations of
$1,000 and integral multiples thereof in book-entry form only. Persons acquiring
beneficial interests in the Certificates will hold their interest through DTC.
See "-- Book-Entry Registration."
DISTRIBUTIONS OF INTEREST
Interest on the Certificate Balance immediately prior to a Distribution
Date will accrue at the Certificate Rate for the related Interest Period, and
will be distributable to Certificateholders of record on each Distribution Date,
commencing January 1997. Interest for each Interest Period will be calculated on
the basis of a 360-day year consisting of twelve 30-day months. Interest
distributions due for any Distribution Date but not distributed on such
Distribution Date will be due on the next Distribution Date together with, to
the extent permitted by law, interest on such amount at the Certificate Rate.
Interest distributions with respect to the Certificates will be made from the
Distribution Amount after the payment of accrued and
<PAGE>
unpaid trustees' fees and
other administrative fees of the Trust, the payment of the Servicing Fee and the
distribution of the Noteholders' Distributable Amount. See "Description of the
Purchase Agreement and the Trust Documents -- Distributions."
DISTRIBUTIONS OF PRINCIPAL
Certificateholders will be entitled to distributions of principal on
each Distribution Date on or after the date on which the Class A-3 Notes have
been paid in full in an amount equal to the Certificateholders' Percentage of
the Principal Distributable Amount, as defined under "Description of the
Securities -- Payments of Principal"; provided, however, that the amount
distributable as principal on the Distribution Date on which the Class A-3 Notes
are paid in full will be reduced by the amount necessary to pay the Class A-3
Notes in full. Distributions with respect to principal payments will be made
from the Distribution Amount after payment of accrued and unpaid trustees' fees
and other administrative fees of the Trust, payment of the Servicing Fee and the
distribution of the Noteholders' Distributable Amount and the
Certificateholders' Interest Distributable Amount. See "Description of the
Purchase Agreement and the Trust Documents -- Distributions" herein.
PREPAYMENT
Upon the occurrence of an Event of Default under the Indenture (so long
as an Insurer Default shall not have occurred and be continuing), the Insurer
will have the right, but not the obligation, to cause the liquidation of the
Trust Property, in whole or in part, on any date or dates as the Insurer, in its
sole discretion, shall elect, as described under "Description of the Securities
- -- Events of Default." Any such liquidation, in whole or in part, may cause a
full or partial prepayment of the Certificates.
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables when
the Pool Balance declines to 5% or less of the Original Pool Balance,
Certificateholders will receive an amount in respect of the Certificates equal
to the outstanding Certificate Balance together with accrued interest at the
Certificate Rate, which distribution will effect early retirement of the
Certificates. See "Description of the Purchase Agreement and the Trust Documents
- -- Termination."
TRANSFERS OF CERTIFICATES
Certificateholders, other than individuals or entities holding
Certificates through a broker who reports sales of securities on Form 1099-B,
are required under the Trust Agreement to notify the Owner Trustee of any
transfer of their Certificates in a taxable sale or exchange within 30 days of
such transfer.
BOOK-ENTRY REGISTRATION
Persons acquiring beneficial ownership interests in the Securities may
hold their interests through DTC. Each of the Notes and the Certificates will be
registered in the name of Cede as nominee for DTC. DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC accepts securities for
deposit from its participating organizations ("Participants") and facilitates
the clearance and settlement of securities transactions between Participants in
such securities through electronic book-entry changes in accounts of
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks and
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants"). The rules applicable to DTC and its
participants are on file with the Commission.
Persons reflected as the beneficial owner of Certificates or Notes on the
books of a clearing agency (such persons being referred to herein as
"Certificate Owners" and "Note Owners," respectively) who are not Participants
but desire to purchase, sell or otherwise transfer ownership of Securities may
do so only through Participants (unless and until Definitive
<PAGE>
Certificates or
Definitive Notes, each as defined below, are issued). In addition, Certificate
Owners and Note Owners will receive all distributions of principal of, and
interest on, the Securities, from the Owner Trustee or the Indenture Trustee, as
applicable, through DTC and Participants. Certificate Owners and Note Owners
will not receive or be entitled to receive certificates representing their
respective interests in the Securities, except under the limited circumstances
described below.
Unless and until Definitive Securities are issued, it is anticipated
that the only Certificateholder of the Certificates and the only Noteholder of
the Notes, if any, will be Cede & Co., as nominee of DTC. Certificate Owners and
Note Owners will not be recognized by the Owner Trustee as Certificateholders or
by the Indenture Trustee as Noteholders as those terms are used in the related
Trust Documents or Indenture. Certificate Owners and Note Owners will be
permitted to exercise the rights of Certificateholders or Noteholders, as the
case may be, only indirectly through Participants and DTC.
With respect to Securities issued in book-entry form, while such
Securities are outstanding (except under the circumstances described below),
under the rules, regulations and procedures creating and affecting DTC and its
operations (the "Rules"), DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Securities and is
required to receive and transmit distributions of principal of, and interest on,
the Securities. Participants with whom Certificate Owners or Note Owners have
accounts with respect to Securities are similarly required to make book-entry
transfers and receive and transmit such distributions on behalf of their
respective Certificate Owners and Note Owners. Accordingly, although Certificate
Owners and Note Owners will not possess Securities, the Rules provide a
mechanism by which Certificate Owners and Note Owners will receive distributions
and will be able to transfer their interests.
Transfers between Participants will occur in accordance with DTC Rules.
Certificates and Notes will be issued in registered form to Certificate
Owners and Note Owners, or their nominees, rather than to DTC (such Certificates
and Notes being referred to herein as "Definitive Certificates" and "Definitive
Notes," respectively, and collectively as "Definitive Securities"), only if (i)
the Seller advises the Owner Trustee or the Indenture Trustee, as the case may
be, in writing that DTC is no longer willing or able to discharge properly its
responsibilities as nominee and depository with respect to the Certificates or
the Notes and the Seller is unable to locate a qualified successor, (ii) the
Seller at its sole option has advised the Owner Trustee or the Indenture
Trustee, as the case may be, in writing that it elects to terminate the
book-entry system through DTC or (iii) after the occurrence of an Event of
Default, the holders representing a majority of the Certificate Balance (a
"Certificate Majority") or a Note Majority advises the Owner Trustee or the
Indenture Trustee, as the case may be, through DTC that continuation of a
book-entry system is no longer in their best interests. Upon issuance of
Definitive Certificates or Definitive Notes to Certificate Owners or Note
Owners, such Certificates or Notes will be transferable directly (and not
exclusively on a book-entry basis) and registered holders will deal directly
with the Owner Trustee or the Indenture Trustee, as the case may be, with
respect to transfers, notices and distributions.
DTC has advised the Seller that, unless and until Definitive
Certificates or Definitive Notes are issued, DTC will take any action permitted
to be taken by a Certificateholder or a Noteholder under the related Trust
Documents or Indenture only at the direction of one or more Participants to
whose DTC accounts the Certificates or Notes are credited. DTC has advised the
Seller that DTC will take such action with respect to any fractional interest of
the Certificates or the Notes only at the direction of and on behalf of such
Participants beneficially owning a corresponding fractional interest of the
Certificates or the Notes. DTC may take actions, at the direction of the related
Participants, with respect to some Certificates or Notes which conflict with
actions taken with respect to other Certificates or Notes.
NEITHER THE TRUST, THE SELLER, THE SERVICER, THE OWNER TRUSTEE, THE
INDENTURE TRUSTEE, NOR THE UNDERWRITER WILL HAVE ANY RESPONSIBILITY OR
OBLIGATION TO ANY PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH
RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT,
(2) THE PAYMENT BY DTC OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL
OWNER IN RESPECT OF THE PRINCIPAL BALANCE OF, OR INTEREST ON, THE NOTES OR
CERTIFICATES, (3) THE DELIVERY BY ANY PARTICIPANT OF ANY NOTICE TO ANY
BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE AGREEMENT
TO BE GIVEN TO NOTEHOLDERS OR CERTIFICATEHOLDERS, OR (4) ANY OTHER ACTION TAKEN
BY DTC OR ITS NOMINEE AS THE NOTEHOLDER AND CERTIFICATEHOLDER.
<PAGE>
Issuance of Certificates and Notes in book-entry form rather than as
physical certificates or notes may adversely affect the liquidity of
Certificates or Notes in the secondary market and the ability of the Certificate
Owners or Note Owners to pledge them. In addition, since distributions on the
Certificates and the Notes will be made by the Owner Trustee or the Indenture
Trustee to DTC unless and until Definitive Certificates and Definitive Notes are
issued and DTC will credit such distributions to the accounts of its
Participants, with the Participants further crediting such distributions to the
accounts of indirect participants or Certificate Owners or Note Owners,
Certificate Owners and Note Owners may experience delays in the receipt of such
distributions.
<PAGE>
WEIGHTED AVERAGE LIFE CONSIDERATIONS
The rate of payment of principal of each Class of Notes and in respect
of the Certificate Balance will depend on the rate of payment (including
prepayments) of the principal balance of the Receivables. As a result, final
payment of any Class of Notes could occur significantly earlier than the Final
Scheduled Distribution Date for such Class of Notes. The final distribution in
respect of principal of the Certificates also could occur prior to the Final
Scheduled Distribution Date for the Certificates. Reinvestment risk associated
with early payment of the Notes and the Certificates will be borne exclusively
by the Noteholders and the Certificateholders, respectively.
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus, the Absolute
Prepayment Model ("ABS"), represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. ABS
further assumes that all the receivables are the same size and amortize at the
same rate and that each receivable in each month of its life will either be paid
as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
The table captioned "Percent of Initial Note Principal Balance or
Initial Certificate Balance at Various ABS Percentages" (the "ABS Table") has
been prepared on the basis of the following assumptions: (i) the Trust includes
four pools of Receivables with the characteristics set forth in the following
table; (ii) the Receivables prepay in full at the specified constant percentage
of ABS monthly, with no defaults, losses or repurchases; (iii) each scheduled
monthly payment on the Receivables is made on the last day of each month and
each month has 30 days; (iv) the initial principal amount of each Class of Notes
and the initial Certificate Balance are as set forth on the cover page hereof;
(v) interest accrues during each Interest Period at the applicable Interest Rate
and Certificate Rate; (vi) LIBOR remains constant at ____% per annum; (vii)
payments on the Notes and distributions on the Certificates are made on the 15th
day of each month whether or not a Business Day; (viii) the Securities are
purchased on the Closing Date; (ix) the scheduled monthly payment for each
Receivables has been calculated on the basis of the assumed characteristics in
the following table such that each Receivable will amortize in amounts
sufficient to repay the principal balance of such Receivable by its indicated
remaining term to maturity; (x) the first due date for each Receivable is in the
month after the assumed cutoff date for such Receivable as set forth in the
following table; and (xi) the Servicer exercises its option to purchase the
Receivables.
Original Term Remaining Term
Aggregate to Maturity to Maturity
Pool Principal Balance APR (in Months) (in Months)
1
2
3
4
---------
=========
Total
The ABS Table indicates, based on the assumptions set forth above, the
percentages of the initial principal amount of each Class of Notes and of the
Certificate Balance of the Certificates that would be outstanding after each of
the Distributions Dates shown at various percentages of ABS and the
corresponding weighted average lives of such Securities. The actual
characteristics and performance of the Receivables will differ from the
assumptions used in constructing the ABS Table. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity, that all of the Receivables will prepay at the same
level of ABS or that LIBOR will remain constant at the level assumed or at any
other level. Moreover, the diverse terms of Receivables could produce slower
<PAGE>
or faster principal distributions than indicated in the ABS Table at the various
constant percentages of ABS specified, even if the original and remaining terms
to maturity of the Receivables are as assumed. Any difference between such
assumptions and the actual characteristics and performance of the Receivables,
or actual prepayment experience, will affect the percentages of initial balances
outstanding over time and the weighted average lives of each Class of Notes and
the Certificates.
<PAGE>
<TABLE>
<CAPTION>
Percent of Initial Note Principal Balance or
Initial Certificate Balance at Various ABS Percentages
Class A-1 Notes Class A-2 Notes
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- ----------------- ------ ------ ------ ------ ------ ------ ------ -----
Closing Date...................... 100.00000 100.00000 100.00000 100.00000 100.00000 100.00000 100.00000 100.00000
Weighted Average Life (years)(1)........
</TABLE>
- ----------------------
(1) The weighted average life of a Security is determined by (i)
multiplying the amount of each principal payment on a Security by the
number of years from the date of the issuance of the Security to the
related Distribution Date, (ii) adding the results and (iii) dividing
the sum by the related initial principal amount of the Security.
<PAGE>
<TABLE>
<CAPTION>
Percent of Initial Note Principal Balance or
Initial Certificate Balance at Various ABS Percentages
Class A-3 Notes Certificates
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- ----------------- ------ ------ ------ ------ ------ ------ ------ -----
Closing Date................ 100.00000 100.00000 100.00000 100.00000 100.00000 100.00000 100.00000 100.00000
Weighted Average Life (years)(1)........
</TABLE>
- ---------------------
(1) The weighted average life of a Security is determined by (i)
multiplying the amount of each principal payment on a Security by the
number of years from the date of the issuance of the Security to the
related Distribution Date, (ii) adding the results and (iii) dividing
the sum by the related initial principal amount of the Security.
<PAGE>
DESCRIPTION OF THE PURCHASE AGREEMENT AND THE TRUST DOCUMENTS
The following summary describes certain terms of the Purchase Agreement
and the Sale and Servicing Agreement and the Trust Agreement (together, the
"Trust Documents"). Forms of the Purchase Agreement and the Trust Documents have
been filed as exhibits to the Registration Statement. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Purchase Agreement and the Trust
Documents.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date, SunStar will enter into a Purchase
Agreement with the Seller pursuant to which SunStar will, on or prior to such
Closing Date, sell and assign to the Seller, without recourse, its entire
interest in and to the Receivables, including its security interest in the
Financed Vehicles securing such Receivables and its rights to receive all
payments on, or proceeds with respect to, such Receivables to the extent paid or
payable after the applicable Cutoff Date. Pursuant to the Purchase Agreement,
SunStar will agree that, upon the occurrence of a breach of a representation or
warranty under the Trust Documents with respect to any of the Receivables which
causes the Seller to be obligated to repurchase a Receivable, the Owner Trustee
will be entitled to require SunStar to repurchase such Receivables from the
Trust. Such rights of the Trust under the Purchase Agreement will constitute
part of the property of the Trust and may be enforced directly by the Owner
Trustee and the Insurer. In addition, the Owner Trustee will pledge such rights
to the Indenture Trustee as collateral for the Notes, and such rights may be
enforced directly by the Indenture Trustee.
On the Closing Date, the Seller will sell and assign to the Owner
Trustee, without recourse, the Seller's entire interest in the Receivables and
the proceeds thereof, including its security interest in the Financed Vehicles.
Concurrently with such transfer and assignment, the Owner Trustee will execute
and deliver the related certificates representing the Certificates to or upon
the order of the Seller, and the Owner Trustee will execute and the Indenture
Trustee will authenticate and deliver the Notes, to or upon the order of the
Seller. The net proceeds received from the sale of the Certificates and the
Notes will be applied to the purchase of the Receivables from the Seller.
ACCOUNTS
The Servicer will establish and maintain one or more accounts, in the
name of the Indenture Collateral Agent, for the benefit of the Indenture
Trustee, on behalf of the Noteholders, the Owner Trustee, on behalf of the
Certificateholders, and the Insurer, into which all payments made on or with
respect to the Receivables will be deposited (the "Collection Account"). The
Servicer will be required to remit collections to the Collection Account within
two Business Days of receipt thereof. Such collections may be remitted less any
payments owed thereon to the Servicer. However, at any time that and for so long
as (i) SunStar is the Servicer, (ii) there exists no Servicer Default, (iii) if
the Servicer does not have a short term debt rating or deposit rating, as
applicable, of at least A-1 from S&P and P-1 from Moody's, a guaranty, letter of
credit, surety bond or other similar instrument is issued covering collections
held by SunStar or such successor servicer, which is acceptable to the Rating
Agencies and is issued by an entity which has a short term debt or deposit
rating of at least A-1 from S&P and P-1 from Moody's, and (iv) the Servicer, the
Indenture Trustee, the Seller or the Issuer shall not have received notice from
S&P or Moody's that failure to separate such funds will result in a reduction or
withdrawal of the then current rating on the Notes or Certificates by either S&P
or Moody's, the Servicer will not be required to deposit such amounts into the
Collection Account until on or before the applicable Distribution Date. Pending
deposit into the Collection Account, collections may be invested by the Servicer
at its own risk and for its own benefit and will not be segregated from its own
funds.
The Servicer will also establish and maintain an account, in the name
of the Indenture Collateral Agent, for the benefit of the Indenture Trustee, on
behalf of the Noteholders, and the Insurer in which amounts released from the
Collection Account for distribution to Noteholders will be deposited and from
which all distributions to Noteholders will be made (the "Note Distribution
Account"). The Servicer will also establish and maintain an account, in the name
of the Indenture Collateral Agent, for the benefit of the Owner Trustee, on
behalf of the Certificateholders, and the Insurer in which amounts released from
the Collection Account for distribution to Certificateholders will be deposited
and from which all distributions to Certificateholders will be made (the
"Certificate Distribution Account").
<PAGE>
All such Accounts shall be Eligible Accounts acceptable to the Insurer
(so long as no Insurer Default has occurred and is continuing).
SERVICING COMPENSATION AND TRUSTEES' FEES
The Servicer is entitled under the Sale and Servicing Agreement on each
Distribution Date to a servicing fee (the "Servicing Fee") for the related
Monthly Period equal to the sum of (i) one-twelfth of ____% (the "Servicing Fee
Rate") multiplied by the Pool Balance as of the first day of such Monthly Period
(the "Base Servicing Fee") and (ii) the investment earnings (net of losses) on
the Collection Account. The Servicer may retain the Base Servicing Fee from
collections on the Receivables. The Servicer will retain from collections a
supplemental servicing fee (the "Supplemental Servicing Fee") for each Monthly
Period equal to any late fees, prepayment fees, rebates and other administrative
fees and expenses collected during the Monthly Period plus reinvestment proceeds
on any payments received in respect of Receivables.
On each Distribution Date under the Agreement, the Indenture Trustee is
entitled to a fee for its services as Indenture Trustee and Indenture Collateral
Agent during the prior Monthly Period equal to an amount agreed upon by the
Indenture Trustee and the Servicer. On each Distribution Date under the
Agreement, the Owner Trustee is entitled to a fee for its services as Owner
Trustee during the prior Monthly Period equal to an amount agreed upon by the
Owner Trustee and the Servicer.
CERTAIN ALLOCATIONS
On or about the fifth Business Day immediately preceding each
Distribution Date or, in the case of the Class A-1 Final Scheduled Distribution
Date and the succeeding Distribution Date, if any distributions are required to
be made on the Class A-1 Final Scheduled Distribution Date, preceding such Class
A-1 Final Scheduled Distribution Date (in each case, the "Determination Date"),
the Servicer will be required to deliver the Servicer's Certificate to the
Indenture Trustee, the Owner Trustee and the Insurer specifying, among other
things, the amount of aggregate collections on the Receivables and the aggregate
Purchase Amount of Receivables to be purchased by the Seller or the Servicer,
all with respect to the preceding Monthly Period.
On the Business Day immediately preceding each Distribution Date (or,
in the case of the Class A-1 Final Scheduled Distribution Date, preceding such
date) (the "Deficiency Claim Date") the Indenture Trustee and/or the Owner
Trustee, as applicable, will (based solely on the information contained in the
Servicer's Certificate delivered on the related Determination Date) deliver to
the Indenture Collateral Agent, the Insurer and the Servicer a Deficiency Notice
specifying the Deficiency Claim Amount, if any, or the Class A-1 Deficiency
Claim Amount, if any, for such Distribution Date or Class A-1 Final Scheduled
Distribution Date, as applicable. Such Deficiency Notice will direct the
Indenture Collateral Agent to remit such Deficiency Claim Amount from amounts on
deposit in the Spread Account (to the extent of funds available therein) to the
Indenture Trustee for deposit in the Collection Account.
The "Scheduled Payment" with respect to a Receivable is the fixed level
payment (net of any portion of such payment attributable to any CPI Funds)
required to be made by the related Obligor during each calendar month sufficient
to amortize the principal balance thereof over the term of the Receivable and to
provide interest at the APR with respect to Precomputed Receivables, under the
actuarial method, and with respect to Simple Interest Receivables, under the
simple interest method.
DISTRIBUTIONS
On each Distribution Date, the Servicer is required to instruct the
Indenture Trustee to distribute the following amounts in the following order of
priority:
1. From the Distribution Amount, to the Indenture
Trustee and the Owner Trustee, any accrued and unpaid
trustees' fees and any accrued and unpaid fees of the
Indenture Collateral Agent (in each case, to the
extent such fees have not been previously paid by the
Servicer).
<PAGE>
2. From the Distribution Amount, to
the Servicer, the Servicing Fee for the related
Monthly Period, and certain other amounts relating to
mistaken deposits, postings or checks returned for
insufficient funds to the extent the Servicer has not
reimbursed itself in respect of such amounts and to
the extent not retained by the Servicer.
3. From the Distribution Amount, to the Note Distribution Account,
the Noteholders' Interest
Distributable Amount.
4. From the Distribution Amount, to the Note Distribution Account,
the Noteholders' Principal
Distributable Amount, to be distributed as described under
"Description of the Securities --
Payments of Principal."
5. From the Distribution Amount, to the Owner Trustee for deposit in
the Certificate Distribution
Account, the Certificateholders' Interest Distributable Amount.
6. From the Distribution Amount, to the Owner Trustee for deposit in
the Certificate Distribution
Account, the Certificateholders' Principal Distributable Amount.
7. From the Available Funds, to the Insurer, any amounts owing to the
Insurer under the Insurance
Agreement and not paid.
8. From the Available Funds, to the Indenture Collateral Agent, up to
the Specified Spread Account
Requirement for deposit in the Spread Account.
9. From the Available Funds, to the Seller, 99% of the remaining funds
and, to the Affiliated
Purchaser, 1% of the remaining funds.
If the Notes are accelerated following an Event of Default under the
Indenture, amounts collected will be distributed in the order described above.
On the Class A-1 Final Scheduled Distribution Date, the Servicer is
required to instruct the Indenture Trustee to distribute the Class A-1
Distribution Amount in the following order of priority:
A. To the Note Distribution Account, the sum of (x) the Noteholders'
Monthly Interest Distributable Amount for the Class A-1 Notes (calculated as if
the Class A-1 Final Scheduled Distribution Date were a Distribution Date) and
(y) the Noteholders' Interest Carryover Shortfall for the Class A-1 Notes
(calculated as if the Class A-1 Final Scheduled Distribution Date were a
Distribution Date).
B. To the Note Distribution Account, the Noteholders' Principal
Distributable Amount for the Class A-1 Notes.
In the event that there are any distributions made on the Class A-1
Final Scheduled Distribution Date, the Distribution Amount for the Distribution
Date following the Class A-1 Final Scheduled Distribution Date will be reduced
by the amount thereof applied on the Class A-1 Final Scheduled Distribution Date
in accordance with the Sale and Servicing Agreement.
In the event that the Servicer's Certificate indicates that the
Distribution Amount will be insufficient on any Distribution Date to cover the
distributions required pursuant to clauses 1 through 4 above on such
Distribution Date, the Indenture Trustee shall furnish to the Insurer no later
than 12:00 noon New York City time on the related Draw Date a completed notice
of claim in the amount of the Note Policy Claim Amount. Amounts paid by the
Insurer pursuant to any such notice of claim shall be deposited by the Insurer
into the Note Distribution Account for payment to Noteholders on the related
Distribution Date.
In the event that the Servicer's Certificate indicates that the Class
A-1 Distribution Amount will be insufficient on the Class A-1 Final Scheduled
Distribution Date to cover the distributions required pursuant to clauses A and
B above on such
<PAGE>
date, the Indenture Trustee shall furnish to the Insurer no
later than 12:00 noon New York City time on the related Draw Date a completed
notice of claim in the amount of the Class A-1 Note Policy Claim Amount. Amounts
paid by the Insurer pursuant to any such notice of claim shall be deposited by
the Insurer into the Note Distribution Account for payment to the Class A-1
Noteholders on the Class A-1 Final Scheduled Distribution Date.
In the event that the Servicer's Certificate indicates that the
Distribution Amount will be insufficient on any Distribution Date to cover the
distributions required by clauses 1 through 6 above on such Distribution Date,
the Owner Trustee shall furnish to the Insurer no later than 12:00 noon New York
City time on the related Draw Date a completed notice of claim in the amount of
the Certificate Policy Claim Amount. Amounts paid by the Insurer pursuant to any
such notice of claim shall be deposited by the Insurer into the Certificate
Distribution Account for payment to Certificateholders on the related
Distribution Date.
For the purposes hereof, the following terms shall have the following
meanings:
"Amount Financed" means, with respect to a Receivable, the aggregate
amount advanced or credited under such Receivable by the applicable Dealer
toward the purchase price of the Financed Vehicle and any related costs,
including amounts advanced or credited in respect of accessories, insurance
premiums, service, car club and warranty contracts, other items customarily
financed as part of retail automobile installment sales contracts or promissory
notes, and related costs.
"Available Funds" means, with respect to any Determination Date, the
sum of (i) the Collected Funds for such Determination Date, (ii) all Purchase
Amounts deposited in the Collection Account for the related Monthly Period,
(iii) following the acceleration of the Notes pursuant to the Indenture, the
amount of money or property collected pursuant to the Indenture since the
preceding Determination Date by the Indenture Trustee for distribution pursuant
to the Indenture, and (iv) any proceeds received from the sale of the assets of
the Trust pursuant to the Trust Agreement. For purposes of determining Available
Funds for the Distribution Date following the Class A-1 Final Scheduled
Distribution Date, the amount thereof, if any, applied on the Class A-1 Final
Scheduled Distribution Date will reduce the amount of Available Funds
dollar-for-dollar for such Distribution Date.
"Certificate Balance" equals, initially, $_________ and thereafter
equals the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificate Policy Claim Amount" for any Distribution Date, shall
equal the lesser of (i) the sum of the Certificateholders' Interest
Distributable Amount and the Certificateholders' Principal Distributable Amount
for such Distribution Date and (ii) the excess, if any, of the amount required
to be distributed pursuant to clauses 1 through 6 above over the Distribution
Amount with respect to such Distribution Date.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Interest Distributable
Amount and the Certificateholders' Principal Distributable Amount.
"Certificateholders' Interest Carryover Shortfall" means, with respect
to any Distribution Date, the excess of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest at the Certificate Rate that was actually deposited in the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on such excess, to the extent permitted by law, at the Certificate Rate
from and including such preceding Distribution Date to but excluding the current
Distribution Date.
"Certificateholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, interest accrued during the related Interest
Period at the Certificate Rate on the Certificate Balance immediately preceding
such Distribution Date. Interest shall be computed on the basis of a 360-day
year of twelve 30-day months for purposes of this definition.
<PAGE>
"Certificateholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date, the Certificateholders' Percentage of the
Principal Distributable Amount.
"Certificateholders' Percentage" means 100% minus the Noteholders'
Percentage.
"Certificateholders' Principal Carryover Shortfall" means, with respect
to any Distribution Date, the excess of the Certificateholders' Principal
Distributable Amount for the preceding Distribution Date, over the amount in
respect of principal that was actually deposited in the Certificate Distribution
Account on such preceding Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such Distribution Date and the
Certificateholders' Principal Carryover Shortfall for such Distribution Date;
provided, however, that the Certificateholders' Principal Distributable Amount
(i) shall not exceed the Certificate Balance and (ii) shall equal the
Certificate Balance on the Final Scheduled Distribution Date for the
Certificates.
"Class A-1 Deficiency Claim Amount" means, with respect to the
Determination Date relating to the Class A-1 Final Scheduled Distribution Date,
the excess, if any, of (i) the sum of the amounts payable on the Class A-1 Final
Scheduled Distribution Date pursuant to clauses A and B above over (ii) the
Available Funds for such Determination Date.
"Class A-1 Distribution Amount" means, with respect to the Class A-1
Final Scheduled Distribution Date, the sum of (i) the Available Funds for the
immediately preceding Determination Date plus (ii) the Class A-1 Deficiency
Claim Amount, if any, received and deposited in the Collection Account (from an
Insurer Optional Deposit or the Spread Account or otherwise other than from
draws under the Policies).
"Class A-1 Note Policy Claim Amount" for the Class A-1 Final Scheduled
Distribution Date, shall equal the lesser of (i) the sum of the amounts required
to be distributed pursuant to clauses A and B above on such Class A-1 Final
Scheduled Distribution Date and (ii) the excess, if any, of the amount specified
in clause (i) over the Class A-1 Distribution Amount with respect to the Class
A-1 Final Scheduled Distribution Date.
"Collected Funds" means, with respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables, exclusive of CPI Funds, during the related Monthly Period,
including all Net Liquidation Proceeds collected during the related Monthly
Period (but excluding any Purchase Amounts).
"CPI Funds" means amounts (including interest) owing under a Contract
on account of collateral protection insurance ("CPI") placed on a Financed
Vehicle prior to, on or after the Cutoff Date.
"Deficiency Claim Amount" means, with respect to any Determination
Date, the excess, if any, of the sum of the amounts payable on the related
Distribution Date pursuant to clauses 1 through 6 above over the amount of
Available Funds with respect to such Determination Date.
"Deficiency Notice" means a written notice delivered by the Indenture
Trustee or the Owner Trustee, as applicable, to the Insurer, the Servicer and
any other person required under the Insurance Agreement, specifying the
Deficiency Claim Amount for such Distribution Date or the Class A-1 Deficiency
Claim Amount for the Class A-1 Final Scheduled Distribution Date.
"Distribution Amount" means, with respect to a Distribution Date, the
sum of (i) the Available Funds for the immediately preceding Determination Date,
plus (ii) the Deficiency Claim Amount, if any, received (from an Insurer
Optional Deposit or the Spread Account or otherwise other than from draws under
the Policies) by the Indenture Trustee with respect to such Distribution Date.
<PAGE>
"Insurer Optional Deposit" means, with respect to any Distribution
Date, an amount delivered by the Insurer pursuant to the Sale and Servicing
Agreement, at its sole option, to the Indenture Collateral Agent for deposit
into the Collection Account for any of the following purposes: (i) to provide
funds in respect of the payment of fees or expenses of any provider of services
to the Trust with respect to such Distribution Date; or (ii) to include such
amount as part of the Distribution Amount or Class A-1 Final Scheduled
Distribution Amount for such Distribution Date or Class A-1 Final Scheduled
Distribution Date to the extent that without such amount a draw would be
required to be made on a Policy.
"Liquidated Receivable" means, with respect to any Determination Date,
a Receivable as to which, as of the last day of the related Monthly Period, (i)
the Servicer has determined in good faith that all amounts it expects to recover
have been received, (ii) such Receivable shall have become 180 or more days
delinquent on a recency basis, (iii) the Financed Vehicle has been sold and the
proceeds received, or (iv) a court of appropriate jurisdiction in an insolvency
proceeding shall have issued an order reducing the amount owed on such
Receivable or otherwise modifying or restructuring the scheduled payments to be
made on such Receivable. For purposes of computing the number of days that a
Receivable is delinquent, a payment delinquency with respect to a Receivable is
considered to have commenced on the last day of the end of the month in which a
Scheduled Payment has not been made.
"Net Liquidation Proceeds" means, with respect to Liquidated
Receivables, (i) proceeds from the disposition of the vehicles securing the
Liquidated Receivables, less reasonable Servicer out-of-pocket costs, including
repair, repossession and resale expenses not already deducted from such
proceeds, and any amounts required by law to be remitted to the Obligor, (ii)
any insurance proceeds, or (iii) other monies received from the Obligor or
otherwise.
"Note Policy Claim Amount" for any Distribution Date, shall equal the
lesser of (i) the sum of the Noteholders' Interest Distributable Amount and
Noteholders' Principal Distributable Amount for such Distribution Date and (ii)
the excess, if any, of the amount required to be distributed pursuant to clauses
1 through 4 above over the Distribution Amount with respect to such Distribution
Date.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date and a Class of Notes, the excess of the Noteholders' Interest
Distributable Amount for such Class for the preceding Distribution Date, over
the amount in respect of interest that was actually deposited in the Note
Distribution Account with respect to such Class on such preceding Distribution
Date, plus interest on the amount of interest due but not paid to Noteholders of
such Class on the preceding Distribution Date, to the extent permitted by law,
at the Interest Rate borne by such Class of Notes from such preceding
Distribution Date to but excluding the current Distribution Date.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date. Interest shall be computed on the basis of
(i) the actual number of days elapsed in a 360-day year in the case of the Class
A-1 Notes and the Class A-2 Notes and (ii) a 360-day year of twelve 30-day
months in the case of the Class A-3 Notes.
"Noteholders' Monthly Interest Distributable Amount" means, (A) with
respect to any Distribution Date, the product of (i)(x) in the case of the Class
A-1 Notes and the Class A-2 Notes, the product of the Interest Rate for such
Class and a fraction, the numerator of which is the number of days elapsed from
and including the prior Distribution Date (or, in the case of the first
Distribution Date, from and including the Closing Date) to but excluding such
Distribution Date and the denominator of which is 360 and (y) in the case of the
Class A-3 Notes, one-twelfth of the Interest Rate for such Class (or, in the
case of the first Distribution Date, the Interest Rate for such Class multiplied
by a fraction, the numerator of which is the number of days elapsed from and
including the Closing Date to but excluding such Distribution Date and the
denominator of which is 360) and (ii) the outstanding principal amount of the
Notes of such Class immediately preceding such Distribution Date and (B) with
respect to the Class A-1 Notes and the Class A-1 Final Scheduled Distribution
Date, the product of (i) the Interest Rate for the Class A-1 Notes and a
fraction, the numerator of which is the actual number of days elapsed from and
including the preceding Distribution Date to but excluding the Class A-1 Final
Scheduled
<PAGE>
Distribution Date and the denominator of which is 360 and (ii) the
outstanding principal amount of the Class A-1 Notes immediately preceding the
Class A-1 Final Scheduled Distribution Date.
"Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date, the Noteholders' Percentage of the Principal
Distributable Amount.
"Noteholders' Percentage" means with respect to any Determination Date
(i) relating to a Distribution Date prior to the Distribution Date on which the
principal amount of the Class A-3 Notes is reduced to zero, 100%; (ii) relating
to the Distribution Date on which the principal amount of the Class A-3 Notes is
reduced to zero, the percentage equivalent of a fraction, the numerator of which
is the principal amount of the Class A-3 Notes immediately prior to such
Distribution Date, and the denominator of which is the Principal Distributable
Amount; and (iii) relating to any other Distribution Date, 0%.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
any Distribution Date, the excess of the Noteholders' Principal Distributable
Amount for the preceding Distribution Date over the amount in respect of
principal that was actually deposited in the Note Distribution Account on such
preceding Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to
any Distribution Date (other than the Final Scheduled Distribution Date for any
Class of Notes), the sum of the Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall for such Distribution Date. The Noteholders' Principal Distributable
Amount on the Final Scheduled Distribution Date for any Class of Notes will
equal the sum of (i) the Noteholders' Monthly Principal Distributable Amount for
such Distribution Date, (ii) the Noteholders' Principal Carryover Shortfall for
such Distribution Date, and (iii) the excess of the outstanding principal amount
of such Class of Notes, if any, over the amounts described in clauses (i) and
(ii).
"Principal Balance" means, with respect to any Receivable, as of any
date (a) with respect to any Precomputed Receivable, the present value of all
Scheduled Payments for such Receivable remaining due and unpaid on such date
(calculated based on the assumption that each such Scheduled Payment is paid on
its due date), discounted monthly over the remaining term of the Receivable at
one-twelfth of the related APR and (b) with respect to any Simple Interest
Receivable, the Amount Financed minus that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the simple
interest method.
"Principal Distributable Amount" means, with respect to any
Distribution Date, without duplication, the sum of (i) the principal portion
(calculated in the case of Precomputed Receivables on the basis of the actuarial
method and in the case of Simple Interest Receivables on the basis of the simple
interest method) of all Collected Funds received during the immediately
preceding Monthly Period (other than Liquidated Receivables and Purchased
Receivables), (ii) the Principal Balance of all Receivables that became
Liquidated Receivables during the related Monthly Period (other than Purchased
Receivables), (iii) the principal portion of the Purchase Amounts received with
respect to all Receivables that became Purchased Receivables during the related
Monthly Period, and (iv) following the acceleration of the Notes pursuant to the
Indenture, the amount of money or property collected pursuant to the Indenture
since the preceding Determination Date by the Indenture Trustee for distribution
pursuant to the Indenture.
"Purchase Amount" means, with respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Principal Balance of such
Receivable (including one month's interest thereon, in the month of payment, at
the APR less, so long as SunStar is the Servicer, the Servicing Fee), after
giving effect to the receipt of any moneys collected (from whatever source) on
such Receivable, if any.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Monthly Period by the Seller or the Servicer
pursuant to the Sale and Servicing Agreement.
<PAGE>
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds to the extent allocable to principal.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Indenture Trustee will be
required to forward a statement to the Noteholders and the Owner Trustee will be
required to forward a statement to the Certificateholders on such Distribution
Date. Such statements will be based on the information in the related Servicer's
Certificate setting forth certain information required under the Trust
Documents. Each such statement to be delivered to Noteholders will include the
following information as to the Notes, and each such statement to be delivered
to Certificateholders will include the following information as to the
Certificates, with respect to such Distribution Date or the period since the
previous Distribution Date, as applicable:
(i) the amount of the distribution allocable to interest
on or with respect to each Class of Notes and
the Certificates:
(ii) the amount of the distribution allocable to
principal with respect to each Class of Notes and the
Certificates;
(iii) the amount of the distribution payable
pursuant to a claim on the Note Policy or the Certificate
Policy, as the case may be, or out of amounts on deposit in the Spread
Account;
(iv) the aggregate outstanding principal amount and the Note
Pool Factor for each Class of Notes and the Certificate Balance and the
Certificate Pool Factor for the Certificates, in each case, after
giving effect to all payments reported under (ii) above on such date;
(v) the Pool Balance as of the close of business on the
last day of the preceding Monthly Period;
(vi) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the
Certificateholders' Interest Carryover Shortfall and the
Certificateholders' Principal Carryover Shortfall, if any, and
the change in such amounts from the preceding statement;
(vii) the amount of the Servicing Fee paid to
the Servicer with respect to the related Monthly Period;
(viii) the amount of Realized Losses, if any,
with respect to the second preceding Monthly Period;
(ix) the aggregate Purchase Amount for Receivables, if
any, that were repurchased in the related
Monthly Period.
Each amount set forth pursuant to subclauses (i) through (iv) with
respect to Certificates or Notes will be expressed as a dollar amount per $1,000
of the initial principal amount of the Notes or initial Certificate Balance, as
applicable.
Unless and until Definitive Notes or Definitive Certificates are
issued, such reports will be sent on behalf of the Trust to Cede & Co., as
registered holder of the Notes and the Certificates and the nominee of DTC.
Within the required period of time after the end of each calendar year,
the Indenture Trustee and the Owner Trustee, as applicable, will furnish to each
person who at any time during such calendar year was a Noteholder or
Certificateholder, a statement as to the aggregate amounts of interest and
principal paid to such Noteholder or Certificateholder, information regarding
the amount of servicing compensation received by the Servicer and such other
information as the Seller deems necessary to enable such Noteholder or
Certificateholder to prepare its tax returns.
LIST OF SECURITYHOLDERS
<PAGE>
At such time, if any, as Definitive Notes have been issued, the
Indenture Trustee will, upon written request by three or more Noteholders or one
or more holders of Notes evidencing not less than 25% of the aggregate principal
balance of the related Notes, within five Business Days after provision to the
Indenture Trustee of a statement of the applicants' desire to communicate with
other Noteholders about their rights under the Indenture or the Notes and a copy
of the communication that the applicants propose to transmit, afford such
Noteholders access during business hours to the current list of Noteholders for
purposes of communicating with other Noteholders with respect to their rights
under the Indenture. The Indenture will not provide for holding any annual or
other meetings of Noteholders.
At such time, if any, as Definitive Certificates have been issued, the
Owner Trustee will, upon written request by three or more Certificateholders or
one or more holders of Certificates evidencing not less than 25% of the
Certificate Balance, within five Business Days after provision to the Owner
Trustee of a statement of the applicants' desire to communicate with other
Certificateholders about their rights under the related Trust Documents or the
Certificates and a copy of the communication that the applicants propose to
transmit, afford such Certificateholders access during business hours to the
current list of Certificateholders for purposes of communicating with other
Certificateholders with respect to their rights under the Trust Documents. The
Trust Documents will not provide for holding any annual or other meetings of
Certificateholders.
SPREAD ACCOUNT
On the Closing Date, the Seller will make an initial deposit of an
amount to be agreed upon by the Seller and the Insurer (the "Spread Account
Initial Deposit") to the Spread Account which will be established with the
Indenture Collateral Agent for the benefit of the Indenture Trustee, on behalf
of the Noteholders, the Owner Trustee, on behalf of the Certificateholders, and
the Insurer pursuant to a certain Spread Account Agreement dated as of November
30, 1996 (the "Spread Account Agreement"). The Spread Account will not be an
asset of the Trust. On each Distribution Date, the Indenture Trustee will be
required to deposit additional amounts into the Spread Account from payments on
the Receivables as described under "-- Distributions" above. Amounts, if any, on
deposit in the Spread Account will be available to the extent provided in the
Spread Account Agreement to fund any Deficiency Claim Amount or the Class A-1
Deficiency Claim Amount otherwise required to be made on a Distribution Date or
the Class A-1 Final Scheduled Distribution Date, as applicable. The aggregate
amount required to be on deposit at any time in the Spread Account (the
"Specified Spread Account Requirement") will be determined in accordance with
the Insurance Agreement and the Spread Account Agreement. The Specified Spread
Account Requirement may increase or decrease over time as a result of floors,
caps and triggers set forth in the Insurance Agreement or the Spread Account
Agreement, even if no withdrawals are made from the Spread Account. Amounts on
deposit in the Spread Account on any Distribution Date (after giving effect to
all distributions made on such Distribution Date) in excess of the Specified
Spread Account Requirement for such Distribution Date will be released to the
Seller. Amounts on deposit or to be deposited in the Spread Account may be
distributed to persons other than the Insurer or the Securityholders without the
consent of the Securityholders.
Amounts held from time to time in the Spread Account will continue to
be held for the benefit of holders of the Securities and the Insurer. Funds in
the Spread Account will be invested in Eligible Investments. Investment income
(net of investment losses and expenses) on amounts in the Spread Account will
not be available for distribution to holders of Securities, and will only be
distributed to the Seller.
In addition, the Seller, the Servicer and the Indenture Collateral
Agent, with the consent of the Insurer, may amend the Spread Account Agreement
(and any provisions in the Insurance Agreement relating to the Spread Account)
in any respect (including, without limitation, reducing or eliminating the
Specified Spread Account Requirement and/or reducing or eliminating the funding
requirements of the Spread Account or permitting such funds to be used for the
benefit of persons other than Securityholders) without the consent of, or notice
to, the Indenture Trustee, the Owner Trustee or the Securityholders. The
Indenture Collateral Agent shall not withhold or delay its consent with respect
to any amendment that does not adversely affect the Indenture Collateral Agent.
Notwithstanding any reduction in or elimination of the funding requirements of
the Spread Account or the depletion thereof, the Insurer will be obligated on
each Distribution Date to fund the full amount of each Guaranteed Note
Distribution and each Guaranteed Certificate Distribution otherwise required to
be made on such Distribution Date. If the Insurer breaches its obligations, any
losses on the Receivables will be borne by the Securityholders.
<PAGE>
SERVICER DEFAULT; RIGHTS UPON SERVICER DEFAULT
A "Servicer Default" under the Sale and Servicing Agreement will
consist of (i) any failure by the Servicer to deliver to the Owner Trustee or
the Indenture Trustee any deposit or payment required to be so made, which
failure continues unremedied for five Business Days after written notice from
the Owner Trustee or the Indenture Trustee or the Insurer is received by the
Servicer, (ii) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement in the Sale and Servicing
Agreement which failure materially and adversely affects the rights of
Certificateholders or Noteholders and which continues unremedied for 60 days
after the giving of written notice of such failure (1) to the Servicer by the
Owner Trustee, the Indenture Trustee or the Insurer or (2) to the Servicer and
to the Owner Trustee and the Indenture Trustee by holders of Certificates or
Notes evidencing not less than 25% in aggregate principal amount of the
outstanding Certificates or Notes, respectively (or such longer period, not in
excess of 120 days, as may be reasonably necessary to remedy such default;
provided that such default is capable of remedy within 120 days or less and the
Servicer delivers an officer's certificate to the Owner Trustee, the Indenture
Trustee and the Insurer to such effect and to the effect that the Servicer has
commenced, or will promptly commence, and diligently pursue all reasonable
efforts to remedy such default); (iii) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings with respect to the Servicer or the Seller and certain actions by
the Servicer or the Seller indicating its insolvency, reorganization pursuant to
bankruptcy proceedings, or inability to pay its obligations; and (iv) unless an
Insurer Default has occurred and is continuing, certain defaults under the
Insurance Agreement.
As long as a Servicer Default under the Sale and Servicing Agreement
remains unremedied, the Insurer or, if an Insurer Default exists, either the
Indenture Trustee or the Noteholders holding not less than a majority of the
principal amount of Notes outstanding may terminate all of the rights and
obligations of the Servicer under the Sale and Servicing Agreement. All
authority, power, obligations and responsibilities of the Servicer under the
Sale and Servicing Agreement automatically then pass to the Indenture Trustee,
as backup servicer, or a successor servicer appointed by the Insurer in
accordance with the Sale and Servicing Agreement.
"Insurer Default" shall mean the occurrence and continuance of any of
the following events:
(a) the Insurer shall have failed to make a payment required
under the Note Policy or the Certificate Policy in accordance with its
terms;
(b) the Insurer shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United
States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (ii) made a general assignment for the benefit of its
creditors, or (iii) had an order for relief entered against it under
the United States Bankruptcy Code or any other similar federal or state
law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority shall have entered
a final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for the Insurer or for all or any
material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the Insurer
(or the taking of possession of all or any material portion of the
property of the Insurer).
WAIVER OF PAST DEFAULTS
The Insurer may, on behalf of all holders of Securities, waive any
default by the Servicer in the performance of its obligations under the Sale and
Servicing Agreement and its consequences. No such waiver will impair the
Securityholders' rights with respect to subsequent defaults.
TERMINATION
The obligations of the Servicer, the Seller, the Owner Trustee and the
Indenture Trustee pursuant to the Sale and Servicing Agreement will terminate
upon the latest of (i) the maturity or other liquidation of the last Receivable
and the
<PAGE>
disposition of any amounts received upon liquidation of any such
remaining Receivables, (ii) the payment to Noteholders and Certificateholders of
all amounts required to be paid to them pursuant to the Sale and Servicing
Agreement and the payment of any fees or other amounts owing to the Insurer, and
(iii) the Servicer's purchase at its option, as of the end of any Monthly Period
when the then outstanding Pool Balance is 5% or less of the Original Pool
Balance, of all remaining Receivables at a price equal to the aggregate of the
Purchase Amounts thereof as of the end of such Monthly Period.
PHYSICAL DAMAGE INSURANCE
The Trust Documents will provide that the Servicer, in accordance with
its customary servicing procedures, shall use its commercially reasonable
efforts to determine whether each obligor has complied with the obligation to
obtain and maintain physical insurance covering the related Financed Vehicle. If
an Obligor fails to maintain such insurance, the Servicer shall in accordance
with its customary procedure for its own account, determine whether to obtain
collateral protection insurance ("CPI") and, if so, advance the premium for such
CPI on behalf of such Obligor, as permitted under the terms of the applicable
Contract and the Trust Documents, each insurance policy naming the Servicer as
an additional insured and loss payee. SunStar has engaged American Bankers
Insurance Company to track the maintenance of physical damage insurance policies
and provide CPI. CPI and any expense reimbursements or finance charges collected
by the Servicer in connection therewith shall be, to the extent permitted by
law, in an amount in accordance with customary servicing procedures, but in no
event in an amount greater than that permitted by applicable law. The Servicer
shall be required to disclose to the related Obligor all information with
respect to such CPI, commissions and finance charges as required by applicable
law.
The Servicer does not, under its customary servicing procedures, obtain
CPI when the principal balance of the related Contract falls below the level or
levels periodically established in accordance with such customary servicing
procedures. In accordance with such customary servicing procedures, the Servicer
may periodically readjust such levels, suspend CPI or arrange other methods of
protection of the Financed Vehicles that it deems necessary or advisable,
provided that the Servicer takes the same action with respect to the Receivables
as it takes for other similar contracts serviced by the Servicer for its own
account. SunStar's practices regarding the purchase of CPI on behalf of obligor
may change over time in accordance with changes in applicable law or its
business judgment.
Any portion of the principal balance of a Contract attributable to
premiums for CPI acquired after the Cutoff Date and interest on such amount at
the rate in the applicable Contract will not be owned by the Trust, and amounts
allocable thereto will not be available for distribution in respect of the
Securities. Unless otherwise designated by the Obligor, the Servicer will not
allocate payments by the Obligor to pay CPI premiums added to the Contracts or
interest thereon after the Cutoff Date if any other amount of principal or
interest is due but unpaid on the Contracts. The Servicer shall not deposit
payments posted with respect to such CPI in the Collection Account. In the event
that an Obligor under a Contract with respect to which the Servicer has advanced
funds to obtain CPI makes scheduled payments under the Contract, but fails to
make scheduled payments of moneys owing on account of such CPI as due, the
Servicer may, but shall not be required to, take any action available to it,
including determining that the related Contract is a defaulted Contract;
provided, however, that any net liquidation proceeds with respect to such
Contract shall be applied first to the accrued and unpaid interest at the
applicable rate for such Contract, then to the principal amount outstanding, and
the remainder, if any, to repayment of any such CPI premiums added to the
Contracts after the Cutoff Date.
The Trust Documents will permit the Servicer or any affiliate of the
Servicer, to the extent permitted by law, to (i) enter into agreements with one
or more insurers or other persons pursuant to which the Servicer or such
affiliate will earn commissions and fees in connection with any insurance policy
(whether or not such physical damage insurance policy is purchased by SunStar or
an affiliate after the failure of an Obligor to maintain required insurance
pursuant to the provisions of any Contract), or any other insurance policy
whatsoever, and (ii) in connection with the foregoing, to solicit, or permit and
assist any insurer or any agent thereof to solicit (including, without
limitation, providing such insurer or agent a list of Obligors including name,
address or other information) any Obligor.
AMENDMENT
The Sale and Servicing Agreement may be amended by the Seller, the
Servicer and the Owner Trustee with the consent of the Indenture Trustee, (which
consent may not be unreasonably withheld) or delayed and with the consent of the
Insurer (so long as no Insurer Default has occurred and is continuing), but
without the consent of the Securityholders, to cure
<PAGE>
any ambiguity, or to correct
or supplement any provision therein which may be inconsistent with any other
provision therein; provided that such action shall not adversely affect in any
material respect the interests of any Securityholder; provided, further, that if
an Insurer Default has occurred and is continuing, such action shall not
materially and adversely affect the interests of the Insurer. The Seller, the
Servicer and the Owner Trustee may also amend the Sale and Servicing Agreement
with the consent of the Insurer, the consent of the Indenture Trustee, the
consent of Noteholders holding a majority of the principal amount of the Notes
and the consent of Certificateholders holding a majority of the principal amount
of Certificates outstanding to add, change or eliminate any other provisions
with respect to matters or questions arising under such Agreement or affecting
the rights of the Noteholders or the Certificateholders; provided that such
action will not (i) increase or reduce in any manner the amount of, or
materially accelerate or delay the timing of, collections of payments on
Receivables or distributions that are required to be made for the benefit of the
Noteholders or Certificateholders or (ii) reduce the aforesaid percentage of the
Noteholders or Certificateholders required to consent to any such amendment,
without, in either case, the consent of the holders of all Notes and
Certificates outstanding; provided, further, that if an Insurer Default has
occurred and is continuing, such action shall not materially and adversely
affect the interest of the Insurer. The Seller and Servicer must deliver to the
Owner Trustee, the Indenture Trustee and the Insurer upon the execution and
delivery of the Sale and Servicing Agreement and any amendment thereto an
opinion of counsel, satisfactory to the Insurer, that all financing statements
and continuation statements have been filed that are necessary to fully protect
and preserve the Trustee's interest in the Receivables.
THE POLICIES
NOTE POLICY
Simultaneously with the issuance of the Notes, the Insurer will deliver
the Note Policy to the Indenture Trustee for the benefit of each Noteholder.
Under the Note Policy, the Insurer will unconditionally and irrevocably
guarantee to the Indenture Trustee for the benefit of each Noteholder the full
and complete payment of (i) Guaranteed Note Distributions (as defined below) on
the Notes and (ii) the amount of any Guaranteed Note Distribution which
subsequently is avoided in whole or in part as a preference payment under
applicable law. In the event the Indenture Trustee fails to make a claim under
the Note Policy, Noteholders do not have the right to make a claim directly
under the Note Policy, but may sue to compel the Indenture Trustee to do so.
"Guaranteed Note Distributions" means payments which are scheduled to
be made on the Notes during the term of the Note Policy in accordance with the
original terms of the Notes when issued and without regard to any subsequent
amendment or modification of the Notes that has not been consented to by the
Insurer, which payments are (i) the Noteholders' Interest Distributable Amount
and (ii) the Noteholders' Principal Distributable Amount; Guaranteed Note
Distributions do not include payments which become due on an accelerated basis
as a result of (a) a default by the Trust, (b) an election by the Trust to pay
principal on an accelerated basis, (c) the occurrence of an Event of Default
under the Indenture or (d) any other cause, unless the Insurer elects, in its
sole discretion, to pay in whole or in part such principal due upon
acceleration, together with any accrued interest to the date of acceleration. In
the event the Insurer does not so elect, the Note Policy will continue to
guarantee Guaranteed Note Distributions due on the Notes in accordance with
their original terms. Guaranteed Note Distributions shall not include (x) any
portion of a Noteholders' Interest Distributable Amount due to Noteholders
because the appropriate notice and certificate for payment in proper form was
not timely Received (as defined below) by the Insurer, or (y) any portion of a
Noteholders' Interest Distributable Amount due to Noteholders representing
interest on any Noteholders' Interest Carryover Shortfall accrued from and
including the date of payment of the amount of such Noteholders' Interest
Carryover Shortfall pursuant to the Note Policy, unless, in each case, the
Insurer elects, in its sole discretion, to pay such amount in whole or in part.
Payment of claims on the Note Policy made in respect of Guaranteed Note
Distributions will be made by the Insurer following Receipt by the Insurer of
the appropriate notice for payment on the later to occur of (i) 12:00 noon, New
York City time, on the third Business Day following Receipt of such notice for
payment, and (ii) 12:00 noon, New York City time, on the date on which such
payment was due on the Notes.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the Note Policy, the Insurer shall cause such payment to be made no earlier than
the first to
<PAGE>
occur of (a) the fourth Business Day following Receipt by the
Insurer from the Indenture Trustee of (i) a certified copy of the order (the
"Order") of the court or other governmental body which exercised jurisdiction to
the effect that the Noteholder is required to return principal or interest paid
on the Notes during the term of the Note Policy because such payments were
avoidable as preference payments under applicable bankruptcy law, (ii) a
certificate of the Noteholder that the Order has been entered and is not subject
to any stay and (iii) an assignment duly executed and delivered by the
Noteholder, in such form as is reasonably required by the Insurer and provided
to the Noteholder by the Insurer, irrevocably assigning to the Insurer all
rights and claims of the Noteholder relating to or arising under the Notes
against the Trust or otherwise with respect to such preference payment, or (b)
the date of Receipt (as defined below) by the Insurer from the Indenture Trustee
of the items referred to in clauses (i), (ii) and (iii) above if, at least four
Business Days prior to such date of Receipt, the Insurer shall have received
written notice from the Indenture Trustee that such items were to be delivered
on such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Indenture Trustee or any Noteholder
directly (unless a Noteholder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
in which case such payment shall be disbursed to the Indenture Trustee for
distribution to such Noteholder upon proof of such payment reasonably
satisfactory to the Insurer). In connection with the foregoing, the Insurer
shall have the rights provided in the Indenture.
CERTIFICATE POLICY
Simultaneously with the issuance of the Certificates, the Insurer will
deliver the Certificate Policy to the Owner Trustee for the benefit of each
Certificateholder. Under the Certificate Policy, the Insurer will
unconditionally and irrevocably guarantee to the Owner Trustee for the benefit
of each Certificateholder the full and complete payment of (i) Guaranteed
Certificate Distributions (as defined below) with respect to the Certificates
and (ii) the amount of any Guaranteed Certificate Distribution which
subsequently is avoided in whole or in part as a preference payment under
applicable law. In the event that the Owner Trustee fails to make a claim under
the Certificate Policy, Certificateholders do not have the right to make a claim
directly under the Certificate Policy but may sue to compel the Owner Trustee to
do so.
"Guaranteed Certificate Distributions" means the distributions to be
made on the Certificates with respect to a Distribution Date during the term of
the Certificate Policy in accordance with the original terms of the Certificates
when issued and without regard to any amendment or modification of the
Certificates or the Trust Agreement which has not been consented to by the
Insurer, which distributions are equal to (i) the Certificateholders' Interest
Distributable Amount with respect to such Distribution Date and (ii) the
Certificateholders' Principal Distributable Amount with respect to such
Distribution Date; provided, however, that Guaranteed Certificate Distributions
shall not include (x) any portion of a Certificateholder's Interest
Distributable Amount due to Certificateholders because the appropriate notice
and certificate for payment in proper form was not timely Received (as defined
below) by the Insurer, or (y) any portion of a Certificateholder's Interest
Distributable Amount due to Certificateholders representing interest on any
Certificateholders' Interest Carryover Shortfall accrued from and including the
date of payment of the amount of such Certificateholders' Interest Carryover
Shortfall pursuant to the Certificate Policy, unless, in each case, the Insurer
elects, in its sole discretion, to pay such amount in whole or in part.
Guaranteed Certificate Distributions do not include, nor shall coverage be
provided under the Certificate Policy in respect of, any payments with respect
to Certificates held by the Affiliated Purchaser.
Payment of claims on the Certificate Policy made in respect of
Guaranteed Certificate Distributions will be made by the Insurer following
Receipt by the Insurer of the appropriate notice for payment on the later to
occur of (i) 12:00 noon New York City time, on the third Business Day following
Receipt (as defined below) of such notice for payment, or (ii) 12:00 noon, New
York City time, on the date on which such payment was due on the Certificates.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the Certificate Policy, the Insurer shall cause such payment to be made no
earlier than the first to occur of (a) the fourth Business Day following Receipt
by the Insurer from the Owner Trustee of (i) a certified copy of the order (the
"Order") of the court or other governmental body which exercised jurisdiction to
the effect that the Certificateholder is required to return the amount of any
Guaranteed Certificate Distributions distributed with respect to the
Certificates during the term of the Certificate Policy because such
distributions were avoidable as preference payments under applicable bankruptcy
law, (ii) a certificate of the Certificateholder that the Order has been entered
and is not subject to any stay and (iii) an assignment duly executed and
delivered by the Certificateholder, in such form as is reasonably required by
the
<PAGE>
Insurer and provided to the Certificateholder by the Insurer, irrevocably
assigning to the Insurer all rights and claims of the Certificateholder relating
to or arising under the Certificates against the debtor which made such
preference payment or otherwise with respect to such preference payment, or (b)
the date of Receipt by the Insurer from the Owner Trustee of the items referred
to in clauses (i), (ii) and (iii) above if, at least four Business Days prior to
such date of Receipt, the Insurer shall have Received written notice from the
Owner Trustee that such items were to be delivered on such date and such date
was specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Owner Trustee or any Certificateholder directly (unless a
Certificateholder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order in which case
such payment shall be disbursed to the Owner Trustee for distribution to such
Certificateholder upon proof of such payment reasonably satisfactory to the
Insurer). In connection with the foregoing, the Insurer shall have the rights
provided in the Sale and Servicing Agreement.
OTHER PROVISIONS OF THE POLICIES
The terms "Receipt" and "Received" with respect to a Policy shall mean
actual delivery to the Insurer and to its fiscal agent, if any, prior to 12:00
noon, New York City time, on a Business Day; delivery either on a day that is
not a Business Day or after 12:00 noon, New York City time, shall be deemed to
be Received on the next succeeding Business Day.
If any notice or certificate given under a Policy by the Indenture Trustee or
the Owner Trustee, as the case may be, is not in proper form or is not properly
completed, executed or delivered, it shall be deemed not to have been Received,
and the Insurer or its fiscal agent shall promptly so advise the Indenture
Trustee or the Owner Trustee and the Indenture Trustee or the Owner Trustee may
submit an amended notice.
Under the Policies, "Business Day" means any day other than a Saturday,
Sunday, legal holiday or other day on which commercial banking institutions in
Wilmington, Delaware, the City of New York or any other location of any
successor Servicer, successor Owner Trustee or successor Indenture Collateral
Agent are authorized or obligated by law, executive order or governmental decree
to be closed.
The Insurer's obligations under the respective Policies in respect of
Scheduled Payments and Guaranteed Distributions shall be discharged to the
extent funds are transferred to the Indenture Trustee or the Owner Trustee as
provided in the related Policy whether or not such funds are properly applied by
the Indenture Trustee or the Owner Trustee.
The Insurer shall be subrogated to the rights of each Noteholder or
Certificateholder to receive payments of principal and interest to the extent of
any payment by the Insurer under the related Policy.
Claims under the Policies constitute direct, unsecured and
unsubordinated obligations of the Insurer ranking not less than pari passu with
other unsecured and unsubordinated indebtedness of the Insurer for borrowed
money. Claims against the Insurer under each other financial guaranty insurance
policy issued thereby constitute pari passu claims against the general assets of
the Insurer. The terms of the Policies cannot be modified or altered by any
other agreement or instrument, or by the merger, consolidation or dissolution of
the Trust. The Note Policy may not be canceled or revoked prior to distribution
in full of all Scheduled Payments, and the Certificate Policy may not be
canceled or revoked prior to distribution in full of all Guaranteed
Distributions. The Policies are not covered by the Property/Casualty Insurance
Security Fund specified in Article 76 of the New York Insurance Law. The
Policies are governed by the laws of the State of New York.
It is a condition to issuance that the Class A-1 Notes be rated A-1+ by
S&P and P-1 by Moody's, and that the Class A-2 Notes, the Class A-3 Notes and
the Certificates be rated AAA by S&P and Aaa by Moody's. The ratings by the
Rating Agencies of the Securities will be based primarily on the issuances of
the Policies. A rating is not a recommendation to purchase, hold or sell
Securities. In the event that the rating initially assigned to any of the
Securities is subsequently lowered or withdrawn for any reason, including by
reason of a downgrading of the claims-paying ability of the Insurer, no person
or entity will be obligated to provide any additional credit enhancement with
respect to the Securities. Any reduction or withdrawal of a rating may have an
adverse effect on the liquidity and market price of the Securities.
<PAGE>
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Contracts are "chattel paper" as defined in the Uniform Commercial
Code as in effect in the states in which the Contracts are originated ("UCC").
Pursuant to the UCC, an ownership interest in chattel paper may be perfected by
possession of the chattel paper or filing a UCC-1 financing statement with the
Secretary of State or other central filing office in the appropriate state as
required by the applicable UCC.
SunStar will take or cause to be taken such action as is required to
perfect the Trust's rights in the Contracts and will represent and warrant that
the Trust, subject to the interest of the Insurer, has good title, free and
clear of liens and encumbrances, to each Contract on the Closing Date. Under the
Trust Documents, SunStar, as Servicer, will have possession of the Contracts
following the sale of the Contracts to the Trust and will hold the Contracts as
custodian and agent of the Owner Trustee and Indenture Trustee. However, the
Contracts will not be physically marked to indicate the ownership interest
thereof by the Trust. UCC-1 financing statements will be filed with the Georgia
and Texas Secretaries of State to perfect by filing and give notice of the
Seller's and the Trust's ownership interest in the Contracts, respectively. If,
through inadvertence or otherwise, any of the Contracts were sold to another
party who purchased such Contracts in the ordinary course of its business and
took possession of such Contracts, the purchaser would acquire an interest in
the Contracts superior to the interests of the Trust if the purchaser acquired
the Contracts in good faith, for value and without actual knowledge of the
Trust's ownership interest in the Contracts. SunStar will agree in the Trust
Documents to take all necessary action to preserve and protect the Trust's
ownership interest in the Contracts. The Seller will represent and warrant that
each Contract is secured by a Financed Vehicle.
SECURITY INTERESTS IN VEHICLES
Perfection of security interests in the vehicles is generally governed
by the motor vehicle registration laws of the state in which the vehicle is
located. In states in which the Receivables have been originated, a security
interest in a vehicle generally may be perfected only by causing such vehicle's
certificate of title to be amended to note the security interest of the secured
party. Such notation of a secured party's security interest is generally
effected in such states by depositing with the applicable state motor vehicles
registrar, or similar authority, along with any necessary registration fees, the
vehicle's certificate of title and an application containing the name and
address of the secured party.
All of the Financed Vehicles were registered in the states where the
related borrower resided at the time of origination. The Seller will represent
and warrant to the Trust in the Trust Documents that all steps necessary to
obtain a perfected first priority security interest with respect to the Financed
Vehicles securing the Contracts have been taken for the benefit of SunStar or,
if an affiliate rather than SunStar acquired the related Contract from a Dealer,
such affiliate. If the Servicer fails, because of clerical error or otherwise,
to effect or maintain such notation for a Financed Vehicle, the Trust may not
have a first priority security interest in such Financed Vehicle. Each
Receivable typically prohibits the sale or transfer of the Financed Vehicle
without the Servicer's consent.
Pursuant to the Purchase Agreement, SunStar will assign its security
interests in the Financed Vehicles securing the Receivables to the Seller and,
pursuant to the Trust Documents, the Seller will assign its security interests
in the Financed Vehicles securing the Receivables to the Owner Trustee. The
Servicer will continue to hold any certificates of title relating to the
Financed Vehicles in its possession as custodian for the Owner Trustee pursuant
to the Trust Documents. However, because of the administrative burden and
expense (estimated by SunStar to be in excess of $446,000, excluding associated
labor costs) that would be entailed in endorsing the certificate of title of
each Financed Vehicle to reflect the Trusts interest therein and delivering each
such certificate of title to the Indenture Trustee for filing (and the payment
of related filing fees), the Servicer, the Seller and the Owner Trustee will not
amend any certificate of title to identify the Trust as the new secured party on
the certificates of title relating to the Financed Vehicles. The Seller believes
that it is customary for certificates of title or ownership to not be endorsed
or amended in connection with asset securitizations of the type contemplated
hereby. The Seller historically has not purchased pools of automobile retail
installment sale contracts similar to the Receivables for its own account. In
the event that the Seller were to purchase such a pool of installment sales
contracts, the Seller believes that, because of the associated administrative
burden and expense, the Seller would not generally require that the certificates
of title or ownership covering the related financed vehicles be endorsed or
amended to reflect that security interests in the related financed vehicles have
been assigned to the Seller.
Under the law of Georgia and most other states, assignments such as
those under the Purchase Agreement and the Trust Documents are an effective
conveyance of a security interest without amendment of any security interest
noted on a vehicle's certificate of title, and the assignee succeeds thereby to
the assignor's rights as secured party. In the absence of fraud or forgery by
the vehicle owner or the Servicer or administrative error by state or local
agencies, the notation of the Servicer's security interest on the certificates
of title or the Servicer's possession of the certificate of title will be
sufficient to protect the Trust against the rights of subsequent purchasers of a
Financed Vehicle or subsequent lenders who take a security interest in a
Financed Vehicle. If there are any Financed Vehicles as to which a perfected
security interest was not obtained, the Trust's security interest would be
subordinate to, among others, subsequent purchasers of the Financed Vehicles,
lienholders and holders of perfected security interests. Such a failure,
however, would constitute a breach of SunStar's warranties under the Purchase
Agreement and of the Seller's warranties under the Trust Documents and would
create an obligation of SunStar under the Purchase Agreement and of the Seller
under the Trust Documents to purchase the Receivable unless the breach is cured.
The Seller will assign its rights under the Purchase Agreement to the Trust. By
not identifying the Trust as the secured party on the certificate of title, the
security interest of the Trust in the Financed Vehicle could be defeated through
fraud or negligence.
Under the laws of most states, the perfected security interest in a
vehicle would continue for four months after a vehicle is moved to a state other
than the state in which it is initially registered and thereafter until the
vehicle owner re-registers the vehicle in the new state. A majority of states
generally require surrender of a certificate of title to re-register a vehicle;
accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle, or, in the case of vehicles registered in
states providing for the notation of a security interest on the certificate of
title but not possession by the secured party, the secured party would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In states that do
not require a certificate of title for registration of a motor vehicle,
re-registration could defeat perfection. In the ordinary course of servicing
receivables, SunStar takes steps to effect re-perfection upon receipt of notice
of re-registration or information from the Obligor as to relocation. Similarly,
when an Obligor sells a vehicle, SunStar must surrender possession of the
certificate of title or will receive notice as a result of its security interest
noted thereon and accordingly will have an opportunity to require satisfaction
of the related Receivable before release of the security interest. Under the
Trust Documents, the Servicer is obligated to take appropriate steps, in
accordance with its customary practices for its own account, at the Servicer's
expense, to maintain perfection of security interests in the Financed Vehicles.
Under the laws of most states, liens for repairs performed on, and for
storage of, a motor vehicle and liens for certain unpaid taxes take priority
over even a perfected security interest in a Financed Vehicle. The Internal
Revenue Code of 1986, as amended, also grants priority to certain federal tax
liens over the security interest of a secured party. The laws of certain states
and federal law permit the confiscation of motor vehicles under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in the confiscated motor vehicle.
SunStar will represent to the Seller and the Seller will represent to the Trust
that each security interest in a Financed Vehicle is or will be prior to all
other present liens (other than tax liens and liens that arise by operation of
law) upon and security interests in such Financed Vehicle. However, liens for
repairs or taxes, or the confiscation of a Financed Vehicle, could arise or
occur at any time during the term of a Receivable. No notice will be given to
the Owner Trustee, the Indenture Trustee, if any, or any Securityholders in the
event such a lien arises or confiscation occurs.
REPOSSESSION
In the event of a default by vehicle purchasers, the holder of the
retail motor vehicle installment sales contract has all the remedies of a
secured party under the UCC, except where specifically limited by other laws.
The UCC remedies of a secured party include the right to repossession by
self-help means, unless such means would constitute a breach of the peace.
Unless a vehicle is voluntarily surrendered, self-help repossession by outside
agencies is the method employed by SunStar in the majority of instances in which
a payment default occurs and is accomplished by retaking possession of the
financed vehicle. In the event of a default by an Obligor, most states place
restrictions on repossession sales, including notice to the debtor of the intent
to sell and of the debtor's right to redeem the vehicle. In addition, the UCC
requires commercial reasonableness in the conduct of the sale. In cases where
the Obligor objects or raises a defense to repossession, or if
<PAGE>
otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be repossessed in accordance
with that order. In certain states under certain circumstances after the vehicle
has been repossessed, the Obligor may reinstate the contract by paying the
delinquent installments on the contract and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the Obligor, some jurisdictions require that
the Obligor be notified of the default and be given a time period within which
the Obligor may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
The UCC and other state laws require the secured party to provide the
Obligor with reasonable notice of the date, time, and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
some states the Obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding, and preparing the collateral
for disposition and arranging for this sale, plus, in some jurisdictions,
reasonable attorneys' fees, or, in some other states, by payment of delinquent
installments or the unpaid balance. Based on an analysis by a central
remarketing department, the repossessed vehicles will be resold through
wholesale buyers or at the branch depending on which method of sale will garner
the greatest amount of proceeds.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be
applied to the expenses of resale and repossession and then to the satisfaction
of the indebtedness of the Obligor on the Receivable. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
resale do not cover the full amount of the indebtedness, a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments.
Under the laws of most states, the proceeds from the resale of the motor vehicle
securing the debtor's loan are required to be applied first to the expenses of
resale and repossession, and if the remaining proceeds are not sufficient to
repay the indebtedness, the creditor may seek a deficiency judgment for the
balance. However, the deficiency judgment would be a personal judgment against
the Obligor for the shortfall, and a defaulting Obligor can be expected to have
very little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency judgment or,
if one is obtained, it may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any other holder of any lien with respect to the
vehicle or, if no such lienholder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the former Obligor.
INSOLVENCY MATTERS
SunStar intends that the transfer of the Receivables to the Seller
will constitute a sale, rather than a pledge of the Receivables to secure
indebtedness of SunStar. However, if SunStar were to become a debtor under the
Insolvency Laws, a creditor or trustee in bankruptcy thereof, or SunStar as
debtor-in-possession, might argue that the sale of the Receivables was a pledge
of Receivables rather than a sale and/or that the assets and liabilities of the
Seller should be consolidated with the assets and liabilities of SunStar. The
Seller has taken and will take steps in structuring the transactions
contemplated hereby that are intended to minimize the risk that the voluntary or
involuntary application for relief under any Insolvency Law would result in the
assets and liabilities of the Seller being consolidated with the assets and
liabilities of any other person. Nevertheless, if SunStar were to become a
debtor under any Insolvency Laws, and such positions - that the transfer of the
Receivables was a pledge rather than a sale or otherwise should be treated as
part of its bankruptcy estate and/or that the assets and liabilities of the
Seller should be consolidated - were presented to or accepted by a court, then
delays in payments to Securityholders could occur or reductions in the amounts
of such payments could result. In addition, if the Seller were to become a
debtor under any Insolvency Law and a creditor or trustee-in-bankruptcy of such
debtor or such debtor itself were to take the position that the sale of the
Receivables to the Trust should instead be treated as a pledge of the
Receivables to secure a borrowing of such debtor, delays in payments of
collections of the Receivables to the Securityholders could occur or reductions
in the amounts of such payments could result. In addition, if the transfer of
the Receivables is recharacterized as a
<PAGE>
pledge, a tax lien, other governmental
lien, or other lien created by operation of law on the property of the Servicer,
the holder of such lien may have priority over the Trust's interest in the
Receivables. See "The Seller."
In addition, in a case recently decided by the United States Court of
Appeals for the Tenth Circuit, Octagon Gas System, Inc. v. Rimmer, such Circuit
Court found that "accounts", a defined term under the UCC, sold prior to a
bankruptcy should be treated as part of the bankruptcy estate of the seller of
such accounts. If SunStar, an affiliate of SunStar which transferred Receivables
to SunStar, or the Seller were to become a debtor in a bankruptcy proceeding and
a court applied the reasoning of the Circuit Court reflected in the case
described above, delays in payments to Securityholders could occur or reductions
in the amounts of such payments could result.
If an Insolvency Event with respect to the Affiliated Purchaser occurs,
the Indenture Trustee or Owner Trustee will promptly sell, dispose of or
otherwise liquidate the related Receivables in a commercially reasonable manner
on commercially reasonable terms, except under certain limited circumstances.
The proceeds from any such sale, disposition or liquidation of Receivables will
be treated as collections on the Receivables and deposited in the Collection
Account of the Trust. If the proceeds from the liquidation of the Receivables
and any amounts on deposit in the Collection Account or the Spread Account are
not sufficient to pay any Notes and/or the Certificates in full, and the Insurer
fails to satisfy its obligations under the policies, the amount of principal
returned to any Noteholders or Certificateholders will be reduced and such
Noteholders and/or Certificateholders will incur a loss.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations B and Z, state adaptations
of the National Consumer Act and of the Uniform Consumer Credit Code and state
motor vehicle retail installment sales acts, retail installment sales acts and
other similar laws. Also, state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect an assignee's (such as the Trust's)
ability to enforce consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC Rule"), the provisions of which are generally duplicated by
the Uniform Consumer Credit Code, state statutes or the common law in certain
states, has the effect with some exceptions, of subjecting a seller (and certain
related lenders and their assignees, such as the Trust) in a consumer credit
transaction and any assignee of the seller to all claims and defenses which the
obligor in the transaction could assert against the seller of the goods.
Liability under the FTC Rule is limited to the amounts paid by the obligor under
the contract, and the holder of the contract may also be unable to collect any
balance remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, the Owner Trustee, as holder of the Receivables, will be
subject to any claims or defenses that the purchaser of the Financed Vehicle may
assert against the seller of the Financed Vehicle. Such claims are limited to a
maximum liability equal to the amounts theretofore paid by the Obligor on the
Receivable. Under most state motor vehicle dealer licensing laws, sellers of
motor vehicles are required to be licensed to sell motor vehicles at retail
sale. Furthermore, Federal Odometer Regulations promulgated under the Motor
Vehicle Information and Cost Savings Act require that all sellers of new and
used vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if an
Odometer Disclosure Statement was not provided to the purchaser of the related
financed vehicle, the obligor may be able to assert a defense against the seller
of the vehicle.
Courts have imposed general equitable principles on secured parties
pursuing repossession of collateral or litigation involving deficiency balances.
These equitable principles may have the effect of relieving an obligor from some
or all of the legal consequences of a default.
In several cases, obligors have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have
<PAGE>
generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
SunStar and the Seller will warrant under the Purchase Agreement and
the Trust Documents that each Receivable complies with all requirements of law
in all material respects. Accordingly, if an Obligor has a claim against the
Trust for violation of any law and the Owner Trustee or the Indenture Trustee,
as the case may be, determines such claim materially and adversely affects the
Trust's interest in a Receivable, such violation would constitute a breach of
warranty under the Purchase Agreement and the Trust Documents and would create
an obligation of SunStar and the Seller to repurchase the Receivable unless the
breach is cured.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
resale upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
TRANSFERS OF VEHICLES
The Receivables typically prohibit the sale or transfer of the Financed
Vehicle securing a Receivable without the Servicer's consent and permit the
Servicer to accelerate the maturity of the Receivable upon a sale or transfer
without its consent. The Servicer generally will not consent to a sale or
transfer without prepayment of the Receivable. However, in certain circumstances
the Servicer may enter into a transfer of equity agreement with the secondary
purchaser for the purpose of effecting the transfer of the Financed Vehicle.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a summary of Federal income tax consequences of the
purchase, ownership and disposition of the Securities. Stroock & Stroock &
Lavan, special Federal tax counsel for the Trust ("Federal Tax Counsel") is of
the opinion that the discussion under this section "Federal Income Tax
Consequences" accurately describes all material Federal tax risks associated
with the purchase, ownership and disposition of the Securities.
This summary does not deal with all aspects of Federal income taxation
applicable to all categories of holders of the Securities, some of which may be
subject to special rules or special treatment under the Federal income tax laws.
For example, it does not discuss the specific tax treatment of Securityholders
that are insurance companies, banks and certain other financial institutions,
regulated investment companies, individual retirement accounts, tax-exempt
organizations or dealers in securities. Furthermore, this summary does not deal
with the tax consequences to individuals holding Securities directly or
indirectly through partnerships, trusts, estates, or S corporations. This
summary is based upon present provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), the regulations promulgated thereunder, and judicial or
ruling authority, all of which are subject to change, which change may be
retroactive. Moreover, there are no cases or Internal Revenue Service ("IRS")
rulings on similar transactions involving a trust that issues debt and equity
interests with terms similar to those of the Notes and the Certificates. As a
result, the IRS may disagree with all or part of the discussion below.
Prospective investors are advised to consult their own tax advisors
with regard to the Federal income tax consequences of the purchase, ownership
and disposition of the Securities, as well as the tax consequences arising under
the laws of any state, foreign country or other jurisdiction. The Trust has been
provided with an opinion of Federal Tax Counsel regarding certain of the Federal
income tax matters discussed below. An opinion of counsel, however, is not
binding on the IRS, and no ruling on any of the issues discussed below will be
sought from the IRS.
<PAGE>
FEDERAL TAX CONSEQUENCES WITH RESPECT TO THE NOTES
Tax Characterization of the Notes and the Trust. Federal Tax Counsel
has advised the Trust that, based on the terms of the Notes and the transactions
relating to the Receivables as set forth herein, in the opinion of Federal Tax
Counsel, the Notes will be treated as debt for Federal income tax purposes.
However, there is no specific authority with respect to the characterization for
Federal income tax purposes of securities having the same terms as the Notes.
Federal Tax Counsel is also of the opinion that, based on the
applicable provisions of the Trust Documents, for Federal income tax purposes,
(i) the Trust will not be classified as an association taxable as a corporation
and (ii) the Trust will not be treated as a publicly traded partnership taxable
as a corporation. However, there are no authorities directly dealing with
similar transactions. If the IRS were to successfully characterize the Trust as
an association taxable as a corporation for Federal income tax purposes, the
income from the Receivables (reduced by deductions, possibly including interest
on the Notes) would be subject to Federal income tax at corporate rates, which
could reduce the amounts available to make payments on the Notes. Likewise, if
the Trust were subject to state or local income or franchise tax, the amount of
cash available to make payment on the Notes could be reduced.
If, contrary to the opinion of Federal Tax Counsel, the IRS
successfully asserted that the Notes were not debt for Federal income tax
purposes, the Notes might be treated as equity interests in the Trust. If so,
the Trust might be taxable as a corporation with the adverse consequences
described above (and the taxable corporation would not be able to deduct
interest on the Notes). The remainder of this discussion assumes that the Notes
will be treated as debt and that the Trust will not be taxable as a corporation.
Interest Income on the Notes. The stated interest on the Notes will be
taxable to a Noteholder as ordinary income when received or accrued in
accordance with such Noteholder's method of tax accounting. Some or all of the
Notes may be issued with "original issue discount" within the meaning of Section
1273 of the Code ("OID"). Unless de minimis, as statutorily defined, the amount
of OID on the Notes will equal the difference between the issue price and the
principal amount of the Notes.
OID will accrue to the Noteholders over the life of the Notes, taking
account of a reasonable prepayment assumption, based on a constant yield to
maturity method and properly adjusted for actual prepayments on the Receivables.
The portion of OID that accrues during the time a Noteholder owns the Notes (i)
constitutes interest includable in the Noteholder's gross income for Federal
income tax purposes and (ii) is added to the Noteholder's tax basis for purposes
of determining gain or loss on the maturity, redemption, prior sale, or other
disposition of the Notes. Thus, the effect of OID is to increase the amount of
taxable income above the actual interest payments during the life of the Notes.
Sale or Other Disposition. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any OID, market discount and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of any bond premium previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Subject to the rules of the Code concerning market discount on the Notes,
any such gain or loss will be capital gain or loss if the Note was held as a
capital asset. Capital losses generally may be deducted only to the extent the
Noteholder has capital gains for the taxable year.
Foreign Holders. If interest paid (or accrued) to a Noteholder who is a
foreign corporation or other non-United States person (a "foreign person") is
not effectively connected with the conduct of a trade or business within the
United States by the foreign person, the interest generally will be considered
"portfolio interest," and generally will not be subject to United States Federal
income tax and withholding tax, if the foreign person (i) is not actually or
constructively a "10 percent shareholder" of the Trust or the Seller (including
a holder of 10% of the outstanding Certificates) nor a "controlled foreign
corporation" with respect to which the Trust or the Seller is a "related person"
within the meaning of the Code and (ii) provides the person
<PAGE>
otherwise required
to withhold U.S. tax with an appropriate statement (such as a Form W-8), signed
under penalties of perjury, certifying that the beneficial owner of the Note is
a foreign person and providing the foreign person's name and address. If the
information provided in the statement changes, the foreign person must so inform
the person otherwise required to withhold U.S. tax within 30 days of such
change. The statement generally must be provided in the year a payment occurs or
in either of the two preceding years. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the withholding agent. However,
in that case, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign person that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
Federal income and withholding tax at a rate of 30%, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person generally will be exempt from
United States Federal income and withholding tax, provided that the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person (although exempt from the withholding tax
previously discussed if the holder provides an appropriate statement on Form
4224), the holder generally will be subject to United States Federal income tax
on the interest, gain or income at regular Federal income tax rates. In
addition, if the foreign person is a foreign corporation, it may be subject to a
branch profits tax equal to 30% of its "effectively connected earnings and
profits" within the meaning of the Code for the taxable year, as adjusted for
certain items, unless it qualifies for a lower rate under an applicable tax
treaty (as modified by the branch profits tax rules).
On April 22, 1996, the IRS issued proposed Treasury regulations that
would revise the procedures for securing an exemption from the 30% United States
Federal withholding tax (the "Proposed Regulations"). If adopted in final form,
the Proposed Regulations would generally apply to payments made after December
31, 1997.
Information Reporting and Backup Withholding. The Trust will be
required to report annually to the IRS, and to each Noteholder of record, the
amount of interest paid on the Notes (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 Noteholder 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.
FEDERAL TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES
Tax Characterization of the Trust. The Seller and the Servicer have
agreed, and the Certificateholders will agree by their purchase of Certificates,
to treat the Trust as a partnership for purposes of Federal income tax, with the
assets of the partnership being the assets held by the Trust, the partners of
the partnership being the Certificateholders and the Seller and the Notes being
debt of the partnership. However, the proper characterization of the arrangement
involving the Trust, the Certificates, the Notes, the Seller, and the Servicer
is not clear because there is no authority on transactions closely comparable to
that contemplated herein.
If the Trust were held to be an "association" taxable as a corporation
for Federal income tax purposes, rather than a partnership, the Trust would be
subject to a corporate level income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificateholders could be liable for any such
tax that is unpaid by the Trust). See also the discussion above under "--Federal
Tax Consequences with Respect to the Notes--Tax Characterization of the Notes
and the Trust." However, in the opinion of Federal Tax Counsel, the Trust will
not be classified as an association taxable as a corporation because of the
nature of its income and because it will not have certain "corporate"
characteristics necessary for a business trust to be an association taxable as a
corporation.
Nonetheless, because of the lack of cases or rulings on similar
transactions, a variety of alternative characterizations are possible in
addition to the position to be taken by Certificateholders that the Certificates
represent equity interests in a partnership. For example, because the
Certificates have certain features characteristic of debt, the Certificates
might be
<PAGE>
considered debt of the Trust or of the Seller. The remainder of this
summary assumes that the Certificates represent equity interests in a
partnership that owns the Receivables.
Partnership Taxation. As a partnership, the Trust will not be subject
to Federal income tax, but each Certificateholder will be required to separately
take into account such holder's allocated share of income, gains, losses,
deductions and credits of the Trust. The Trust's income will consist primarily
of interest accrued on the Receivables (including appropriate adjustments for
market discount (as discussed below), and any original issue discount and bond
premium), investment income from investments in the Trust Accounts and any gain
upon collection or disposition of the Receivables. The Trust's deductions will
consist primarily of interest accruing with respect to the Notes, servicing and
other fees and losses or deductions upon collection or disposition of the
Receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Basic Documents). The Trust Agreement will provide that the
Certificateholders will be allocated taxable income of the Trust for each
Interest Period equal to the sum of (i) the amount of interest that accrues on
the Certificates for such Interest Period based on the Certificate Rate; (ii) an
amount equivalent to interest that accrues during such Interest Period on
amounts previously due on the Certificates but not yet distributed; and (iii) an
amount of Trust income that corresponds to any excess of the principal amount of
the Certificates over their initial issue price. All remaining taxable income of
the Trust will be allocated to the Seller. It is believed that this allocation
will be valid under applicable Treasury regulations. However, due to lack of
authority on transactions similar to the one described herein, Federal Tax
Counsel is unable to opine to such effect. Consequently, no assurances can be
given that the IRS would not require a greater amount of income to be allocated
to Certificateholders. Moreover, under the foregoing method of allocation,
holders may be allocated income greater than the amount of interest accruing on
the Certificates based on the Certificate Rate or may be allocated income
greater than the amount of cash distributed to them.
Except as provided in the following paragraph, the Trust currently
intends to make all tax calculations relating to income and allocations to
Certificateholders on an aggregate basis. However, due to the lack of authority
as to the proper method of making such calculations, Federal Tax Counsel is
unable to opine that this is the proper method. Consequently, if the IRS were to
require that such calculations be made separately for each of the Receivables,
the Trust might be required to incur additional expense, but it is believed that
there would not be a material adverse effect on Certificateholders.
Market Discount. To the extent the Receivables are purchased by the
Trust for a price that is less than the aggregate stated redemption price at
maturity of the Receivables, the Trust must account for "market discount" on the
Receivables pursuant to Section 1276 of the Code. Market discount will be
accounted for each of the Receivables on an individual basis, and the Trust will
make an election to calculate market discount as it economically accrues.
Original Issue Discount and Bond Premium. It is believed that the
Receivables were not issued with OID or at a premium, and, therefore, the Trust
should not have OID income or amortizable bond premium.
Section 708 Termination. Under Section 708 of the Code, a partnership will
be deemed to terminate for Federal income tax purposes if 50% or more of the
capital and profits interests in the partnership are sold or exchanged within a
12- month period. If such a termination occurs, the partnership will be
considered to distribute its assets to the partners, who would then be treated
as recontributing those assets to a new partnership. Proposed regulations would
provide that if a termination occurs, the partnership will be considered to
transfer its assets and liabilities to a new partnership in exchange for
interests in that new partnership which it would then be treated as transferring
to its partners. The Trust may not comply with certain technical requirements
that might apply when such a constructive termination occurs. As a result, the
Trust may be subject to certain tax penalties and may incur additional expenses
if it is required to comply with those requirements. Furthermore, the Trust
might not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of a Certificate in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificate sold.
A Certificateholder's tax basis in a Certificate will generally equal his cost
increased by his share of Trust income that is includable in his gross income
and decreased by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificate and the amount realized on a
sale of a Certificate would include the holder's share of the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in
<PAGE>
such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a pro rata portion of such aggregate tax basis to the
Certificates sold (rather than maintaining a separate tax basis in each
Certificate for purposes of computing gain or loss on a sale of that
Certificate).
Any gain on the sale of a Certificate attributable to the holder's
share of unrecognized accrued market discount on the Receivables would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid these
special reporting requirements, the Trust will elect to include any such market
discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income over the life of the Certificates that exceeds the aggregate cash
distributions with respect thereto, such excess will generally give rise to a
capital loss upon the retirement of the Certificates.
Allocations Between Transferor and Transferee. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect the tax liability and tax basis of the
holder) attributable to periods before the actual purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. Consequently, Federal Tax Counsel is unable to opine on the use of
such monthly convention. If a monthly convention is not allowed (or is allowed
only for transfers of less than all of the partner's interest), taxable income
or losses of the Trust might be reallocated among the Certificateholders. The
Seller is authorized to revise the Trust's method of allocation between
transferors and transferees to conform to a method permitted by any future
authority.
Section 754 Election. In the event that a Certificateholder sells a
Certificate at a profit (or loss), the purchasing Certificateholder will have a
higher (or lower) basis in the Certificate than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust files an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such an election. As
a result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Servicer, on behalf of the Trust, is
required to keep or cause to be kept complete and accurate books of the Trust.
Such books will be maintained for financial reporting and tax purposes on an
accrual basis and the taxable year of the Trust will be the calendar year. The
Seller will file a partnership information return (IRS Form 1065) with the IRS
for each taxable year of the Trust and will report to holders (and to the IRS)
each Certificateholder's allocable share of items of Trust income and expense on
Schedule K-l. The Trust will provide the Schedule K-l information to nominees
that fail to provide the Trust with the information statement described below
and such nominees will be required to forward such information to the beneficial
owners of the Certificates. Generally, holders must file tax returns that are
consistent with the information returns filed by the Trust or be subject to
penalties unless the holder timely notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as
a nominee on behalf of another person at any time during a calendar year is
required to furnish the Trust with a statement containing certain information on
the nominee, the beneficial owners and the Certificates so held. Such
information includes (i) the name, address and taxpayer identification number of
the nominee and (ii) as to each beneficial owner (x) the name, address and
taxpayer identification number of such person, (y) whether such person is a
United States person, a tax-exempt entity or a foreign government, an
international organization, or any wholly owned agency or instrumentality of
either of the foregoing and (z) certain information concerning Certificates that
were held, acquired or transferred on behalf of such person throughout the year.
In addition, brokers and financial institutions that hold Certificates through a
nominee are required to furnish directly to the Trust information as to
themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act that holds Certificates as a nominee is
not required to furnish any such information statement to the Trust. The
information
<PAGE>
referred to above for any calendar year must be furnished to the
Trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust with the information described above
may be subject to penalties. The Trust will provide the Schedule K-1 information
to nominees that fail to provide the Trust with the information described above
and such nominees will be required to forward such information to the beneficial
owners of the Certificates.
The Seller, as the "tax matters partner," will be responsible for
representing the Certificateholders in any dispute with the IRS with respect to
partnership items. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the Trust
by the appropriate taxing authorities could result in an adjustment of the
returns of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related to
the income and losses of the Trust.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates may be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
Unrelated Business Taxable Income. Because the Trust is issuing both
Notes and Certificates, all or a portion of the income with respect to the
Certificates will be considered unrelated business taxable income to a
Certificateholder that is subject to tax on unrelated business taxable income
under Section 511 of the Code.
Tax Consequences to Foreign Certificateholders. No regulations,
published rulings or judicial decisions exist that discuss the characterization
for Federal withholding tax purposes with respect to non-U.S. persons of a
partnership with activities substantially the same as the Trust. However,
although Federal Tax Counsel is not able to opine due to the lack of authority,
it is not expected that the Trust would be considered to be engaged in a trade
or business in the United States for purposes of Federal withholding taxes with
respect to non-U.S. persons. If the Trust were considered to be engaged in a
trade or business in the United States for such purposes, the income of the
Trust distributable to a non-U.S. person would be subject to a Federal
withholding tax at a rate of 35% for persons taxable as a corporation. Also, in
such case, a non-U.S. holder that is a corporation may be subject to the branch
profits tax. Subsequent adoption of Treasury regulations or the issuance of
other administrative pronouncements may require the Trust to change its
withholding procedures.
Each foreign holder might be required to file a U.S. income tax return
(including in the case of a corporation, the branch profits tax) on its share of
the Trust's income. A foreign holder generally would be entitled to file with
the IRS a claim for refund with respect to withheld taxes, taking the position
that no taxes were due because the Trust was not engaged in a U.S. trade or
business. However, interest payments made (or accrued) to a Certificateholder
who is a foreign person may be considered guaranteed payments to the extent such
payments are determined without regard to the income of the Trust and for that
reason, or because of the nature of the Receivables, the interest will likely
not be considered "portfolio interest." See "-- Federal Tax Consequences with
Respect to the Notes--Foreign Holders" for a discussion of "portfolio interest."
As a result, even if the Trust is not considered to be engaged in a U.S. trade
or business, Certificateholders will likely be subject to United States Federal
income tax and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable treaty. A foreign holder would generally be
entitled to file with the IRS a refund claim for such withheld taxes, taking the
position that the interest was portfolio interest. However, the IRS may disagree
and no assurance can be given as to the appropriate amount of tax liability.
If the Owner Trustee is notified that a holder of record or the
beneficial owner of the Certificates is a foreign person, the Owner Trustee will
withhold an amount which in its determination is appropriate. As a result, each
potential foreign owner of a Certificate should consult its tax advisor as to
whether the tax consequences of holding an interest in a Certificate make it an
unsuitable investment.
STATE AND LOCAL TAX CONSEQUENCES
<PAGE>
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the securities under any state or local tax law.
Investors should consult their own tax advisors regarding state and local tax
consequences.
ERISA CONSIDERATIONS
THE NOTES
A fiduciary of an employee benefit plan or other retirement
arrangement subject to Title I of ERISA, should consider the fiduciary standards
under ERISA in the context of the plan or arrangement's particular circumstances
before authorizing an investment of a portion of such plan or arrangement's
assets in the Notes. Accordingly, pursuant to Section 404 of ERISA, such
fiduciary should consider among other factors (i) whether the investment is for
the exclusive benefit of participants and their beneficiaries; (ii) whether the
investment satisfies the applicable diversification requirements; (iii) whether
the investment is in accordance with the documents and instruments governing the
plan or arrangement; and (iv) whether the investment is prudent, considering the
nature of the investment.
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan or retirement arrangements,
including individual retirement accounts and certain types of Keogh Plans, as
well as any entity whose underlying assets include plan assets by reason of a
plan or arrangement investing in such entity (including an insurance company
general account), (each a "Benefit Plan"), from engaging in certain transactions
with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to such Benefit Plan. A violation of these
"prohibited transaction" rules may result in an excise tax or other penalties
and liabilities under ERISA and the Code for such persons.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Code with respect to a Benefit Plan that purchases Notes if assets of the Trust
were deemed to be assets of the Benefit Plan. Under a regulation issued by the
United States Department of Labor, 29 C.F.R. ' 2510.3-101 (the "Plan Assets
Regulation"), the assets of the Trust would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquired an "equity interest" in the Trust and none of the exceptions contained
in the Plan Assets Regulation was applicable. An "equity interest" is defined
under the Plan Assets Regulation as an interest other than an instrument which
is treated as indebtedness under applicable local law and which has no
substantial equity features. Assuming that the Notes are treated as indebtedness
under applicable local law without substantial equity features for purposes of
the Plan Assets Regulation, then the Notes will be eligible for purchase by
Benefit Plans.
However, without regard to whether the Notes are treated as an equity
interest for such purposes, the acquisition or holding of Notes by or on behalf
of a Benefit Plan could be considered to give rise to a prohibited transaction
if the Trust, the owner of collateral, or any of their respective affiliates is
or becomes a party in interest or a disqualified person with respect to such
Benefit Plan. In such case, certain exemptions from the prohibited transaction
rules could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to acquire a Note. Included among these exemptions
are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding investments
by insurance company pooled separate accounts; PTCE 95-60, regarding investments
by insurance company general accounts; PTCE 91-38, regarding investments by bank
collective investment funds; PTCE 96-23, regarding transactions affected by
"in-house asset managers"; and PTCE 84-14, regarding transactions effected by
"qualified professional asset managers."
A Benefit Plan fiduciary considering the purchase of Notes should
consult its tax and/or legal advisors regarding whether the assets of the Trust
would be considered Plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
THE CERTIFICATES
The Certificates may not be acquired (directly or indirectly) by or on
behalf of any Benefit Plan or any entity (including an insurance company general
account) whose underlying assets include plan assets of the Benefit Plan by
reason of a plan's investment in the entity. By acceptance of a Certificate,
each Certificateholder will be deemed to have represented and warranted that it
is not a Benefit Plan.
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") dated December , 1996, between the
Seller and the Underwriter, the Seller has agreed to sell to the Underwriter,
and the Underwriter has agreed to purchase, the principal amount of the Notes
and Certificates set forth on the cover page of this Prospectus.
In the Underwriting Agreement, the Underwriter has agreed, subject to
the terms and conditions set forth therein, to purchase all the Securities
offered hereby if any Securities are purchased. The Seller has been advised by
the Underwriter that the Underwriter proposes initially to offer the Notes and
Certificates to the public at the public offering prices set forth on the cover
page of this Prospectus, and to certain dealers at such prices less a concession
not in excess of % of the principal amount of each Class of Notes and the
Certificates. The Underwriter may allow and such dealers may reallow a
concession not in excess of % of such principal amount. After the initial public
offering, the public offering price and such concessions may be changed.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriter against certain liabilities, including liabilities under applicable
securities laws, or contribute to payments in the Underwriter may be required to
make in respect thereof.
NCMI is a separate subsidiary of NationsBank. NCMI is a registered
broker-dealer and not a bank. Any obligations of NCMI are the sole
responsibility of NCMI and do not create any obligation or guarantee on the part
of any affiliate of NCMI.
EXPERTS
The consolidated balance sheets of Financial Security as of December
31, 1995 and 1994 and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1995, incorporated by reference herein, have been audited by
Coopers & Lybrand L.L.P., independent certified public accountants, and are
incorporated herein in reliance upon the authority of that firm as experts in
accounting and auditing.
LEGAL OPINIONS
Certain legal matters relating to the validity of the Securities will
be passed upon for the Seller and the Trust by Stroock & Stroock & Lavan.
Federal income tax and other matters will be passed upon for the Seller and the
Trust by Stroock & Stroock & Lavan, special federal tax counsel. Certain legal
matters relating to the validity of the Securities will be passed upon for the
Underwriter by Stroock & Stroock & Lavan. Certain legal matters will be passed
upon for the Insurer by Bruce E. Stern, General Counsel, the Insurer. The
Insurer is represented by Rogers & Wells.
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
and the pages on which the definitions of such terms may be found.
ABS....................................................................46
ABS Table..............................................................46
accounts...............................................................16
Actuarial Receivables..................................................26
Affiliated Purchaser...................................................19
aggregate risks........................................................35
Amount Financed........................................................53
APR....................................................................26
association............................................................71
Available Funds........................................................53
Base Servicing Fee.....................................................51
Basic Documents........................................................42
Benefit Plan...........................................................75
BHCA...................................................................21
Business Day............................................................6
Cede...................................................................19
Certificate Balance....................................................53
Certificate Distribution Account.......................................51
Certificate Majority...................................................45
Certificate Owners.....................................................44
Certificate Policy......................................................5
Certificate Policy Claim Amount........................................53
Certificateholders......................................................9
Certificateholders' Distributable Amount...............................53
Certificateholders' Interest Carryover Shortfall.......................53
Certificateholders' Interest Distributable Amount......................54
Certificateholders' Monthly Interest Distributable Amount..............54
Certificateholders' Monthly Principal Distributable Amount.............54
Certificateholders' Percentage.........................................54
Certificateholders' Principal Carryover Shortfall......................54
Certificateholders' Principal Distributable Amount.....................54
Certificates............................................................1
chattel paper..........................................................64
Class A-1 Deficiency Claim Amount......................................54
Class A-1 Distribution Amount..........................................54
Class A-1 Final Scheduled Distribution Date.............................9
Class A-1 Note Policy Claim Amount.....................................54
Class A-1 Notes.........................................................1
Class A-2 Notes.........................................................1
Class A-3 Notes.........................................................1
clearing corporation...................................................44
Code...................................................................69
Collected Funds........................................................54
Collection Account.....................................................12
Commission..............................................................2
Contracts...............................................................5
controlled foreign corporation.........................................70
CPI....................................................................60
CPI Funds..............................................................54
Cutoff Date.............................................................1
<PAGE>
Dealer Agreements.......................................................5
Dealers................................................................23
Deficiency Claim Amount................................................54
Deficiency Claim Date..................................................51
Deficiency Notice......................................................54
Definitive Certificates................................................45
Definitive Notes.......................................................45
Definitive Securities..................................................45
Determination Date.....................................................51
disqualified persons...................................................75
Distribution Amount....................................................55
Distribution Date.......................................................1
DTC.....................................................................1
due date...............................................................24
ERISA..................................................................75
Event of Default.......................................................39
Exchange Act............................................................2
Federal Tax Counsel....................................................69
Final Class A-1 Interest Period........................................38
Financed Vehicles.......................................................1
foreign person.........................................................70
FTC Rule...............................................................68
Guaranteed Certificate Distributions...................................62
Guaranteed Note Distributions..........................................61
Holdings................................................................2
Indenture...............................................................1
Indenture Collateral Agent..............................................1
Indenture Trustee.......................................................1
Independent Director...................................................21
Index Maturity.........................................................36
indirect participants..................................................44
Initial Certificate Balance.............................................5
Insolvency Event.......................................................17
Insolvency Laws........................................................16
Insurance Agreement.....................................................8
Insurance Agreement Indenture Cross Defaults...........................39
Insurer.................................................................2
Insurer Default........................................................59
Insurer Optional Deposit...............................................55
Interest Period.........................................................7
Interest Rate...........................................................7
IRS....................................................................69
Issuer..................................................................4
LIBOR..................................................................36
LIBOR Determination Date...............................................36
Liquidated Receivable..................................................55
Monthly Period..........................................................7
Net Liquidation Proceeds...............................................55
Note Distribution Account..............................................50
Note Majority..........................................................38
Note Owners............................................................44
Note Policy.............................................................8
Note Policy Claim Amount...............................................55
Noteholders.............................................................4
Noteholders' Distributable Amount......................................55
Noteholders' Interest Carryover Shortfall..............................55
<PAGE>
Noteholders' Interest Distributable Amount.............................55
Noteholders' Monthly Interest Distributable Amount.....................55
Noteholders' Monthly Principal Distributable Amount....................56
Noteholders' Percentage................................................56
Noteholders' Principal Carryover Shortfall.............................56
Noteholders' Principal Distributable Amount............................56
Notes...................................................................1
Obligors................................................................5
OID....................................................................70
original issue discount................................................70
Original Pool Balance..................................................21
Owner Trustee...........................................................4
parties in interest....................................................75
Plan Assets Regulation.................................................75
Policies................................................................1
Pool Balance...........................................................20
portfolio interest.....................................................70
Precomputed Receivables................................................26
Principal Balance......................................................56
Principal Distributable Amount.........................................56
prohibited transaction.................................................75
PTCE...................................................................75
Purchase Agreement......................................................6
Purchase Amount........................................................57
Purchased Receivable...................................................57
Rating Agencies........................................................14
Realized Losses........................................................57
Receipt................................................................63
Receivables.............................................................1
Receivables Files.......................................................6
Received...............................................................63
Record Date.............................................................6
Redemption Price.......................................................37
Reference Banks........................................................37
Registration Statement..................................................2
related person.........................................................70
Rule of 78s Receivables................................................26
Rules..................................................................44
Securities..............................................................1
Seller..................................................................1
Service Contracts.......................................................6
Servicer Default.......................................................59
Servicing Fee..........................................................13
Simple Interest Receivables............................................26
single risks...........................................................35
Specified Spread Account Requirement...................................58
Spread Account.........................................................10
Spread Account Agreement...............................................58
Spread Account Initial Deposit.........................................58
Supplemental Servicing Fee.............................................51
tax matters partner....................................................73
Telerate Page 3750.....................................................37
Trust...................................................................2
Trust Agreement.........................................................4
Trust Documents........................................................50
Trust Property..........................................................1
<PAGE>
UCC....................................................................64
Underwriting Agreement.................................................75
Weighted Average Life..................................................15
<PAGE>
============================================================
No Dealer, salesman, or any other person has been authorized to give any
information, or to make any representations, other than those contained in this
Prospectus or the documents incorporated or deemed incorporated by reference
herein and, if given or made, such information must not be relied upon as having
been authorized by the seller or any dealer, salesman, or any
other person. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create an implication that there has
1996-1, been no change in the information herein since the date hereof. This
Prospectus is not an offer to sell or a solicitation of an offer to buy any
security Issuer in any jurisdiction in which it is unlawful to make such offer
or solicitation.
------------------------
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION.................................. 4
REPORTS TO SECURITYHOLDERS............................. 4
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE........................................... 4
SUMMARY OF TERMS....................................... 6
RISK FACTORS...........................................17
USE OF PROCEEDS........................................21
THE TRUST..............................................21
THE TRUST PROPERTY.....................................22
NATIONSBANK CORPORATION................................23
THE SELLER.............................................23
SUNSTAR ACCEPTANCE CORPORATION.........................24
THE RECEIVABLES........................................27
THE INSURER............................................34
DESCRIPTION OF THE SECURITIES..........................35
WEIGHTED AVERAGE LIFE CONSIDERATIONS...................45
DESCRIPTION OF THE PURCHASE AGREEMENT AND THE
TRUST DOCUMENTS........................................50
THE POLICIES...........................................61
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES...............64
FEDERAL INCOME TAX CONSEQUENCES........................69
STATE AND LOCAL TAX CONSIDERATIONS.....................74
ERISA CONSIDERATIONS...................................74
UNDERWRITING...........................................75
EXPERTS................................................76
LEGAL OPINIONS.........................................76
INDEX OF TERMS.........................................77
--------------------------
Until , 1996 (90 days after the date of this Prospectus), all dealers
effecting transactions in the Securities, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to subscriptions their unsold allotments or subscriptions.
============================================================
- ------------------------------------------------------------
============================================================
$__________
NATIONSFINANCIAL AUTO OWNER TRUST
1996-1,
Issuer
$___________
Class A-1%
Asset Backed Notes
$___________
Class A-2 Floating Rate
Asset Backed Note
$___________
Class A-3 ___%
Asset Backed Notes
$___________
___%
Asset Backed Certificates
NATIONSFINANCIAL FUNDING
CORPORATION
Seller
----------------------------------------------
----------------------------------------------
PROSPECTUS
----------------------------------------------
NATIONSBANC CAPITAL MARKETS, INC.
_________________, 1996
============================================================
- ------------------------------------------------------------
<PAGE>
[Alternate Page]
SUBJECT TO COMPLETION, DATED _________, 1996
$------------
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
$_________ Class A-1 % Asset Backed Notes
$__________ Class A-2 Floating Rate Asset Backed Notes
$___________ Class A-3 % Asset Backed Notes
$___________ % Asset Backed Certificates
NationsFinancial Funding Corporation
Seller
SunStar Acceptance Corporation
Servicer
The NationsFinancial Auto Owner Trust 1996-1 (the "Trust") will be
formed pursuant to a Trust Agreement to be entered into between NationsFinancial
Funding Corporation, as seller (the "Seller"), and ____________, as Owner
Trustee, and will issue $_______________ aggregate principal amount of Class A-1
% Asset Backed Notes (the "Class A-1 Notes"), $________________ aggregate
principal amount of Class A-2 Floating Rate Asset Backed Notes (the "Class A-2
Notes") and $______________ aggregate principal amount of Class A-3 % Asset
Backed Notes (the "Class A-3 Notes" and, together with the Class A-1 Notes and
the Class A-2 Notes, the "Notes"). The Notes will be issued pursuant to an
Indenture, dated as of November 30, 1996 (the "Indenture"), between the Trust
and __________________, as Indenture Trustee and as Indenture Collateral Agent
(the "Indenture Trustee" and the "Indenture Collateral Agent"). The Trust also
will issue $______________ aggregate principal amount of % Asset Backed
Certificates (the "Certificates" and, together with the Notes, the
"Securities").
Distributions of interest on the Certificates will be subordinated in
priority of payment to interest on and principal of the Notes. No principal will
be paid on the Certificates until all of the Notes have been paid in full.
The assets of the Trust (the "Trust Property") will include a pool of
non-prime retail motor vehicle installment sales contracts (the "Receivables")
secured by new and used automobiles, light trucks and vans financed thereby (the
"Financed Vehicles"), certain amounts received under each Receivable after
November 30, 1996 (the "Cutoff Date"), security interests in the Financed
Vehicles, the Certificate Policy (as defined herein) and certain other property,
as more fully described herein.
(Cover continued on next page)
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES, SEE "RISK FACTORS" AT PAGE __ HEREIN.
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS
IN, AND ARE NOT GUARANTEED OR INSURED BY, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, ANY GOVERNMENTAL AGENCY, THE SELLER, THE SERVICER OR NATIONSBANK
CORPORATION OR ANY OF THEIR AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is to be used by NationsBanc Capital Markets, Inc.
("NCMI") an affiliate of the Seller in connection with offers
and sales related to market-making transactions in the
Securities in which NCMI acts
as principal. NCMI may also act as agent in such transactions. Sales
will be made
at prices related to the prevailing prices at the time of sale.
NationsBanc Capital Markets, Inc.
The date of this Prospectus is ________ , 1996.
<PAGE>
[Alternate Page]
PROSPECTUS SUPPLEMENT
On or about , 199_, this Prospectus will be distributed together with,
and should be read in conjunction with, an accompanying supplement to the
Prospectus. Such supplement generally will incorporate by reference include the
information contained in the monthly statements furnished to Noteholders and
Certificateholders. See "Description of the Transfer and Servicing Agreements --
Statements to Securityholders."
<PAGE>
[Alternate Page]
"parties in interest" under ERISA or "disqualified persons" under the Code with
respect to such Benefit Plan. A violation of these "prohibited transaction"
rules may result in an excise tax or other penalties and liabilities under ERISA
and the Code for such persons.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Code with respect to a Benefit Plan that purchases Notes if assets of the Trust
were deemed to be assets of the Benefit Plan. Under a regulation issued by the
United States Department of Labor, 29 C.F.R. ' 2510.3-101 (the "Plan Assets
Regulation"), the assets of the Trust would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquired an "equity interest" in the Trust and none of the exceptions contained
in the Plan Assets Regulation was applicable. An "equity interest" is defined
under the Plan Assets Regulation as an interest other than an instrument which
is treated as indebtedness under applicable local law and which has no
substantial equity features. Assuming that the Notes are treated as indebtedness
under applicable local law without substantial equity features for purposes of
the Plan Assets Regulation, then the Notes will be eligible for purchase by
Benefit Plans.
However, without regard to whether the Notes are treated as an equity
interest for such purposes, the acquisition or holding of Notes by or on behalf
of a Benefit Plan could be considered to give rise to a prohibited transaction
if the Trust, the owner of collateral, or any of their respective affiliates is
or becomes a party in interest or a disqualified person with respect to such
Benefit Plan. In such case, certain exemptions from the prohibited transaction
rules could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to acquire a Note. Included among these exemptions
are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding investments
by insurance company pooled separate accounts; PTCE 95-60, regarding investments
by insurance company general accounts; PTCE 91-38, regarding investments by bank
collective investment funds; PTCE 96-23, regarding transactions affected by
"in-house asset managers"; and PTCE 84-14, regarding transactions effected by
"qualified professional asset managers."
A Benefit Plan fiduciary considering the purchase of Notes should
consult its tax and/or legal advisors regarding whether the assets of the Trust
would be considered Plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
THE CERTIFICATES
The Certificates may not be acquired (directly or indirectly) by or on
behalf of any Benefit Plan or any entity (including an insurance company general
account) whose underlying assets include plan assets of the Benefit Plan by
reason of a plan's investment in the entity. By acceptance of a Certificate,
each Certificateholder will be deemed to have represented and warranted that it
is not a Benefit Plan.
PLAN OF DISTRIBUTION
This Prospectus is to be used by the Underwriter, an affiliate of the
Seller, in connection with offers and sales related to market-making
transactions in the Securities in which the Underwriter acts as principal. The
Underwriter may also act as agent in such transactions. Sales will be made at
prices related to prevailing prices at the time of sale. Any obligations of the
Underwriter are the sole obligations of the Underwriter and do not create any
obligations on the part of any affiliate of the Underwriter.
LEGAL OPINIONS
Certain legal matters relating to the validity of the Securities will
be passed upon the Seller and the Trust by Stroock & Stroock & Lavan. Federal
income tax and other matters will be passed upon for the Seller and the Trust by
Stroock & Stroock & Lavan, special federal tax counsel. Certain legal matters
relating to the validity of the Securities will be passed upon for the
Underwriter by Stroock & Stroock & Lavan. Certain legal matters will be passed
upon for the Insurer by Bruce E. Stern, General Counsel, the Insurer. The
Insurer is represented by Rogers & Wells.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission
Registration Fee................................................$ *
Trustee's Fees................................................... *
Printing..........................................................*
Legal Fees and Expenses.......................................... *
Accountings Fees................................................. *
Blue Sky Qualification Fees and Expenses..........................*
Rating Agency Fees................................................*
Miscellaneous ....................................................*
Total.............................................................*
- -------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware provides as follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance --
(a) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of another corporation, or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections
(a) and (b) of this section,
<PAGE>
or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made (1) by a majority vote of the directors who
are not parties to such action, suit or proceeding, even though less
than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion,
or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the corporation as authorized
in this section. Such expenses (including attorneys' fees) incurred by
the other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action and in his official capacity and as to
action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director,
officer, employee or agent with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation's obligations to advance expenses (including attorneys'
fees).
<PAGE>
Article 11 of the Certificate of Incorporation of the Registrant
provides as follows:
No director shall have any personal liability to the
Corporation or its stockholders for any monetary damages for breach of
fiduciary duty as a director, except that this Article 11 shall not
eliminate or limit the liability of each director;
(i) for any breach of such director's duty of
loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing
violation of law,
(iii) under Section 174 of the Delaware General
Corporation Law, or
(iv) for any transaction from which such director
derived an improper benefit.
If the Delaware Corporate Law is amended to authorize
corporation action further eliminating or limiting the personal
liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the furthest extent of
the Delaware Corporate Law, as so amended. Any repeal or modification
of this provision shall not adversely affect any right or protection of
a director of the Corporation existing at the time of such repeal or
modification.
Article VI of the Registrant's Bylaws provides that:
The Registrant will indemnify any person who was a director,
officer, employee or agent of the Registrant to the fullest extent and
in the manner set forth in and as provided by the General Corporation
Law of Delaware.
ITEM 16. EXHIBITS.
See the Exhibit Index herein.
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; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement.
(b) 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.
(c) To remove from registration by means of a post-effective amendment
any of the Securities being registered which remain unsold at the termination of
the offering.
(d) For purposes of determining any liability under the Securities Act
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 that is incorporated by
reference in
<PAGE>
that 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) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may by permitted to directors, officers and controlling
persons of the Registrant pursuant to this provisions described under "Item
15-Indemnification of Directors and Officers" 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) To provide to the Underwriter at the closing specified in the
Underwriting Agreements Notes and Certificates in such denominations and
registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
(g) 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)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(h) For purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") 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.
(i) 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.
(j) To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310 of the
Trust Indenture Act in accordance with the rules and regulations prescribed by
the Commission under Section 305(b)(2) of the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irving, State of Texas, on the 12th day of November,
1996.
NationsFinancial Funding Corporation, Seller
By: *
Name: Joseph A. Cutrona
Title: President and Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statements has been signed by the following person in the
capacities indicated on November 12, 1996.
Signature Title Date
* President, Chief
Financial Officer November 12, 1996
- -------------------------------- and Director
Joseph A. Cutrona
* Chief Accounting Officer November 12, 1996
- -------------------------------- and Director
Thomas T. Harahan
*By: /s/ Robert W. Long, Jr.
Robert W. Long, Jr.
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Number Description Page
1.l** Form of Underwriting Agreement.
3.1** Certificate of Incorporation of the Seller.
3.2** By-laws of the Seller.
4.1* Form of Indenture between the Trust and the
Indenture Trustee.
4.2* Form of Trust Agreement between the Seller and
the Owner Trustee.
5.1* Opinion of Counsel to the Seller.
10.1** Form of Purchase Agreement between the Servicer
and the Seller.
23.1* Consent of Counsel to the Seller (included as
part of Exhibit 5.1).
23.2** Consent of Coopers & Lybrand L.L.P.
24.1*** Power of Attorney
25.1** Statement of Eligibility of Trustee
99.1* Form of Sale and Servicing Agreement among the
Seller, the Servicer and the Owner Trustee on behalf of
the Trust.
99.2* Form of Retail Motor Vehicle Installment Sales Contract.
99.3** Form of the Note Policy.
99.4** Form of the Certificate Policy.
* Filed herewith.
** To be filed by amendment.
*** Previously Filed.
<PAGE>
REGISTRATION NO. 333-12843
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
EXHIBITS
FILED WITH
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
(Issuer of the Securities)
-------------------------
NATIONSFINANCIAL FUNDING CORPORATION
(Seller)
(Exact name of Registrant as specified in its charter)
-------------------------
Exhibit 4.1
============================================================================
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
CLASS A-1 ______% Asset Backed Notes
CLASS A-2 Floating Rate Asset Backed Notes
CLASS A-3 ____% Asset Backed Notes
--------------------------------
INDENTURE
Dated as of November 30, 1996
---------------------------------
--------------------------
Trustee, and Indenture Collateral Agent
=============================================================================
<PAGE>
CROSS REFERENCE TABLE1
TIA Indenture
Section Section
310 (a) (1) ........................................ 6.11
(a) (2) ........................................ 6.11
(a) (3) ........................................ 6.10; 6.11
(a) (4) ........................................ N.A.2
(a) (5) ........................................ 6.11
(b) ........................................ 6.8; 6.11
(c) ........................................ N.A.
311 (a) ........................................ 6.12
(b) ........................................ 6.12
(c) ........................................ N.A.
312 (a) ........................................ 7.1
(b) ........................................ 7.2
(c) ........................................ 7.2
313 (a) ........................................ 7.4
(b) (1) ........................................ 7.4
(b) (2) ........................................ 7.4
(c) ........................................ 11.5
(d) ........................................ 7.3
314 (a) ........................................ 3.9; 7.3
(b) ........................................ 11.15
(c) (1) ........................................ 11.1
- --------
1 Note: This Cross Reference Table shall not, for any
purpose, be deemed to be part of this Indenture.
2 N.A. means Not Applicable.
<PAGE>
(c) (2) ........................................... 11.1
(c) (3) ........................................... 11.1
(d) ........................................... 11.1
(e) ........................................... 1.1; 11.1
(f) ........................................... 11.1
315 (a) ........................................... 6.1
(b) ........................................... 6.5; 11.5
(c) ........................................... 6.1
(d) ........................................... 6.1
(e) ........................................... 5.14
316 (a) (last sentence)................................... 1.1
(a) (1) (A)........................................... 5.12
(a) (1) (B)........................................... 5.13
(a) (2) ........................................... N.A.
(b) ........................................... 5.7; 5.8
(c) ........................................... N.A
317 (a) (1) ........................................... 5.3
(a) (2) ........................................... 5.3
(b) ........................................... 3.3
318 (a) ........................................... 11.7
(b) ........................................... N.A.
(c) ........................................... 11.7
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1 Definitions.........................................
SECTION 1.2 Incorporation by Reference of Trust
Indenture Act......................................
ARTICLE II
The Notes
SECTION 2.1 Form................................................
SECTION 2.2 Execution, Authentication and Delivery..............
SECTION 2.3 Temporary Notes.....................................
SECTION 2.4 Registration; Registration of Transfer
and Exchange.......................................
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen
Notes..............................................
SECTION 2.6 Persons Deemed Owner................................
SECTION 2.7 Payment of Principal and Interest;
Defaulted Interest..................................
SECTION 2.8 Cancellation........................................
SECTION 2.9 Release of Collateral...............................
SECTION 2.10 Book-Entry Notes....................................
SECTION 2.11 Notices to Clearing Agency..........................
SECTION 2.12 Definitive Notes....................................
ARTICLE III
Covenants
SECTION 3.1 Payment of Principal and Interest...................
SECTION 3.2 Maintenance of Office or Agency.....................
SECTION 3.3 Money for Payments To Be Held in Trust..............
SECTION 3.4 Existence...........................................
SECTION 3.5 Protection of Trust Estate..........................
SECTION 3.6 Opinions as to Trust Estate.........................
SECTION 3.7 Performance of Obligations; Servicing
of Receivables.....................................
SECTION 3.8 Negative Covenants..................................
SECTION 3.9 Annual Statement as to Compliance...................
SECTION 3.10 Issuer May Consolidate, Etc. Only on
Certain Terms......................................
SECTION 3.11 Successor or Transferee.............................
SECTION 3.12 No Other Business...................................
SECTION 3.13 No Borrowing........................................
SECTION 3.14 Servicer's Obligations..............................
SECTION 3.15 Guarantees, Loans, Advances and Other
Liabilities........................................
SECTION 3.16 Capital Expenditures................................
SECTION 3.17 Compliance with Laws................................
SECTION 3.18 Restricted Payments.................................
SECTION 3.19 Notice of Events of Default.........................
SECTION 3.20 Further Instruments and Acts........................
SECTION 3.21 Amendments of Sale and Servicing
Agreement and Trust Agreement......................
SECTION 3.22 Income Tax Characterization.........................
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1 Satisfaction and Discharge of Indenture.............
SECTION 4.2 Application of Trust Money..........................
SECTION 4.3 Repayment of Moneys Held by Paying
Agent..............................................
ARTICLE V
Remedies
SECTION 5.1 Events of Default...................................
SECTION 5.2 Rights Upon Event of Default........................
SECTION 5.3 Collection of Indebtedness and Suits for
Enforcement by Trustee.............................
SECTION 5.4 Remedies............................................
SECTION 5.5 Optional Preservation of the
Receivables........................................
SECTION 5.6 Priorities..........................................
SECTION 5.7 Limitation of Suits.................................
SECTION 5.8 Unconditional Rights of Noteholders To
Receive Principal and Interest.....................
SECTION 5.9 Restoration of Rights and Remedies..................
SECTION 5.10 Rights and Remedies Cumulative......................
SECTION 5.11 Delay or Omission Not a Waiver......................
SECTION 5.12 Control by Noteholders..............................
SECTION 5.13 Waiver of Past Defaults.............................
SECTION 5.14 Undertaking for Costs...............................
SECTION 5.15 Waiver of Stay or Extension Laws....................
SECTION 5.16 Action on Notes.....................................
SECTION 5.17 Performance and Enforcement of Certain
Obligations........................................
SECTION 5.18 Claims Under Note Policy............................
SECTION 5.19 Preference Claims...................................
ARTICLE VI
The Trustee and the Indenture Collateral Agent
SECTION 6.1 Duties of Trustee...................................
SECTION 6.2 Rights of Trustee...................................
SECTION 6.3 Individual Rights of Trustee........................
SECTION 6.4 Trustee's Disclaimer................................
SECTION 6.5 Notice of Defaults..................................
SECTION 6.6 Reports by Trustee to Holders.......................
SECTION 6.7 Compensation and Indemnity..........................
SECTION 6.8 Replacement of Trustee..............................
SECTION 6.9 Successor Trustee by Merger.........................
SECTION 6.10 Appointment of Co-Trustee or Separate
Trustee............................................
SECTION 6.11 Eligibility; Disqualification.......................
SECTION 6.12 Preferential Collection of Claims
Against Issuer.....................................
SECTION 6.13 Appointment and Powers..............................
SECTION 6.14 Performance of Duties...............................
SECTION 6.15 Limitation on Liability.............................
SECTION 6.16 Reliance Upon Documents.............................
SECTION 6.17 Successor Indenture Collateral Agent. ..............
SECTION 6.18 Compensation........................................
SECTION 6.19 Representations and Warranties of the
Indenture Collateral Agent.........................
SECTION 6.20 Waiver of Setoffs...................................
SECTION 6.21 Control by the Controlling Party. .................
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1 Issuer To Furnish To Trustee Names and
Addresses of Noteholders...........................
SECTION 7.2 Preservation of Information;
Communications to Noteholders.......................
SECTION 7.3 Reports by Issuer...................................
SECTION 7.4 Reports by Trustee..................................
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1 Collection of Money...............................
SECTION 8.2 Trust Accounts....................................
SECTION 8.3 General Provisions Regarding Accounts.............
SECTION 8.4 Release of Trust Estate...........................
SECTION 8.5 Opinion of Counsel................................
ARTICLE IX
Supplemental Indentures
SECTION 9.1 Supplemental Indentures Without Consent
of Noteholders...................................
SECTION 9.2 Supplemental Indentures with Consent of
Noteholders......................................
SECTION 9.3 Execution of Supplemental Indentures..............
SECTION 9.4 Effect of Supplemental Indenture..................
SECTION 9.5 Conformity With Trust Indenture Act...............
SECTION 9.6 Reference in Notes to Supplemental
Indentures.......................................
ARTICLE X
Redemption of Notes
SECTION 10.1 Redemption.........................................
SECTION 10.2 Form of Redemption Notice..........................
SECTION 10.3 Notes Payable on Redemption Date...................
ARTICLE XI
Miscellaneous
SECTION 11.1 Compliance Certificates and Opinions,
etc................................................
SECTION 11.2 Form of Documents Delivered to Trustee..............
SECTION 11.3 Acts of Noteholders.................................
SECTION 11.4 Notices, etc., to Trustee, Issuer and
Rating Agencies....................................
SECTION 11.5 Notices to Noteholders; Waiver......................
SECTION 11.6 Alternate Payment and Notice Provisions.............
SECTION 11.7 Conflict with Trust Indenture Act...................
SECTION 11.8 Effect of Headings and Table of
Contents...........................................
SECTION 11.9 Successors and Assigns..............................
SECTION 11.10 Separability........................................
SECTION 11.11 Benefits of Indenture...............................
SECTION 11.12 Legal Holidays......................................
SECTION 11.13 GOVERNING LAW.......................................
SECTION 11.14 Counterparts........................................
SECTION 11.15 Recording of Indenture..............................
SECTION 11.16 Trust Obligation....................................
SECTION 11.17 No Petition.........................................
SECTION 11.18 Inspection..........................................
<PAGE>
INDENTURE dated as of November 30, 1996, between
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1, a Delaware
business trust (the "Issuer"), and ______________________, a
national banking association, as trustee (the "Trustee") and
Indenture Collateral Agent (as defined below)
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's Class A-1 ______%
Asset Backed Notes (the "Class A-1 Notes"), Class A-2 Floating Rate Asset
Backed Notes (the "Class A-2 Notes") and Class A-3 ____% Asset Backed Notes (the
"Class A-3 Notes"), (the "Class A-3 Notes" and, together with the Class A-1
Notes and Class A-2 Notes, the "Notes"):
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Indenture Collateral (as defined below) as collateral to the Indenture
Collateral Agent for the benefit of the Trustee on behalf of the Noteholders.
Financial Security Assurance Inc. (the "Insurer") has issued and delivered
a financial guaranty insurance policy, dated the Closing Date (with
endorsements, the "Note Policy"), pursuant to which the Insurer guarantees
Guaranteed Note Distributions, as defined in the Note Policy.
As an inducement to the Insurer to issue and deliver the Note Policy, the
Issuer and the Insurer have executed and delivered the Insurance and Indemnity
Agreement, dated as of November 30, 1996 (as amended from time to time, the
"Insurance Agreement"), among the Insurer, the Issuer, SunStar Acceptance
Corporation and NationsFinancial Funding Corporation.
As an additional inducement to the Insurer to issue the Note Policy, and as
security for the performance by the Issuer of the Insurer Issuer Secured
Obligations and as security for the performance by the Issuer of the Trustee
Issuer Secured Obligations, the Issuer has agreed to assign the Indenture
Collateral (as defined below) as collateral to the Indenture Collateral Agent
for the benefit of the Issuer Secured Parties, as their respective interests may
appear.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Collateral Agent at the Closing
Date, for the benefit of the Issuer Secured Parties to secure the Issuer Secured
Parties, all of the Issuer's right, title and interest in and to (a) the
Receivables, and all moneys due thereon after the Cutoff Date; (b) an assignment
of the security interests in the Financed Vehicles granted by Obligors pursuant
to the Receivables and any other interest of the Issuer in the Financed
Vehicles; (c) any proceeds with respect to the Receivables repurchased by a
Dealer, pursuant to a Dealer Agreement, as a result of a breach of
representation or warranty in the related Dealer Agreement; (d) all rights under
any Service Contracts on the related Financed Vehicles; (e) any proceeds with
respect to the Receivables from claims on any physical damage, theft, credit
life or disability insurance policies covering Financed Vehicles or Obligors;
(f) all funds on deposit from time to time in the Trust Accounts, and in all
investments and proceeds thereof and all rights of the Issuer therein (including
all income thereon); (g) the Issuer's rights and benefits, but none of its
obligations or burdens, under the Purchase Agreement, including the delivery
requirements, representations and warranties and the cure and repurchase
obligations of SunStar Acceptance Corporation under the Purchase Agreement; (h)
all items contained in the Receivable Files and any and all other documents that
SunStar Acceptance Corporation keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed Vehicles,
(i) the Issuer's rights and benefits, but none of its obligations or burdens,
under the Sale and Servicing Agreement (including all rights of the Seller under
the Purchase Agreement, assigned to the Issuer pursuant to the Sale and
Servicing Agreement); and (j) all present and future claims, demands, causes and
choses in action in respect of any or all of the foregoing and all payments on
or under and all proceeds of every kind and nature whatsoever in respect of any
or all of the foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction except as set forth
herein, and to secure compliance with the provisions of this Indenture, all as
provided in this Indenture.
The Indenture Collateral Agent, for the benefit of the Trustee on behalf of
the Holders of the Notes and for the benefit of the Insurer acknowledges such
Grant, accepts the trusts under this Indenture in accordance with the provisions
of this Indenture and agrees to perform its duties required in this Indenture to
the best of its ability to the end that the interests of the Holders of the
Notes may be adequately and effectively protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1 Definitions. Except as otherwise specified herein, all
capitalized terms have the respective meanings set forth in Exhibit A to the
Sale and Servicing Agreement as in effect on the Closing Date for all purposes
of this Indenture.
SECTION 1.2 Incorporation by Reference of the Trust Indenture Act. Whenever
this Indenture refers to provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture. The following TIA terms used in
this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
ARTICLE II
The Notes
SECTION 2.1 Form. The Class A-1 Notes, the Class A-2 Notes and the Class
A-3 Notes, in each case together with the Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibit D-1, D-2
and D-3, respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit D is part of the terms of this Indenture.
SECTION 2.2 Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall upon receipt of the Note Policy and Issuer Order
authenticate and deliver Class A-1 Notes for original issue in an aggregate
principal amount of $_________, Class A-2 Notes for original issue in the
aggregate principal amount of $_________ and Class A-3 Notes for original issue
in the aggregate principal amount of $_________. Class A-1 Notes, Class A-2
Notes and Class A-3 Notes outstanding at any time may not exceed such amounts
except as provided in Section 2.5.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples thereof (except for one Note of each class which may be
issued in a denomination other than an integral multiple of $1,000).
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
SECTION 2.3 Temporary Notes. Pending the preparation of Definitive Notes,
the Issuer may execute, and upon receipt of an Issuer Order the Trustee shall
authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to be
prepared without unreasonable delay. After the preparation of Definitive Notes,
the temporary Notes shall be exchangeable for Definitive Notes upon surrender of
the temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.2, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of Definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as Definitive Notes.
SECTION 2.4 Registration; Registration of Transfer and Exchange. The Issuer
shall cause to be kept a register (the "Note Register") in which, subject to
such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.2, if the
requirements of Section 8-401(1) of the UCC are met the Issuer shall execute and
upon its request the Trustee shall authenticate and the Noteholder shall obtain
from the Trustee, in the name of the designated transferee or transferees, one
or more new Notes, in any authorized denominations, of the same class and a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in any
authorized denominations, of the same class and a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met the Issuer shall execute and upon its
request the Trustee shall authenticate and the Noteholder shall obtain from the
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be (i) duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("Stamp") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Trustee may
require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.
The preceding provisions of this section notwithstanding, the Issuer shall
not be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee and the Insurer (unless an Insurer Default
shall have occurred and be continuing) such security or indemnity as may be
required by it to hold the Issuer, the Trustee and the Insurer harmless, then,
in the absence of notice to the Issuer, the Note Registrar or the Trustee that
such Note has been acquired by a bona fide purchaser, and provided that the
requirements of Section 8-405 of the UCC are met, the Issuer shall execute and
upon its request the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
Note; provided, however, that if any such destroyed, lost or stolen Note, but
not a mutilated Note, shall have become or within seven days shall be due and
payable, or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable or upon the Redemption Date without surrender thereof. If, after
the delivery of such replacement Note or payment of a destroyed, lost or stolen
Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of
the original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer, the Trustee and the Insurer shall be
entitled to recover such replacement Note (or such payment) from the Person to
whom it was delivered or any Person taking such replacement Note from such
Person to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Trustee)
connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.6 Persons Deemed Owner. Prior to due presentment for registration
of transfer of any Note, the Issuer, the Trustee and any agent of the Issuer,
the Trustee, the Insurer may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Insurer, the Trustee nor any agent of the Issuer or the
Trustee shall be affected by notice to the contrary.
SECTION 2.7 Payment of Principal and Interest; Defaulted Interest. (a) The
Notes shall accrue interest as provided in the forms of the Class A-1 Note, the
Class A-2 Note and the Class A-3 Note set forth in Exhibits D-1, D-2 and D-3,
respectively, and such interest shall be payable on each Distribution Date as
specified therein. Any installment of interest or principal, if any, payable on
any Note which is punctually paid or duly provided for by the Issuer on the
applicable Distribution Date shall be paid to the Person in whose name such Note
(or one or more Predecessor Notes) is registered on the Record Date, by check
mailed first-class, postage prepaid, to such Person's address as it appears on
the Note Register on such Record Date, except that, unless Definitive Notes have
been issued pursuant to Section 2.12, with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a
Distribution Date or on the Final Scheduled Distribution Date (and except for
the Redemption Price for any Note called for redemption pursuant to Section
10.1(a)) which shall be payable as provided below. The funds represented by any
such checks returned undelivered shall be held in accordance with Section 3.3.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Class A-1 Note, the Class A-2
Note and the Class A-3 Note set forth in Exhibits D-1, D-2 and D-3,
respectively. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable, if not previously paid, on the date on
which an Event of Default shall have occurred and be continuing, if the Trustee
or the Holders of the Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.2. All principal payments on
each class of Notes shall be made pro rata to the Noteholders of such class
entitled thereto. The Trustee shall notify the Person in whose name a Note is
registered at the close of business on the Record Date preceding the
Distribution Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Distribution Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.2.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to each Noteholder and the Trustee a
notice that states the special record date, the payment date and the amount of
defaulted interest to be paid.
(d) Promptly following the date on which all principal of and interest on
the Notes has been paid in full and the Notes have been surrendered to the
Trustee, the Trustee shall, if the Insurer has paid any amount in respect of the
Notes under the Note Policy or otherwise which has not been reimbursed to it,
deliver such surrendered Notes to the Insurer.
SECTION 2.8 Cancellation. Subject to Section 2.7(d), all Notes surrendered
for payment, registration of transfer, exchange or redemption shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. Subject to Section 2.7(d), the
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. Subject to Section 2.7(d), all canceled Notes may
be held or disposed of by the Trustee in accordance with its standard retention
or disposal policy as in effect at the time unless the Issuer shall direct by an
Issuer Order that they be destroyed or returned to it; provided that such Issuer
Order is timely and the Notes have not been previously disposed of by the
Trustee.
SECTION 2.9 Release of Collateral. The Indenture Collateral Agent shall, on
or after the Termination Date, release any remaining portion of the Trust Estate
from the lien created by this Indenture and deposit in the Collection Account
any funds then on deposit in any other Trust Account. The Indenture Collateral
Agent shall release property from the lien created by this Indenture pursuant to
this Section 2.9 only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1)
meeting the applicable requirements of Section 11.1.
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance, will be
issued in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Note Owner will receive a Definitive Note representing such Note Owner's
interest in such Note, except as provided in Section 2.12. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Trustee shall be entitled to deal with
the Clearing Agency for all purposes of this Indenture (including the
payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole Holder of the Notes, and
shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Note Depository Agreement,
unless and until Definitive Notes are issued pursuant to Section 2.12, the
initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of and
interest on the Notes to such Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Note Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Trustee; and
(vi) Note Owners may receive copies of any reports sent to Noteholders
pursuant to this Indenture, upon written request, together with a
certification that they are Note Owners and payment of reproduction and
postage expenses associated with the distribution of such reports, from the
Trustee at the Corporate Trust Office.
SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency, and shall
have no obligation to the Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Servicer advises the Trustee in
writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Notes, and the Servicer is
unable to locate a qualified successor, (ii) the Servicer at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Clearing Agency or (iii) after the occurrence of an Event of Default, Note
Owners representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Trustee through the Clearing Agency
in writing that the continuation of a book entry system through the Clearing
Agency is no longer in the best interests of the Note Owners, then the Clearing
Agency shall notify all Note Owners and the Trustee of the occurrence of any
such event and of the availability of Definitive Notes to Note Owners requesting
the same. Upon surrender to the Trustee of the typewritten Note or Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Notes, the Trustee shall recognize the Holders of the Definitive
Notes as Note-holders.
ARTICLE III
Covenants
SECTION 3.1 Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest on the Notes in accordance with the
terms of the Notes and this Indenture. Without limiting the foregoing, subject
to Section 8.2(c), the Issuer will cause to be distributed all amounts on
deposit in the Note Distribution Account on a Distribution Date deposited
therein pursuant to the Sale and Servicing Agreement (i) for the benefit of the
Class A-l Notes, to Class A-1 Note- holders, (ii) for the benefit of the Class
A-2 Notes, to Class A-2 Noteholders and (iii) for the benefit of the Class A-3
Notes, to Class A-3 Noteholders. Amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all purposes
of this Indenture.
SECTION 3.2 Maintenance of Office or Agency. The Issuer will maintain in
the Borough of Manhattan, The City of New York, an office or agency where Notes
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer hereby initially appoints the Trustee to serve as its
agent for the foregoing purposes. The Issuer will give prompt written notice to
the Trustee of the location, and of any change in the location, of any such
office or agency. If at any time the Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Trustee as its agent to receive
all such surrenders, notices and demands.
SECTION 3.3 Money for Payments To Be Held in Trust. As provided in Sections
8.2(a) and (b), all payments of amounts due and payable with respect to any
Notes that are to be made from amounts withdrawn from the Collection Account and
the Note Distribution Account pursuant to Section 8.2(c) shall be made on behalf
of the Issuer by the Trustee or by another Paying Agent, and no amounts so
withdrawn from the Collection Account and the Note Distribution Account for
payments of Notes shall be paid over to the Issuer except as provided in this
Section.
On or before each Payment Date and Redemption Date, the Issuer shall
deposit or cause to be deposited in the Note Distribution Account an aggregate
sum sufficient to pay the amounts then becoming due under the Notes, such sum to
be held in trust for the benefit of the Persons entitled thereto and (unless the
Paying Agent is the Trustee) shall promptly notify the Trustee of its action or
failure so to act.
The Issuer will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee and the Insurer an instrument in which such Paying
Agent shall agree with the Trustee (and if the Trustee acts as Paying Agent, it
hereby so agrees), subject to the provisions of this Section, that such Paying
Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Trustee notice of any default by the Issuer of which it
has actual knowledge (or any other obligor upon the Notes) in the making of
any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Trustee all sums held by it in trust for the payment of Notes if at any
time it ceases to meet the standards required to be met by a Paying Agent
at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which the sums were held by such Paying Agent; and upon such a payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to the escheat of funds, any money
held by the Trustee or any Paying Agent in trust for the payment of any amount
due with respect to any Note and remaining unclaimed for two years after such
amount has become due and payable shall be discharged from such trust and be
paid to the Issuer on Issuer Request with the consent of the Insurer (unless an
Insurer Default shall have occurred and be continuing) shall be deposited by the
Trustee in the Collection Account; and the Holder of such Note shall thereafter,
as an unsecured general creditor, look only to the Issuer for payment thereof
(but only to the extent of the amounts so paid to the Issuer), and all liability
of the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that if such money or any portion thereof
had been previously deposited by the Insurer or the Indenture Collateral Agent
with the Trustee for the payment of principal or interest on the Notes, to the
extent any amounts are owing to the Insurer, such amounts shall be paid promptly
to the Insurer upon receipt of a written request by the Insurer to such effect,
and provided, further, that the Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense of the Issuer cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Issuer.
The Trustee shall also adopt and employ, at the expense of the Issuer, any other
reasonable means of notification of such repayment (including, but not limited
to, mailing notice of such repayment to Holders whose Notes have been called but
have not been surrendered for redemption or whose right to or interest in moneys
due and payable but not claimed is determinable from the records of the Trustee
or of any Paying Agent, at the last address of record for each such Holder).
SECTION 3.4 Existence. Except as otherwise permitted by the provisions of
Section 3.10, the Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Issuer hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in which case the
Issuer will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Estate.
SECTION 3.5 Protection of Trust Estate. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Issuer Secured
Parties to be prior to all other liens in respect of the Trust Estate, and the
Issuer shall take all actions necessary to obtain and maintain, in favor of the
Indenture Collateral Agent, for the benefit of the Issuer Secured Parties, a
first lien on and a first priority, perfected security interest in the Trust
Estate. The Issuer will from time to time prepare (or shall cause to be
prepared), execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Indenture Collateral Agent for the
benefit of the Issuer Secured Parties created by this Indenture or carry
out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Estate and the rights of
the Indenture Collateral Agent in such Trust Estate against the claims of
all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the Trust
Estate when due.
The Issuer hereby designates the Indenture Collateral Agent its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Collateral Agent pursuant to this
Section.
SECTION 3.6 Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Trustee, the Indenture Collateral Agent and the
Insurer an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording and filing of
this Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the first priority lien and security interest in favor of the
Indenture Collateral Agent, for the benefit of the Issuer Secured Parties,
created by this Indenture and reciting the details of such action, or stating
that, in the opinion of such counsel, no such action is necessary to make such
lien and security interest effective.
(b) Within 120 days after the beginning of each calendar year, beginning
with the first calendar year beginning more than three months after the Closing
Date, the Issuer shall furnish to the Trustee, Indenture Collateral Agent and
the Insurer an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as are necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until January 30 in
the following calendar year.
SECTION 3.7 Performance of Obligations; Servicing of Receivables. (a) The
Issuer will not take any action and will use its best efforts not to permit any
action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the Basic Documents or such other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the Insurer
(so long as no Insurer Default shall have occurred and be continuing) to assist
it in performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Trustee and the Insurer in an Officer's
Certificate of the Issuer shall be deemed to be action taken by the Issuer.
Initially, the Issuer has contracted with the Servicer to assist the Issuer in
performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to preparing (or causing to be prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements required to be
filed by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Trustee, the Insurer or the Holders of at
least a majority of the Outstanding Amount of the Notes.
(d) If a responsible officer of the Owner Trustee shall have actual
knowledge of the occurrence of a Servicer Default under the Sale and Servicing
Agreement, the Issuer shall promptly notify the Trustee, the Insurer and the
Rating Agencies thereof in accordance with Section 11.4, and shall specify in
such notice the action, if any, the Issuer is taking in respect of such default.
If a Servicer Default shall arise from the failure of the Servicer to perform
any of its duties or obligations under the Sale and Servicing Agreement with
respect to the Receivables, the Issuer shall take all reasonable steps available
to it to remedy such failure.
(e) If an Insurer Default shall have occurred and be continuing and if the
Issuer has given notice of termination to the Servicer of the Servicer's rights
and powers pursuant to Section 8.1 of the Sale and Servicing Agreement, as
promptly as possible thereafter, the Issuer shall appoint a successor servicer
in accordance with Section 8.2 of the Sale and Servicing Agreement.
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Sale and Servicing Agreement, the Issuer shall promptly notify the Trustee.
As soon as a Successor Servicer (other than the Trustee) is appointed, the
Issuer shall notify the Trustee of such appointment, specifying in such notice
the name and address of such Successor Servicer.
(g) The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Seller of its duties under the Basic Documents
(x) without the prior consent of the Insurer (unless an Insurer Default shall
have occurred and be controlling) or (y) if the effect thereof would adversely
affect the Holders of the Notes.
SECTION 3.8 Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Basic
Documents, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the
Trust Estate, unless directed to do so by the Controlling Party;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code or
applicable state law) or assert any claim against any present or
former Noteholder by reason of the payment of the taxes levied or
assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien in favor of the Indenture
Collateral Agent created by this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect
to the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture)
to be created on or extend to or otherwise arise upon or burden the
Trust Estate or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens and other
liens that arise by operation of law, in each case on a Financed
Vehicle and arising solely as a result of an action or omission of the
related Obligor), (C) permit the lien of this Indenture not to
constitute a valid first priority (other than with respect to any such
tax, mechanics' or other lien) security interest in the Trust Estate
or (D) amend, modify or fail to comply with the provisions of the
Basic Documents without the prior written consent of the Controlling
Party.
SECTION 3.9 Annual Statement as to Compliance. The Issuer will deliver to
the Trustee and the Insurer, within 120 days after the end of each fiscal year
of the Issuer (commencing with the fiscal year ended December 31, 1997), and
otherwise in compliance with the requirements of TIA Section 314(a)(4) an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that
(i) a review of the activities of the Issuer during such year and
of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10 Issuer May Consolidate, Etc. Only on Certain Terms. (a) The
Issuer shall not consolidate or merge with or into any other Person, unless
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any state and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee and the
Insurer (so long as no Insurer Default shall have occurred and be
continuing), the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel and
shall have delivered copies thereof to the Trustee and the Insurer (so
long as no Insurer Default shall have occurred and be continuing) to
the effect that such transaction will not have any material adverse
tax consequence to the Trust, the Insurer, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such consolidation or merger at least 20 Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Insurer of such consolidation or merger and the Issuer
or the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (a) greater than zero and (b) not
less than the net worth of the Issuer immediately prior to giving
effect to such consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all of its
properties or assets, including those included in the Trust Estate, to any
Person, unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a United States citizen or a
Person organized and existing under the laws of the United States of
America or any state, (B) expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, and the Insurer (so long as no Insurer
Default shall have occurred and be continuing), the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture and each of the Basic Documents on the part of the Issuer to
be performed or observed, all as provided herein, (C) expressly agree
by means of such supplemental indenture that all right, title and
interest so conveyed or transferred shall be subject and subordinate
to the rights of Holders of the Notes, (D) unless otherwise provided
in such supplemental indenture, expressly agree to indemnify, defend
and hold harmless the Issuer against and from any loss, liability or
expense arising under or related to this Indenture and the Notes and
(E) expressly agree by means of such supplemental indenture that such
Person (or if a group of persons, then one specified Person) shall
prepare (or cause to be prepared) and make all filings with the
Commission (and any other appropriate Person) required by the Exchange
Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee and the Insurer (so
long as no Insurer Default shall have occurred and be continuing)) to
the effect that such transaction will not have any material adverse
tax consequence to the Trust, the Insurer, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such conveyance or transfer at least 20 Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Insurer of such consolidation or merger and the Issuer
or the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (a) greater than zero and (b) not
less than the net worth of the Issuer immediately prior to giving
effect to such consolidation or merger.
SECTION 3.11 Successor or Transferee. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.10 (b), NationsFinancial Auto Owner Trust 1996-1
will be released from every covenant and agreement of this Indenture to be
observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Trustee stating that
NationsFinancial Auto Owner Trust 1996-1 is to be so released.
SECTION 3.12 No Other Business. The Issuer shall not engage in any business
other than financing, purchasing, owning, selling and managing the Receivables
in the manner contemplated by this Indenture and the Basic Documents and
activities incidental thereto.
SECTION 3.13 No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) obligations owing from time to time
to the Insurer under the Insurance Agreement and (iii) any other Indebtedness
permitted by or arising pursuant to the Basic Documents or the Issuer's
compliance therewith. The proceeds of the Notes and the Certificates shall be
used exclusively to fund the Issuer's purchase of the Receivables and the other
assets specified in the Sale and Servicing Agreement to fund the Spread Account
and to pay the Issuer's organizational, transactional and start-up expenses.
SECTION 3.14 Servicer's Obligations. The Issuer shall cause the Servicer to
comply with Sections 4.9, 4.10, 4.11 and 5.8 of the Sale and Servicing
Agreement.
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Sale and Servicing Agreement or this Indenture, the Issuer
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16 Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17 Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Basic Document.
SECTION 3.18 Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Trustee and the Certificateholders as
permitted by, and to the extent funds are available for such purpose under, the
Sale and Servicing Agreement or Trust Agreement. The Issuer will not, directly
or indirectly, make payments to or distributions from the Collection Account
except in accordance with this Indenture and the Basic Documents.
SECTION 3.19 Notice of Events of Default. Upon a responsible officer of the
Owner Trustee having actual knowledge thereof, the Issuer agrees to give the
Trustee, the Insurer and the Rating Agencies prompt written notice of each Event
of Default hereunder and each default on the part of the Servicer or the Seller
of its obligations under the Sale and Servicing Agreement.
SECTION 3.20 Further Instruments and Acts. Upon request of the Trustee or
the Insurer, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 3.21 Amendments of Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 11.1 of the
Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate
the requirements thereunder that the Trustee or the Holders of the Notes consent
to amendments thereto as provided therein.
SECTION 3.22 Income Tax Characterization. For purposes of federal income,
state and local income and franchise and any other income taxes, the Issuer will
treat the Notes as indebtedness of the Issuer.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights, obligations and
immunities of the Trustee hereunder (including the rights of the Trustee under
Section 6.7 and the obligations of the Trustee under Section 4.2) and (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them, and the Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.5 and (ii) Notes for whose payment money
has theretofore been deposited in trust or segregated and held in trust by
the Issuer and thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 3.3) have been delivered to the Trustee for
cancellation and the Note Policy has expired and been returned to the
Insurer for cancellation; or
(2) all Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable,
(ii) will become due and payable at their respective Final
Scheduled Distribution Dates within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Issuer, and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Indenture Collateral Agent cash or direct obligations of or
obligations guaranteed by the United States of America (which will
mature prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Trustee
for cancellation when due to the Final Scheduled Distribution Date or
Redemption Date (if Notes shall have been called for redemption
pursuant to Section 10.1(a)), as the case may be;
(B) the Issuer has paid or caused to be paid all Insurer Issuer
Secured Obligations and all Trustee Issuer Secured Obligations; and
(C) the Issuer has delivered to the Trustee, the Indenture
Collateral Agent and the Insurer an Officer's Certificate, an Opinion
of Counsel and (if required by the TIA, the Trustee, the Indenture
Collateral Agent or the Insurer (so long as an Insurer Default shall
not have occurred and be continuing)) an Independent Certificate from
a firm of certified public accountants, each meeting the applicable
requirements of Section 11.1(a) and each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
SECTION 4.2 Application of Trust Money. All moneys deposited with the
Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
SECTION 4.3 Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Trustee under the provisions
of this Indenture with respect to such Notes shall, upon demand of the Issuer,
be paid to the Trustee to be held and applied according to Section 3.3 and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.
ARTICLE V
Remedies
SECTION 5.1 Events of Default. "Event of Default", wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five days after receipt of notice thereof (solely for
purposes of this clause, a payment on the Notes funded by the Insurer
or the Collateral Agent pursuant to the Spread Account Agreement shall
be deemed to be a payment made by the Issuer); or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable on the related Final Scheduled Distribution Date (solely for
purposes of this clause, a payment on the Notes funded by the Insurer
or the Collateral Agent pursuant to the Spread Account Agreement,
shall be deemed to be a payment made by the Issuer); or
(iii) so long as an Insurer Default shall not have occurred and
be continuing, an Insurance Agreement Indenture Cross Default shall
have occurred; provided, however, that the occurrence of an Insurance
Agreement Indenture Cross Default may not form the basis of an Event
of Default unless the Insurer shall, upon prior written notice to the
Rating Agencies, have delivered to the Issuer and the Trustee and not
rescinded a written notice specifying that such Insurance Agreement
Indenture Cross Default constitutes an Event of Default under the
Indenture; or
(iv) so long as an Insurer Default shall have occurred and be
continuing, default in the observance or performance of any covenant
or agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a
period of 30 days (or for such longer period, not in excess of 90
days, as may be reasonably necessary to remedy such default; provided
that such default is capable of remedy within 90 days or less and the
Servicer on behalf of the Owner Trustee delivers an Officer's
Certificate to the Trustee to the effect that the Issuer has
commenced, or will promptly commence and diligently pursue, all
reasonable efforts to remedy such default) after there shall have been
given, by registered or certified mail, to the Issuer by the Trustee
or to the Issuer and the Trustee by the Holders of at least 25% of the
Outstanding Amount of the Notes, a written notice specifying such
default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(v) so long as an Insurer Default shall have occurred and be
continuing, the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or ordering
the winding-up or liquidation of the Issuer's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(vi) so long as an Insurer Default shall have occurred and be
continuing, the commencement by the Issuer of a voluntary case under
any applicable Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer
to the entry of an order for relief in an involuntary case under any
such law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Trust Estate, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Trustee and the Insurer, within five days
after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of time
would become an Event of Default under clause (iii), its status and what
action the Issuer is taking or proposes to take with respect thereto.
SECTION 5.2 Rights Upon Event of Default. (a) If an Insurer Default shall
not have occurred and be continuing and an Event of Default shall have occurred
and be continuing, the Notes shall become immediately due and payable at par,
together with accrued interest thereon. If an Event of Default shall have
occurred and be continuing, the Controlling Party may exercise any of the
remedies specified in Section 5.4(a). In the event of any acceleration of any
Notes by operation of this Section 5.2, the Trustee shall continue to be
entitled to make claims under the Note Policy pursuant to Section 5.18 hereof
for Guaranteed Note Distributions on the Notes. Payments under the Note Policy
following acceleration of any Notes shall be applied by the Trustee:
FIRST: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest;
and
SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal.
(b) In the event any Notes are accelerated due to an Event of Default, the
Insurer shall have the right (in addition to its obligation to pay Guaranteed
Note Distributions on the Notes in accordance with the Note Policy), but not the
obligation, to make payments under the Note Policy or otherwise of interest and
principal due on such Notes, in whole or in part, on any date or dates following
such acceleration as the Insurer, in its sole discretion, shall elect.
(c) If an Insurer Default shall have occurred and be continuing and an
Event of Default shall have occurred and be continuing, the Trustee in its
discretion may, or if so requested in writing by Holders holding Notes
representing not less than a majority of the Outstanding Amount of the Notes,
declare by written notice to the Issuer that the Notes become, whereupon they
shall become, immediately due and payable at par, together with accrued interest
thereon.
(d) If an Insurer Default shall have occurred and be continuing, then at
any time after such declaration of acceleration of maturity has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V provided, the Holders of Notes
representing a majority of the Outstanding Amount of the Notes, by written
notice to the Issuer and the Trustee, may rescind and annul such declaration and
its consequences if:
(i) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay
(A) all payments of principal of and interest on all Notes
and all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee and its agents and counsel.
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee. (a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, the Issuer will, upon demand of the Trustee, pay to it,
for the benefit of the Holders of the Notes, the whole amount then due and
payable on such Notes for principal and interest, with interest upon the overdue
principal, and, to the extent payment at such rate of interest shall be legally
enforceable, upon overdue installments of interest, at the applicable Interest
Rate and in addition thereto such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.
(b) Each Issuer Secured Party hereby irrevocably and unconditionally
appoints the Controlling Party as the true and lawful attorney-in-fact of such
Issuer Secured Party for so long as such Issuer Secured Party is not the
Controlling Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument and to
do in the name of the Controlling Party as well as in the name, place and stead
of such Issuer Secured Party such acts, things and deeds for or on behalf of and
in the name of such Issuer Secured Party under this Indenture (including
specifically under Section 5.4) and under the Basic Documents which such Issuer
Secured Party could or might do or which may be necessary, desirable or
convenient in such Controlling Party's sole discretion to effect the purposes
contemplated hereunder and under the Related Documents and, without limitation,
following the occurrence of an Event of Default, exercise full right, power and
authority to take, or defer from taking, any and all acts with respect to the
administration, maintenance or disposition of the Trust Estate.
(c) If an Event of Default occurs and is continuing, the Trustee may in its
discretion but with the consent of the Controlling Party and shall, at the
direction of the Controlling Party (except as provided in Section 5.3(d) below),
proceed to protect and enforce its rights and the rights of the Noteholders by
such appropriate Proceedings as the Trustee or the Controlling Party shall deem
most effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, proceedings under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Trustee, irrespective of whether the principal of any
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee,
and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a
result of negligence, bad faith or willful misconduct) and of the
Noteholders allowed in such proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or person performing similar functions in any such
proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official
in any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(f) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
(g) All rights of action and of asserting claims under this Indenture, the
Spread Account Agreement or under any of the Notes, may be enforced by the
Trustee without the possession of any of the Notes or the production thereof in
any trial or other proceedings relative thereto, and any such action or
proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture or the Spread
Account Agreement), the Trustee shall be held to represent all the Holders of
the Notes, and it shall not be necessary to make any Noteholder a party to any
such proceedings.
SECTION 5.4 Remedies. (a) If an Event of Default shall have occurred and be
continuing, the Controlling Party may do one or more of the following (subject
to Section 5.5):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights
and remedies of the Trustee and the Holders of the Notes; and
(iv) direct the Indenture Collateral Agent to sell the Trust
Estate or any portion thereof or rights or interest therein, at one or
more public or private sales called and conducted in any manner
permitted by law; provided, however, that
(A) if the Insurer is the Controlling Party, the Insurer may
not sell or otherwise liquidate the Trust Estate following an
Insurance Agreement Indenture Cross Default unless
(I) such Insurance Agreement Indenture Cross Default
arises from a claim being made on the Note Policy or from
the insolvency of the Trust or the Seller, or
(II) the proceeds of such sale or liquidation
distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for
principal and interest; or
(B) if the Trustee is the Controlling Party, the Trustee may
not sell or otherwise liquidate the Trust Estate following an
Event of Default unless
(I) such Event of Default is of the type described in
Section 5.01(i) or (ii), or
(II) either
(x) the Holders of 100% of the Outstanding Amount of
the Notes consent thereto,
(y) the proceeds of such sale or liquidation
distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for
principal and interest, or
(z) the Trustee determines that the Trust Estate will
not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as they would have
become due if the Notes had not been declared due and
payable, and the Trustee provides prior written notice to
the Rating Agencies and obtains the consent of Holders of
66-2/3% of the Outstanding Amount of the Notes.
In determining such sufficiency or insufficiency with respect to clause (y)
and (z), the Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
SECTION 5.5 Optional Preservation of the Receivables. If the Trustee is the
Controlling Party and if the Notes have been declared to be due and payable
under Section 5.2 following an Event of Default and such declaration and its
consequences have not been rescinded and annulled, the Trustee may, but need
not, elect to maintain possession of the Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest on the Notes, and the Trustee shall
take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain possession of
the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
SECTION 5.6 Priorities.
(a) Following (1) the acceleration of the Notes pursuant to Section 5.2 or
(2) if an Insurer Default shall have occurred and be continuing, the occurrence
of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iii), 5.1(v) or
5.1(vi) of the Indenture or (3) the receipt of Insolvency Proceeds pursuant to
Section 9.1(b) of the Sale and Servicing Agreement, the Distribution Amount,
including any money or property collected pursuant to Section 5.4 of the
Indenture and any Insolvency Proceeds, shall be applied by the Trustee on the
related Distribution Date in the following order of priority:
FIRST: amounts due and owing and required to be distributed to the
Servicer, the Owner Trustee, the Trustee, the Collateral Agent and the
Indenture Collateral Agent, respectively, pursuant to priorities (i) and
(ii) of Section 5.6(b) of the Sale and Servicing Agreement and not
previously distributed, in the order of such priorities and without
preference or priority of any kind within such priorities;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for interest;
THIRD: to Noteholders for amounts due and unpaid on the Notes for
principal and premium, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal;
FOURTH: amounts due and unpaid on the Certificates for interest,
principal and premium, to the Owner Trustee for distribution to
Certificateholders in accordance with Section 5.2(d) of the Trust
Agreement;
FIFTH: amounts due and owing and required to be distributed to the
Insurer pursuant to priority (vii) of Section 5.6(b) of the Sale and
Servicing Agreement and not previously distributed; and
SIXTH: to the Collateral Agent to be applied as provided in the Spread
Account Agreement.
(b) The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date
the Issuer shall mail to each Noteholder and the Trustee a notice that states
the record date, the payment date and the amount to be paid.
SECTION 5.7 Limitation of Suits. No Holder of any Note shall have any right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Trustee to institute such proceeding
in respect of such Event of Default in its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to it against the costs, expenses and liabilities
to be incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute such proceedings;
(v) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority of
the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more groups of Holders of Notes, each representing
less than a majority of the Outstanding Amount of the Notes, the Trustee in its
sole discretion may determine what action, if any, shall be taken,
notwithstanding any other provisions of this Indenture.
SECTION 5.8 Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies. If the Controlling Party or
any Noteholder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Trustee or to such
Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not a Waiver. No delay or omission of the
Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.12 Control by Noteholders. If the Trustee is the Controlling
Party, the Holders of a majority of the Outstanding Amount of the Notes shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee with respect to the Notes or exercising
any trust or power conferred on the Trustee; provided that
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.4, any direction to the
Trustee to sell or liquidate the Trust Estate shall be by the Holders of
Notes representing not less than 100% of the Outstanding Amount of the
Notes;
(iii) if the conditions set forth in Section 5.5 have been satisfied
and the Trustee elects to retain the Trust Estate pursuant to such Section,
then any direction to the trustee by Holders of Notes representing less
than 100% of the Outstanding Amount of the Notes to sell or liquidate the
Trust Estate shall be of no force and effect; and
(iv) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.1, the Trustee need not take
any action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
Section 5.13 Waiver of Past Defaults. If an Insurer Default shall occurred
and be continuing, prior to the declaration of the acceleration of the maturity
of the Notes as provided in Section 5.4, the Holders of Notes of not less than a
majority of the Outstanding Amount of the Notes may waive any past Default or
Event of Default and its consequences except a Default (a) in payment of
principal of or interest on any of the Notes or (b) in respect of a covenant or
provision hereof which cannot be modified or amended without the consent of the
Holder of each Note. In the case of any such waiver, the Issuer, the Trustee and
the Holders of the Notes shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.14 Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to (a)
any suit instituted by the Trustee, (b) any suit instituted by any Noteholder,
or group of Noteholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.15 Waiver of Stay or Extension Laws. The Issuer covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 5.16 Action on Notes. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Trustee or the Noteholders shall be impaired by the recovery of any judgment
by the Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of the assets of the
Issuer.
SECTION 5.17 Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Trustee to do so and at the Servicer's
expense, the Issuer agrees to take all such lawful action as the Trustee may
request to compel or secure the performance and observance by the Seller and the
Servicer, as applicable, of each of their obligations to the Issuer under or in
connection with the Sale and Servicing Agreement in accordance with the terms
thereof, and to exercise any and all rights, remedies, powers and privileges
lawfully available to the Issuer under or in connection with the Sale and
Servicing Agreement to the extent and in the manner directed by the Trustee,
including the transmission of notices of default on the part of the Seller or
the Servicer thereunder and the institution of legal or administrative actions
or proceedings to compel or secure performance by the Seller or the Servicer of
each of their obligations under the Sale and Servicing Agreement.
(b) If the Trustee is a Controlling Party and if an Event of Default has
occurred and is continuing, the Trustee may, and, at the direction (which
direction shall be in writing or by telephone (confirmed in writing promptly
thereafter)) of the Holders of 66-2/3% of the Outstanding Amount of the Notes
shall, exercise all rights, remedies, powers, privileges and claims of the
Issuer against the Seller or the Servicer under or in connection with the Sale
and Servicing Agreement, including the right or power to take any action to
compel or secure performance or observance by the Seller or the Servicer of each
of their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
SECTION 5.18 Claims Under Note Policy.
(a) In the event that the Trustee has delivered a Deficiency Notice with
respect to any Determination Date pursuant to Section 5.4 of the Sale and
Servicing Agreement, the Trustee shall on the related Draw Date determine the
Note Policy Claim Amount (as defined below) for the related Payment Date. If the
Note Policy Claim Amount for such Payment Date is greater than zero, the Trustee
shall furnish to the Insurer no later than 12:00 noon New York City time on the
related Draw Date a completed Notice of Claim in the amount of the Note Policy
Claim Amount. Amounts paid by the Insurer pursuant to a claim submitted under
this Section 5.18(a) shall be deposited by the Trustee into the Note
Distribution Account for payment to Noteholders on the related Payment Date. The
"Note Policy Claim Amount" for any Payment Date other than the Class A-1 Final
Scheduled Distribution Date shall equal the lesser of (i) the sum of the
Noteholders' Interest Distributable Amount and the Noteholders' Principal
Distributable Amount for such Payment Date, and (ii) the excess, if any, of the
amount required to be distributed pursuant to clauses (i) - (iv) of Section
5.6(b)of the Sale and Servicing Agreement (without giving effect to the
limitation of the Distribution Amount specified in each such clause) over the
Distribution Amount with respect to such Payment Date. The "Note Policy Claim
Amount" with respect to the Class A-1 Final Scheduled Distribution Date shall
equal the excess, if any, of (i) the amount required to be distributed pursuant
to clauses (i) - (ii) of Section 5.6(c) of the Sale and Servicing Agreement
(without giving effect to the limitation of the Distribution Amount specified in
each such clause) over (ii) the Class A-1 Distribution Amount with respect to
such Payment Date.
(b) Any notice delivered by the Trustee to the Insurer pursuant to
subsection 5.18(a) shall specify the Note Policy Claim Amount claimed under the
Note Policy and shall constitute a "Notice of Claim" under the Note Policy. In
accordance with the provisions of the Note Policy, the Insurer is required to
pay to the Trustee the Note Policy Claim Amount properly claimed thereunder by
12:00 noon, New York City time, on the later of (i) the third Business Day
following receipt on a Business Day of the Notice of Claim, and (ii) the
applicable Payment Date. Any payment made by the Insurer under the Note Policy
shall be applied solely to the payment of the Notes, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each Noteholder
any Note Policy Claim Amount from the Insurer and (ii) deposit the same in the
Note Distribution Account for distribution to Noteholders as provided in Section
3.1 or Section 5.2 of this Indenture. Any and all Note Policy Claim Amounts
disbursed by the Trustee from claims made under the Note Policy shall not be
considered payment by the Trust or from the Spread Account with respect to such
Notes, and shall not discharge the obligations of the Trust with respect
thereto. The Insurer shall, to the extent it makes any payment with respect to
the Notes, become subrogated to the rights of the recipients of such payments to
the extent of such payments. Subject to and conditioned upon any payment with
respect to the Notes by or on behalf of the Insurer, the Trustee shall assign to
the Insurer all rights to the payment of interest or principal with respect
to the Notes which are then due for payment to the extent of all payments made
by the Insurer, and the Insurer may exercise any option, vote, right, power or
the like with respect to the Notes to the extent that it has made payment
pursuant to the Note Policy. To evidence such subrogation, the Note Registrar
shall note the Insurer's rights as subrogee upon the register of Noteholders
upon receipt from the Insurer of proof of payment by the Insurer of any
Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. The foregoing subrogation shall in all cases be subject to
the rights of the Noteholders to receive all Guaranteed Note Distributions in
respect of the Notes.
(d) The Trustee shall keep a complete and accurate record of
all funds deposited by the Insurer into the Collection Account and the
allocation of such funds to payment of interest on and principal paid in respect
of any Note. The Insurer shall have the right to inspect such records at
reasonable times upon one Business Day's prior notice to the Trustee.
(e) The Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Related Document,
the Noteholders are not entitled to institute proceedings directly against the
Insurer.
SECTION 5.19 Preference Claims. (a) In the event that the Trustee has
received a certified copy of an order of the appropriate court that any
Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount paid on a Note has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Trustee shall so notify
the Insurer, shall comply with the provisions of the Note Policy to obtain
payment by the Insurer of such avoided payment, and shall, at the time it
provides notice to the Insurer, notify Holders of the Notes by mail that, in the
event that any Noteholder's payment is so recoverable, such Noteholder will be
entitled to payment pursuant to the terms of the Note Policy. The Trustee shall
furnish to the Insurer its records evidencing the payments of principal of and
interest on Notes, if any, which have been made by the Trustee and subsequently
recovered from Noteholders, and the dates on which such payments were made.
Pursuant to the terms of the Note Policy, the Insurer will make such payment on
behalf of the Noteholder to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order (as defined in the Note Policy) and not
to the Trustee or any Noteholder directly (unless a Noteholder has previously
paid such payment to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy, in which case the Insurer will make such payment to the Trustee
for distribution to such Noteholder upon proof of such payment reasonably
satisfactory to the Insurer).
(b) The Trustee shall promptly notify the Insurer of any proceeding or the
institution of any action (of which the Trustee has actual knowledge) seeking
the avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (a "Preference Claim")
of any distribution made with respect to the Notes. Each Holder, by its purchase
of Notes, and the Trustee hereby agree that so long as an Insurer Default shall
not have occurred and be continuing, the Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim including, without limitation, (i) the
direction of any appeal of any order relating to any Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal at the expense of the Insurer, but subject to reimbursement as provided
in the Insurance Agreement. In addition, and without limitation of the
foregoing, as set forth in Section 5.18(c), the Insurer shall be subrogated to,
and each Noteholder and the Trustee hereby delegate and assign, to the fullest
extent permitted by law, the rights of the Trustee and each Noteholder in the
conduct of any proceeding with respect to a Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action with
respect to any court order issued in connection with any such Preference Claim.
ARTICLE VI
The Trustee and the Indenture Collateral Agent
SECTION 6.1 Duties of Trustee. (a) If an Event of Default has occurred and
is continuing, the Trustee shall exercise the rights and powers vested in it by
this Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; however, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture and, if applicable, the Spread Account
Agreement and the Trustee's other Basic Documents.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.12.
(d) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuer.
(e) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law or the terms of this Indenture or the
Sale and Servicing Agreement.
(f) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.
(h) The Trustee shall, upon one Business Day's prior notice to the Trustee,
permit any representative of the Insurer, during the Trustee's normal business
hours, to examine all books of account, records, reports and other papers of the
Trustee relating to the Notes, to make copies and extracts therefrom and to
discuss the Trustee's affairs and actions, as such affairs and actions relate to
the Trustee's duties with respect to the Notes, with the Trustee's officers and
employees responsible for carrying out the Trustee's duties with respect to the
Notes.
(i) The Trustee shall, and hereby agrees that it will, perform all of the
obligations and duties required of it under the Sale and Servicing Agreement.
(j) The Trustee shall, and hereby agrees that it will, hold the Note Policy
in trust, and will hold any proceeds of any claim on the Note Policy in trust
solely for the use and benefit of the Noteholders.
(k) Without limiting the generality of this Section 6.1, the Trustee shall
have no duty (i) to see to any recording, filing or depositing of this Indenture
or any agreement referred to herein or any financing statement evidencing a
security interest in the Financed Vehicles, or to see to the maintenance of any
such recording or filing or depositing or to any recording, refiling or
redepositing of any thereof, (ii) to see to any insurance of the Financed
Vehicles or Obligors or to effect or maintain any such insurance, (iii) to see
to the payment or discharge of any tax, assessment or other governmental charge
or any Lien or encumbrance of any kind owing with respect to, assessed or levied
against any part of the Trust, (iv) to confirm or verify the contents of any
reports or certificates delivered to the Trustee pursuant to this Indenture or
the Sale and Servicing Agreement believed by the Trustee to be genuine and to
have been signed or presented by the proper party or parties, or (v) to inspect
the Financed Vehicles at any time or ascertain or inquire as to the performance
of observance of any of the Issuer's, the Seller's or the Servicer's
representations, warranties or covenants or the Servicer's duties and
obligations as Servicer and as custodian of the Receivable Files under the Sale
and Servicing Agreement.
SECTION 6.2 Rights of Trustee. (a) The Trustee may rely on any document
believed by it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of,
SunStar Acceptance Corporation, or any other such agent, attorney, custodian or
nominee appointed with due care by it hereunder.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to institute, conduct or
defend any litigation under this Indenture or in relation to this Indenture, at
the request, order or direction of any of the Holders of Notes or the
Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders of Notes or the Controlling Party shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; provided, however, that the Trustee
shall, upon the occurrence of an Event of Default (that has not been cured),
exercise the rights and powers vested in it by this Indenture with reasonable
care and skill.
(g) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Insurer (so long as no
Insurer Default shall have occurred and be continuing) or (if an Insurer Default
shall have occurred and be continuing) by the Holders of Notes evidencing not
less than 25% of the Outstanding Amount thereof; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture or the Sale and Servicing
Agreement, the Trustee may require reasonable indemnity against such cost,
expense or liability as a condition to so proceeding; the reasonable expense of
every such examination shall be paid by the Person making such request, or, if
paid by the Trustee, shall be reimbursed by the Person making such request upon
demand.
SECTION 6.3 Individual Rights of Trustee. The Trustee in its individual or
any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Issuer or its Affiliates with the same rights it would have if it
were not Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 6.11 and 6.12.
SECTION 6.4 Trustee's Disclaimer. The Trustee shall not be responsible for
and makes no representation as to the validity or adequacy of this Indenture,
the Trustee's Estate or the Notes, it shall not be accountable for the Issuer's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Issuer in the Indenture or in any document issued in connection
with the sale of the Notes or in the Notes other than the Trustee's certificate
of authentication.
SECTION 6.5 Notice of Defaults. If a Default occurs and is continuing and
if it is either known by, or written notice of the existence thereof has been
delivered to, a Responsible Officer of the Trustee, the Trustee shall mail to
each Noteholder notice of the Default within 90 days after such knowledge or
notice occurs. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Trustee may withhold the notice if and so long as
a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.6 Reports by Trustee to Holders. The Trustee shall deliver to
each Noteholder such information as may be reasonably required to enable such
Holder to prepare its Federal and state income tax returns.
SECTION 6.7 Compensation and Indemnity. (a) Pursuant to Section 5.6(b) of
the Sale and Servicing Agreement, the Issuer shall, or shall cause the Servicer
to, pay to the Trustee from time to time compensation for its services in
accordance with a separate agreement between the Servicer and the Trustee. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall or shall cause the Servicer to
reimburse the Trustee for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Issuer shall or shall cause the Servicer to indemnify the Trustee,
the Indenture Collateral Agent and their respective officers, directors,
employees and agents against any and all loss, liability or expense (including
attorneys' fees and expenses) incurred by it in connection with the acceptance
or the administration of this trust and the performance of its duties hereunder.
The Trustee shall notify the Issuer and the Servicer promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Issuer and
the Servicer shall not relieve the Issuer of its obligations hereunder or the
Servicer of its obligations under Article X of the Sale and Servicing Agreement,
unless and to the extent that it can demonstrate prejudice therefrom. The Issuer
shall or shall cause the Servicer to defend the claim, the Trustee may have
separate counsel chosen by the Issuer (subject to the approval of the Trustee
which approval shall not be unreasonably withheld) and the Issuer shall or shall
cause the Servicer to pay the fees and expenses of such counsel. Neither the
Issuer nor the Servicer need reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith.
(b) The Issuer's payment obligations to the Trustee pursuant to this
Section shall survive the discharge of this Indenture subject to a satisfaction
of the Rating Agency Condition. When the Trustee incurs expenses after the
occurrence of a Default specified in Section 5.1(iv) or (v) with respect to the
Issuer, the expenses are intended to constitute expenses of administration under
Title 11 of the United States Code or any other applicable Federal or state
bankruptcy, insolvency or similar law. Notwithstanding anything else set forth
in this Indenture or the Basic Documents, the Trustee agrees that the
obligations of the Issuer (but not the Servicer) to the Trustee hereunder and
under the Basic Documents shall be recourse to the Trust Estate only and
specifically shall not be recourse to the assets of the General Partner of the
Issuer or any Certificateholder. In addition, the Trustee agrees that its
recourse to the Issuer, the Trust Estate, the Seller and amounts held pursuant
of the Spread Account Agreement shall be limited to the right to receive the
distributions referred to in Section 5.6(b) of the Sale and Servicing Agreement.
SECTION 6.8 Replacement of Trustee. The Trustee may resign at any time by
so notifying the Issuer and the Insurer. The Issuer may and, at the request of
the Insurer (unless an Insurer Default shall have occurred and be continuing)
shall, remove the Trustee, if:
(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, shall have entered a decree or order granting relief or
appointing a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or similar official) for the Trustee or for
any substantial part of the Trustee's property, or ordering the
winding-up or liquidation of the Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws, as
now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Trustee and such case is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal or
state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, or consents to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or other similar official) for the Trustee or for any
substantial part of the Trustee's property, or makes any assignment
for the benefit of creditors or fails generally to pay its debts as
such debts become due or takes any corporate action in furtherance of
any of the foregoing; or
(v) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee
acceptable to the Insurer (so long as an Insurer Default shall not have occurred
and be continuing). If the Issuer fails to appoint such a successor Trustee, the
Insurer may appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuer. Thereupon the resignation or removal
of the retiring Trustee the Insurer (provided that no Insurer Default shall have
occurred and be continuing) shall become effective, and the successor Trustee
shall have all the rights, powers and duties of the Trustee under this Indenture
subject to satisfaction of the Rating Agency Condition. The successor Trustee
shall mail a notice of its succession to Noteholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of a majority in Outstanding Amount of the Notes may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor Trustee pursuant to
Section 6.8 and payment of all fees and expenses owed to the outgoing Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Issuer's and the Servicer's obligations under Section 6.7 shall continue for
the benefit of the retiring Trustee.
SECTION 6.9 Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee. The Trustee shall provide the Rating Agencies prior
written notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
SECTION 6.10 Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Trust may at the time be located, the Trustee with the consent of the
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) 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 Noteholders,
such title to the Trust, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Trustee may consider necessary or desirable. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.8 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 the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder, including acts or
omissions of predecessor or successor trustees; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the 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 VI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Indenture on its behalf and in its name. If any separate trustee or co-trustee
shall die, dissolve, become insolvent, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
invest in and be exercised by the Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
SECTION 6.11 Eligibility; Disqualification. The Trustee shall at all times
satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition and it shall have a long term debt rating
of BBB- or better by the Rating Agencies. The Trustee shall provide copies of
such reports to the Insurer upon request. The Trustee shall comply with TIA ss.
310 (b), including the optional provision permitted by the second sentence of
TIA ss. 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA ss. 310(b)(1) are met.
SECTION 6.12 Preferential Collection of Claims Against Issuer. The Trustee
shall comply with TIA ss. 311(a), excluding any creditor relationship listed in
TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to
TIA ss. 311(a) to the extent indicated.
SECTION 6.13 Appointment and Powers. Subject to the terms and conditions
hereof, each of the Issuer Secured Parties hereby appoints
__________________________ as the Indenture Collateral Agent with respect to the
Indenture Collateral, and __________________________ hereby accepts such
appointment and agrees to act as Indenture Collateral Agent with respect to the
Indenture Collateral for the Issuer Secured Parties, to maintain custody and
possession of such Indenture Collateral (except as otherwise provided hereunder)
and to perform the other duties of the Indenture Collateral Agent in accordance
with the provisions of this Indenture. Each Issuer Secured Party hereby
authorizes the Indenture Collateral Agent to take such action on its behalf, and
to exercise such rights, remedies, powers and privileges hereunder, as the
Controlling Party may direct and as are specifically authorized to be exercised
by the Indenture Collateral Agent by the terms hereof, together with such
actions, rights, remedies, powers and privileges as are reasonably incidental
thereto. The Indenture Collateral Agent shall act upon and in compliance with
the written instructions of the Controlling Party delivered pursuant to this
Indenture promptly following receipt of such written instructions; provided that
the Indenture Collateral Agent shall not act in accordance with any instructions
(i) which are not authorized by, or in violation of the provisions of, this
Indenture, (ii) which are in violation of any applicable law, rule or regulation
or (iii) for which the Indenture Collateral Agent has not received reasonable
indemnity. Receipt of such instructions shall not be a condition to the exercise
by the Indenture Collateral Agent of its express duties hereunder, except where
this Indenture provides that the Indenture Collateral Agent is permitted to act
only following and in accordance with such instructions.
SECTION 6.14 Performance of Duties. The Indenture Collateral Agent shall
have no duties or responsibilities except those expressly set forth in this
Indenture and the other Basic Documents to which the Indenture Collateral Agent
is a party or as directed by the Controlling Party in accordance with this
Indenture. The Indenture Collateral Agent shall not be required to take any
discretionary actions hereunder except at the written direction and with the
indemnification of the Controlling Party. The Indenture Collateral Agent shall,
and hereby agrees that it will, perform all of the duties and obligations
required of it under the Sale and Servicing Agreement.
SECTION 6.15 Limitation on Liability. Neither the Indenture Collateral
Agent nor any of its directors, officers or employees shall be liable for any
action taken or omitted to be taken by it or them hereunder, or in connection
herewith, except that the Indenture Collateral Agent shall be liable for its
negligence, bad faith or willful misconduct; nor shall the Indenture Collateral
Agent be responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Issuer of this Indenture or any of the Indenture
Collateral (or any part thereof). Notwithstanding any term or provision of this
Indenture, the Indenture Collateral Agent shall incur no liability to the Issuer
or the Issuer Secured Parties for any action taken or omitted by the Indenture
Collateral Agent in connection with the Indenture Collateral, except for the
negligence, bad faith or willful misconduct on the part of the Indenture
Collateral Agent, and, further, shall incur no liability to the Issuer Secured
Parties except for negligence, bad faith or willful misconduct in carrying out
its duties to the Issuer Secured Parties. Subject to Section 6.16, the Indenture
Collateral Agent shall be protected and shall incur no liability to any such
party in relying upon the accuracy, acting in reliance upon the contents, and
assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document reasonably believed by the Indenture Collateral
Agent to be genuine and to have been duly executed by the appropriate signatory,
and (absent actual knowledge to the contrary) the Indenture Collateral Agent
shall not be required to make any independent investigation with respect
thereto. The Indenture Collateral Agent shall at all times be free independently
to establish to its reasonable satisfaction, but shall have no duty to
independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Related Documents. The Indenture Collateral Agent may consult
with counsel, and shall not be liable for any action taken or omitted to be
taken by it hereunder in good faith and in accordance with the written advice of
such counsel. The Indenture Collateral Agent shall not be under any obligation
to exercise any of the remedial rights or powers vested in it by this Indenture
or to follow any direction from the Controlling Party unless it shall have
received reasonable security or indemnity satisfactory to the Indenture
Collateral Agent against the costs, expenses and liabilities which might be
incurred by it.
SECTION 6.16 Reliance Upon Documents. In the absence of negligence, bad
faith or willful misconduct on its part, the Indenture Collateral Agent shall be
entitled to rely on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed or
sent by the proper Person or Persons and shall have no liability in acting, or
omitting to act, where such action or omission to act is in reasonable reliance
upon any statement or opinion contained in any such document or instrument.
SECTION 6.17 Successor Indenture Collateral Agent.
(a) Merger. Any Person into which the Indenture Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as a
whole, or any Person resulting from any such conversion, merger, consolidation,
sale or transfer to which the Indenture Collateral Agent is a party, shall
(provided it is otherwise qualified to serve as the Indenture Collateral Agent
hereunder) be and become a successor Indenture Collateral Agent hereunder and be
vested with all of the title to and interest in the Indenture Collateral and all
of the trusts, powers, discretions, immunities, privileges and other matters as
was its predecessor without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, except to the extent, if any,
that any such action is necessary to perfect, or continue the perfection of, the
security interest of the Issuer Secured Parties in the Indenture Collateral;
provided that any such successor shall also be the successor Trustee under
Section 6.9.
(b) Resignation. The Indenture Collateral Agent and any successor Indenture
Collateral Agent may resign at any time by so notifying the Issuer and the
Insurer; provided that the Indenture Collateral Agent shall not so resign unless
it shall also resign as Trustee hereunder.
(c) Removal. The Indenture Collateral Agent may be removed by the
Controlling Party at any time (and should be removed at any time that the
Trustee has been removed), with or without cause, by an instrument or concurrent
instruments in writing delivered to the Indenture Collateral Agent, the other
Issuer Secured Party and the Issuer. A temporary successor may be removed at any
time to allow a successor Indenture Collateral Agent to be appointed pursuant to
subsection (d) below. Any removal pursuant to the provisions of this subsection
(c) shall take effect only upon the date which is the latest of (i) the
effective date of the appointment of a successor Indenture Collateral Agent and
the acceptance in writing by such successor Indenture Collateral Agent of such
appointment and of its obligation to perform its duties hereunder in accordance
with the provisions hereof, and (ii) receipt by the Controlling Party of an
Opinion of Counsel to the effect described in Section 3.6.
(d) Acceptance by Successor. The Controlling Party shall have the sole
right to appoint each successor Indenture Collateral Agent. Every temporary or
permanent successor Indenture Collateral Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor and to the Trustee, each
Issuer Secured Party and the Issuer an instrument in writing accepting such
appointment hereunder and the relevant predecessor shall execute, acknowledge
and deliver such other documents and instruments as will effectuate the delivery
of all Indenture Collateral to the successor Indenture Collateral Agent,
whereupon such successor, without any further act, deed or conveyance, shall
become fully vested with all the estates, properties, rights, powers, duties and
obligations of its predecessor. Such predecessor shall, nevertheless, on the
written request of either Issuer Secured Party or the Issuer, execute and
deliver an instrument transferring to such successor all the estates,
properties, rights and powers of such predecessor hereunder. In the event that
any instrument in writing from the Issuer or an Issuer Secured Party is
reasonably required by a successor Indenture Collateral Agent to more fully and
certainly vest in such successor the estates, properties, rights, powers, duties
and obligations vested or intended to be vested hereunder in the Indenture
Collateral Agent, any and all such written instruments shall, at the request of
the temporary or permanent successor Indenture Collateral Agent, be forthwith
executed, acknowledged and delivered by the Trustee or the Issuer, as the case
may be. The designation of any successor Indenture Collateral Agent and the
instrument or instruments removing any Indenture Collateral Agent and appointing
a successor hereunder, together with all other instruments provided for herein,
shall be maintained with the records relating to the Indenture Collateral and,
to the extent required by applicable law, filed or recorded by the successor
Indenture Collateral Agent in each place where such filing or recording is
necessary to effect the transfer of the Indenture Collateral to the successor
Indenture Collateral Agent or to protect or continue the perfection of the
security interests granted hereunder.
SECTION 6.18 Compensation. The Indenture Collateral Agent shall not be
entitled to any compensation for the performance of its duties hereunder other
than the compensation it is entitled to receive in its capacity as Trustee.
SECTION 6.19 Representations and Warranties of the Indenture Collateral
Agent. The Indenture Collateral Agent represents and warrants to the Issuer and
to each Issuer Secured Party as follows:
(a) Due Organization. The Indenture Collateral Agent is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States and is duly authorized and licensed under applicable
law to conduct its business as now conducted.
(b) Corporate Power. The Indenture Collateral Agent has all requisite
right, power and authority to execute and deliver this Indenture and to perform
all of its duties as Indenture Collateral Agent hereunder.
(c) Due Authorization. The execution and delivery by the Indenture
Collateral Agent of this Indenture and the other Transaction Documents to which
it is a party, and the performance by the Indenture Collateral Agent of its
duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and delivery by the
Indenture Collateral Agent, or the performance by the Indenture Collateral
Agent, of this Indenture and such other Related Documents.
(d) Valid and Binding Indenture. The Indenture Collateral Agent has duly
executed and delivered this Indenture and each other Related Document to which
it is a party, and each of this Indenture and each such other Related Document
constitutes the legal, valid and binding obligation of the Indenture Collateral
Agent, enforceable against the Indenture Collateral Agent in accordance with its
terms, except as (i) such enforceability may be limited by bankruptcy,
insolvency, reorganization and similar laws relating to or affecting the
enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
SECTION 6.20 Waiver of Setoffs. The Indenture Collateral Agent hereby
expressly waives any and all rights of setoff that the Indenture Collateral
Agent may otherwise at any time have under applicable law with respect to any
Trust Account and agrees that amounts in the Trust Accounts shall at all times
be held and applied solely in accordance with the provisions hereof.
SECTION 6.21 Control by the Controlling Party. The
- -------------------------------- Indenture Collateral Agent shall comply with
notices and instructions given by the Issuer only if accompanied by the written
consent of the Controlling Party, except that if any Event of Default shall have
occurred and be continuing, the Indenture Collateral Agent shall act upon and
comply with notices and instructions given by the Controlling Party alone in the
place and stead of the Issuer.
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1 Issuer To Furnish To Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Record
Date, (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Note Registrar,
no such list shall be required to be furnished. The Trustee or, if the Trustee
is not the Note Registrar, the Issuer shall furnish to the Insurer in writing on
an annual basis on each March 31 and at such other times as the Insurer may
request a copy of the list.
SECTION 7.2 Preservation of Information; Communications to Noteholders. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of the Holders contained in the most recent list
furnished to the Trustee as provided in Section 7.1 and the names and addresses
of Holders received by the Trustee in its capacity as Note Registrar. The
Trustee may destroy any list furnished to it as provided in such Section 7.1
upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
SECTION 7.3 Reports by Issuer. (a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Issuer may
be required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act;
(ii) file with the Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA ss. 313(c)) such summaries of
any information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may
be required by rules and regulations prescribed from time to time by
the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
SECTION 7.4 Reports by Trustee. If required by TIA ss. 313(a), within 60
days after each June 30, beginning with June 30, 1997, the Trustee shall mail to
each Noteholder as required by TIA ss. 313(c) a brief report dated as of such
date that complies with TIA ss. 313(a). The Trustee also shall comply with TIA
ss. 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Trustee with the Commission and each stock exchange, if any, on
which the Notes are listed. The Issuer shall notify the Trustee if and when the
Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1 Collection of Money. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture. The Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Trust
Estate, the Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.
SECTION 8.2 Trust Accounts. (a) On or prior to the Closing Date, the Issuer
shall cause the Servicer to establish and maintain, in the name of the Trustee,
for the benefit of the Noteholders and the Certificateholders, the Trust
Accounts as provided in Section 5.1 of the Sale and Servicing Agreement.
(b) Subject to Section 5.6 of the Sale and Servicing Agreement, on each
Payment Date (other than the Class A-1 Final Scheduled Distribution Date) and
Redemption Date, the Trustee shall distribute all amounts on deposit in the Note
Distribution Account to Noteholders in respect of the Notes to the extent of
amounts due and unpaid on the Notes for principal and interest in the following
amounts and in the following order of priority (except as otherwise provided in
Section 5.6):
(i) accrued and unpaid interest on the Notes; provided that if
there are not sufficient funds in the Note Distribution Account to pay
the entire amount of accrued and unpaid interest then due on each
class of Notes, the amount in the Note Distribution Account shall be
applied to the payment of such interest on each class of Notes pro
rata on the basis of the amount of accrued and unpaid interest due on
each class of Notes;
(ii) principal to the Holders of the Class A-1 Notes until the
Outstanding Amount of the Class A-1 Notes is reduced to zero;
(iii) principal to the Holders of the Class A-2 Notes until the
Outstanding Amount of the Class A-2 Notes is reduced to zero; and
(iv) principal to the Holders of the Class A-3 Notes until the
Outstanding Amount of the Class A-3 Notes is reduced to zero.
(c) On the Class A-1 Final Scheduled Distribution Date, the Trustee shall
distribute all amounts on deposit in the Note Distribution Account to Class A-1
Noteholders to the extent of amounts due and unpaid on the Class A-1 Notes for
principal and interest in the following amounts and in the following order of
priority (except as otherwise provided in Section 5.6):
(i) to the Holders of the Class A-1 Notes, accrued and unpaid
interest on the Notes; and
(ii) to the Holders of the Class A-1 Notes until the Outstanding
Amount of the Class A-1 Notes is reduced to zero.
SECTION 8.3 General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts shall be invested in Eligible
Investments and reinvested by the Trustee upon Issuer Order, subject to the
provisions of Section 5.1(b) of the Sale and Servicing Agreement. All income or
other gain from investments of moneys deposited in the Trust Accounts shall be
deposited (or caused to be deposited) by the Trustee in the Collection Account,
and any loss resulting from such investments shall be charged to such account.
The Issuer will not direct the Trustee to make any investment of any funds or to
sell any investment held in any of the Trust Accounts unless the security
interest Granted and perfected in such account will continue to be perfected in
such investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Trustee to
make any such investment or sale, if requested by the Trustee, the Issuer shall
deliver to the Trustee an Opinion of Counsel, acceptable to the Trustee, to such
effect.
(b) [Reserved]
(c) Subject to Section 6.1(c), the Trustee shall not in any way be held
liable by reason of any insufficiency in any of the Trust Accounts resulting
from any loss on any Eligible Investment included therein except for losses
attributable to the Trustee's failure to make payments on such Eligible
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as trustee, in accordance with their terms.
(d) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Trustee by 2:00 p.m. Eastern
Time (or such other time as may be agreed by the Issuer and Trustee) on any
Business Day; or (ii) a Default or Event of Default shall have occurred and be
continuing with respect to the Notes but the Notes shall not have been declared
due and payable pursuant to Section 5.2, or, if such Notes shall have been
declared due and payable following an Event of Default, amounts collected or
receivable from the Trust Estate are being applied in accordance with Section
5.5 as if there had not been such a declaration; then the Trustee shall, to the
fullest extent practicable, invest and reinvest funds in the Trust Accounts in
one or more Eligible Investments.
SECTION 8.4 Release of Trust Estate. (a) Subject to the payment of its fees
and expenses pursuant to Section 6.7, the Indenture Collateral Agent may, and
when required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Collateral Agent's interest in the same, in a manner and under circumstances
that are not inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Indenture Collateral Agent as
provided in this Article VIII shall be bound to ascertain the Indenture
Collateral Agent's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Collateral Agent shall, at such time as there are no
Notes outstanding and all sums due the Trustee pursuant to Section 6.7 have been
paid, release any remaining portion of the Trust Estate that secured the Notes
from the lien of this Indenture and release to the Issuer or any other Person
entitled thereto any funds then on deposit in the Trust Accounts. The Trustee
shall release property from the lien of this Indenture pursuant to this Section
8.4(b) only upon receipt of an Issuer Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.
SECTION 8.5 Opinion of Counsel. The Indenture Collateral Agent shall
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.4(a), accompanied by copies of any instruments
involved, and the Trustee shall also require as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Estate. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Trustee in connection with any such action.
ARTICLE IX
Supplemental Indentures
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with the consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing) and
with prior notice to the Rating Agencies by the Issuer, as evidenced to the
Trustee, the Issuer and the Trustee, when authorized by an Issuer Order, at any
time and from time to time, may enter into one or more indentures supplemental
hereto (which shall conform to the provisions of the Trust Indenture Act as in
force at the date of the execution thereof), in form satisfactory to the
Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Collateral Agent any property
subject or required to be subjected to the lien of this Indenture, or
to subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Collateral Agent;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with
any other provision herein or in any supplemental indenture or to make
any other provisions with respect to matters or questions arising
under this Indenture or in any supplemental indenture; provided that
such action shall not adversely affect the interests of the Holders of
the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Trustee, when authorized by an Issuer Order, may,
also without the consent of any of the Holders of the Notes but with prior
notice to the Rating Agencies by the Issuer, as evidenced to the Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.
SECTION 9.2 Supplemental Indentures with Consent of Noteholders. The Issuer
and the Trustee, when authorized by an Issuer Order, also may, with prior notice
to the Rating Agencies, with the consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) and with the consent of the
Holders of not less than a majority of the outstanding Amount of the Notes, by
Act of such Holders delivered to the Issuer and the Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that, subject to the express
rights of the Insurer under the Basic Documents, no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Note affected
thereby:
(i) change the date of payment of any installment of principal of
or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provision of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place
of payment where, or the coin or currency in which, any Note or the
interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption
Date);
(iii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences
provided for in this Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.4;
(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(viii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein
or in any of the Basic Documents, terminate the lien of this Indenture
on any property at any time subject hereto or deprive the Holder of
any Note of the security provided by the lien of this Indenture.
The Trustee may determine whether or not any Notes would be affected by any
supplemental indenture and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Trustee shall not be liable for any such determination
made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.1 and 6.2, shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Trustee, the Issuer and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
SECTION 9.5 Conformity With Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
ARTICLE X
Redemption of Notes
SECTION 10.1 Redemption. (a) The Notes are subject to redemption in whole,
but not in part, at the direction of the Seller pursuant to Section 9.1(a) of
the Sale and Servicing Agreement, on any Distribution Date on which the Servicer
exercises its option to purchase the Trust Estate pursuant to said Section
9.1(a), for a purchase price equal to the Redemption Price; provided, however,
that the Issuer has available funds sufficient to pay the Redemption Price. The
Servicer or the Issuer shall furnish the Insurer and the Rating Agencies notice
of such redemption. If the Notes are to be redeemed pursuant to this Section
10.1(a), the Servicer or the Issuer shall furnish notice of such election to the
Trustee not later than 35 days prior to the Redemption Date and the Issuer shall
deposit with the Trustee in the Note Distribution Account the Redemption Price
of the Notes to be redeemed whereupon all such Notes shall be due and payable on
the Redemption Date upon the furnishing of a notice complying with Section 10.2
to each Holder of Notes.
(b) In the event that the assets of the Trust are sold pursuant to Section
9.2 of the Trust Agreement, all amounts on deposit in the Note Distribution
Account shall be paid to the Noteholders up to the Outstanding Amount of the
Notes and all accrued and unpaid interest thereon. If amounts are to be paid
to Noteholders pursuant to this Section 10.1(b), the Servicer or the Issuer
shall, to the extent practicable, furnish notice of such event to the Trustee
not later than 45 days prior to the Redemption Date whereupon all such amounts
shall be payable on the Redemption Date.
SECTION 10.2 Form of Redemption Notice. Notice of redemption under Section
10.1(a) shall be given by the Trustee by facsimile or by first-class mail,
postage prepaid, transmitted or mailed prior to the applicable Redemption Date
to each Holder of Notes, as of the close of business on the Record Date
preceding the applicable Redemption Date, at such Holder's address appearing in
the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) that the Record Date otherwise applicable to such Redemption
Date is not applicable and that payments shall be made only upon
presentation and surrender of such Notes and the place where such Notes are
to be surrendered for payment of the Redemption Price (which shall be the
office or agency of the Issuer to be maintained as provided in Section
3.2); and
(iv) that interest on the Notes shall cease to accrue on the
Redemption Date.
Notice of redemption of the Notes shall be given by the Trustee in the name
and at the expense of the Issuer. Failure to give notice of redemption, or any
defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
SECTION 10.3 Notes Payable on Redemption Date. The Notes to be redeemed
shall, following notice of redemption as required by Section 10.2 (in the case
of redemption pursuant to Section 10.1(a)), on the Redemption Date become due
and payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.1 Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Trustee or the Indenture Collateral
Agent to take any action under any provision of this Indenture, the Issuer shall
furnish to the Trustee or the Indenture Collateral Agent, as the case may be,
and to the Insurer if the application or request is made to the Indenture
Collateral Agent (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Collateral Agent that is to be made the basis for
the release of any property or securities subject to the lien of this Indenture,
the Issuer shall, in addition to any obligation imposed in Section 11.1(a) or
elsewhere in this Indenture, furnish to the Indenture Collateral Agent and the
Insurer an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
deposit) to the Issuer of the Collateral or other property or securities to be
so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Collateral Agent and the Insurer an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters described in
clause (i) above, the Issuer shall also deliver to the Indenture Collateral
Agent and the Insurer an Independent Certificate as to the same matters, if
the fair value to the Issuer of the securities to be so deposited and of
all other such securities made the basis of any such withdrawal or release
since the commencement of the then-current fiscal year of the Issuer, as
set forth in the certificates delivered pursuant to clause (i) above and
this clause (ii), is 10% or more of the Outstanding Amount of the Notes,
but such a certificate need not be furnished with respect to any securities
so deposited, if the fair value thereof to the Issuer as set forth in the
related Officer's Certificate is less than $25,000 or less than 1% percent
of the Outstanding Amount of the Notes.
(iii) Other than with respect to the release of any Purchased
Receivables or Liquidated Receivables, whenever any property or securities
are to be released from the lien of this Indenture, the Issuer shall also
furnish to the Indenture Collateral Agent and the Insurer an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such release) of the
property or securities proposed to be released and stating that in the
opinion of such person the proposed release will not impair the security
under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee and the
Insurer an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the
Issuer shall also furnish to the Indenture Collateral Agent and the Insurer
an Independent Certificate as to the same matters if the fair value of the
property or securities and of all other property other than Purchased
Receivables and Defaulted Receivables, or securities released from the lien
of this Indenture since the commencement of the then current calendar year,
as set forth in the certificates required by clause (iii) above and this
clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but
such certificate need not be furnished in the case of any release of
property or securities if the fair value thereof as set forth in the
related Officer's Certificate is less than $25,000 or less than 1% percent
of the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.9 or any other provision of this
Section, the Issuer may (A) collect, liquidate, sell or otherwise dispose
of Receivables as and to the extent permitted or required by the Basic
Documents and (B) make cash payments out of the Trust Accounts as and to
the extent permitted or required by the Basic Documents.
SECTION 11.2 Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Seller or the Issuer, stating that the information with respect to
such factual matters is in the possession of the Servicer, the Seller or the
Issuer, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.
SECTION 11.3 Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.1) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any customary manner of the Trustee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Trustee or
the Issuer in reliance thereon, whether or not notation of such action is made
upon such Note.
SECTION 11.4 Notices, etc., to Trustee, Issuer and Rating Agencies. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
(a) The Trustee by any Noteholder or by the Issuer shall be sufficient for
every purpose hereunder if personally delivered, delivered by overnight courier
or mailed certified mail, return receipt requested and shall be deemed to have
been duly given upon receipt to the Trustee at its Corporate Trust Office, or
(b) The Issuer by the Trustee or by any Noteholder shall be sufficient for
every purpose hereunder if personally delivered, delivered by overnight courier
or mailed certified mail, return receipt requested and shall be deemed to have
been duly given upon receipt to the Issuer addressed to: NationsFinancial Auto
Owner Trust 1996-1, in care of ______________________________________________,
Attention: ____________, with a copy to NationsCredit Commercial Corporation,
One Canterbury Green, Stamford, Connecticut 06901, Attention: General Counsel,
or at any other address previously furnished in writing to the Trustee by
Issuer. The Issuer shall promptly transmit any notice received by it from the
Noteholders to the Trustee.
(c) the Insurer by the Issuer or the Trustee shall be sufficient for any
purpose hereunder if in writing and mailed by registered mail or personally
delivered or telexed or telecopied to the recipient as follows:
To the Insurer: Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212)826-0100
Telecopy Nos.: (212)339-3518 or
(212) 339-3529
(In each case in which notice or other communication to the Insurer refers
to an Event of Default, a claim on the Note Policy or with respect to which
failure on the part of the Insurer to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of the General Counsel and the Head-Financial
Guaranty Group "URGENT MATERIAL ENCLOSED.")
Notices required to be given to the Rating Agencies by the Issuer, the
Trustee or the Owner Trustee shall be in writing, personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10004 and (ii) in
the case of S&P, at the following address: Standard & Poor's Ratings Services,
26 Broadway (15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department; or as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.
SECTION 11.5 Notices to Noteholders; Waiver. Where this Indenture provides
for notice to Noteholders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class, postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Noteholders is given by mail, neither the failure to
mail such notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with respect to other
Noteholders, and any notice that is mailed in the manner here in provided shall
conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Trustee but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.6 Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Trustee or any Paying Agent to such Holder, that is
different from the methods provided for in this Indenture for such payments or
notices, provided that such methods are reasonable and consented to by the
Trustee (which consent shall not be unreasonably withheld). The Issuer will
furnish to the Trustee a copy of each such agreement and the Trustee will cause
payments to be made and notices to be given in accordance with such agreements.
SECTION 11.7 Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.8 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.9 Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Trustee in this Indenture
shall bind its successors. All agreements of the Indenture Collateral Agent in
this Indenture shall bind its successors.
SECTION 11.10 Separability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11 Benefits of Indenture. The Insurer and its successors and
assigns shall be a third-party beneficiary to the provisions of this Indenture,
and shall be entitled to rely upon and directly to enforce such provisions of
this Indenture so long as no Insurer Default shall have occurred and be
continuing. Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured hereunder, and any
other person with an Ownership interest in any part of the Trust Estate, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
The Insurer may disclaim any of its rights and powers under this Indenture (in
which case the Indenture Trustee may exercise such right or power hereunder),
but not its duties and obligations under the Note Policy, upon delivery of a
written notice to the Trustee.
SECTION 11.12 Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date an which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 Counterparts. This Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trustee or any other counsel reasonably acceptable
to the Trustee and the Insurer) to the effect that such recording is necessary
either for the protection of the Noteholders or any other person secured
hereunder or for the enforcement of any right or remedy granted to the Trustee
or the Indenture Collateral Agent under this Indenture or the Collateral Agent
under the Spread Account Agreement.
SECTION 11.16 Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Seller, the
Servicer, the General Partner, the Owner Trustee or the Trustee on the Notes or
under this Indenture or any certificate or other writing delivered in connection
herewith or therewith, against (i) the Seller, the Servicer, the General
Partner, the Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Seller, the
Servicer, the General Partner, the Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Seller, the Servicer, the General Partner, the Owner Trustee or the Trustee or
of any successor or assign of the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Trustee and the
Owner Trustee have no such obligations in their individual capacity) and except
that any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity. For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Article VI, VII and
VIII of the Trust Agreement.
SECTION 11.17 No Petition. The Trustee and the Indenture Collateral Agent,
by entering into this Indenture, and each Noteholder, by accepting a Note,
hereby covenant and agree that they will not at any time institute against the
Seller, the General Partner, or the Issuer, or join in any institution against
the Seller, the General Partner, or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents.
SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee or of the Insurer,
during the Issuer's normal business hours, to examine all the books of account,
records, reports, and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees, and independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Trustee may reasonably determine that such disclosure is
consistent with its Obligations hereunder.
[THIS SPACE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture
to be duly executed by their respective officers, thereunto duly authorized, all
as of the day and year first above written.
NATIONSFINANCIAL AUTO OWNER TRUST
1996-1,
By: __________________________, not in
its individual capacity but solely
as Owner Trustee,
By:_____________________________
Name:
Title:
__________________________, not in its
individual capacity but solely as
Trustee and Indenture Collateral Agent,
By:_____________________________
Name:
Title:
<PAGE>
[Form of Note] EXHIBIT D-1
REGISTERED $_____________
No. R-___
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
[Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
CLASS A-1 % ASSET BACKED NOTES
NationsFinancial Auto Owner Trust 1996-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [ ] DOLLARS payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE]
and the denominator of which is $ by (ii) the aggregate amount, if any, payable
from the Note Distribution Account in respect of principal on the Class A-1
Notes pursuant to Section 3.1 of the Indenture; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the ____
__, 199_ Distribution Date (the "Class A-1 Final Scheduled Payment Date"). The
Issuer will pay interest on this Note at the rate per annum shown above on each
Payment Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Payment Date (after giving effect to all payments of principal made on the
preceding Payment Date). Interest on this Note will accrue for each Payment Date
from the most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid, from December
__, 1996. Interest will be computed on the basis of the actual number of days
elapsed in a 360-day year. Such principal of and interest on this Note shall be
paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Noteholders' Interest Distributable Amount and the Noteholders'
Principle Distributable Amount on each Payment Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
by _____________________________,
not in its individual capacity
but solely as Owner Trustee
under the Trust Agreement,
by
--------------------------
Name:
Title:
Date:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date:
__________________________, not in
its individual capacity but solely
as Trustee,
by______________________
Authorized Signatory
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 % Asset Backed Notes (herein called the
"Class A-1 Notes"), all issued under an Indenture dated as of November 30, 1996
(such indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and __________________________, as trustee (the "Trustee",
which term includes any successor Trustee under the Indenture, and the
"Indenture Collateral Agent", which term includes any successor Indenture
Collateral Agent under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture. All terms used
in this Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes (together,
the "Notes") are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January __, 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Scheduled Distribution Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(b) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable (i) on the date on which an Event of Default
shall have occurred and be continuing so long as an Insurer Default shall not
have occurred and be continuing or (ii) if an Insurer Default shall have
occurred and be continuing, on the date on which an Event of Default shall have
occurred and be continuing and the Trustee or the Holders of the Notes
representing at least 66-2/3% of the Outstanding Amount of the Notes have
declared the Notes to be immediately due and payable in the manner provided in
Section 5.2 of the Indenture. All principal payments on the Class A-1 Notes
shall be made pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Trustee, in the
name of and on behalf of the Issuer, will notify the Person who was the Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
prior to such Distribution Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.1(a) of the Indenture, in whole, but not in part, at the option of the
Servicer (with the consent of the Insurer under certain circumstances), on any
Payment Date on or after the date on which the Pool Balance is less than or
equal to 5% of the Original Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the General Partner, the Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the General
Partner, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the General Partner, the Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor, the General Partner, or the Issuer or join
in any institution against the Depositor, the General Partner, or the Issuer of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings, under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee or
the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be 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 and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither
_________________________ in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on, or performance of, or omission to perform, any
of the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purposes of
binding the interests of the Owner Trustee in the assets of the Issuer. The
Holder of this Note by the acceptance hereof agrees that except as expressly
provided in the Indenture or the Basic Documents, in the case of an Event of
Default under the Indenture, the Holder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto _______________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated: ___________ _______________________2
Signature Guaranteed:
- --------
2 NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
<PAGE>
[Form of Note] Exhibit D-2
REGISTERED $__________
No. R-_
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. ___________
[Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
CLASS A-2 FLOATING RATE ASSET BACKED NOTES
NationsFinancial Auto Owner Trust 1996-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [______________] DOLLARS payable on
each Distribution Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF
NOTE] and the denominator of which is $__________ by (ii) the aggregate amount,
if any, payable from the Note Distribution Account in respect of principal on
the Class A-2 Notes pursuant to Section 3.1 of the Indenture; provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the ________ ____ Distribution Date (the "Class A-2 Final Scheduled Payment
Date"). The Issuer will pay interest on this Note at the rate per annum equal to
LIBOR (as defined in the Indenture) plus ____%, subject to a maximum rate equal
to __% per annum, on each Payment Date until the principal of this Note is paid
or made available for payment, on the principal amount of this Note outstanding
on the preceding Payment Date (after giving effect to all payments of principal
made on the preceding Payment Date). Interest on this Note will accrue for each
Payment Date from the most recent Payment Date on which interest has been paid
to but excluding such Payment Date or, if no interest has yet been paid, from
December __, 1996. Interest will be computed on the basis of the actual number
of days elapsed in a 360-day year. Such principal of and interest on this Note
shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Noteholders' Interest Distributable Amount and the Noteholders'
Principle Distributable Amount on each Payment Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
NATIONSFINANCIAL AUTO OWNER
TRUST 1996-1
By: ________________________,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
By:__________________________
Name:
Title:
Date:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:
______________________, not in its
individual capacity but solely as
Trustee,
By:______________________
Authorized Signatory
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 Floating Rate Asset Backed Notes (herein called the
"Class A-2 Notes"), all issued under an Indenture dated as of November 30, 1996
(such indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and _______________________, as trustee (the "Trustee", which
term includes any successor Trustee under the Indenture, and the "Indenture
Collateral Agent", which term includes any successor Indenture Collateral Agent
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A-2 Notes, the Class A-1 Notes and the Class A-3 Notes (together,
the "Notes") are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January __, 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Scheduled Distribution Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(b) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable (i) on the date on which an Event of Default
shall have occurred and be continuing so long as an Insurer Default shall not
have occurred and be continuing or (ii) if an Insurer Default shall have
occurred and be continuing, on the date on which an Event of Default shall have
occurred and be continuing and the Trustee or the Holders of the Notes
representing at least 66-2/3% of the Outstanding Amount of the Notes have
declared the Notes to be immediately due and payable in the manner provided in
Section 5.2 of the Indenture. All principal payments on the Class A-2 Notes
shall be made pro rata to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Trustee, in the
name of and on behalf of the Issuer, will notify the Person who was the Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
prior to such Distribution Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.1(a) of the Indenture, in whole, but not in part, at the option of the
Servicer (with the consent of the Insurer under certain circumstances), on any
Payment Date on or after the date on which the Pool Balance is less than or
equal to 5% of the Original Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the General Partner, the Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the General
Partner, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the General Partner, the Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor, the General Partner, or the Issuer or join
in any institution against the Depositor, the General Partner, or the Issuer of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings, under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee or
the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be 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 and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither
________________________ in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on, or performance of, or omission to perform, any
of the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purposes of
binding the interests of the Owner Trustee in the assets of the Issuer. The
Holder of this Note by the acceptance hereof agrees that except as expressly
provided in the Indenture or the Basic Documents, in the case of an Event of
Default under the Indenture, the Holder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto _______________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated: ___________ _______________________1
Signature Guaranteed:
- --------
1 NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
Exhibit 4.2
[Form of Note]
REGISTERED $__________
No. R-_
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. ___________
[Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
CLASS A-3 ____% ASSET BACKED NOTES
NationsFinancial Auto Owner Trust 1996-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [_______________] DOLLARS payable on
each Distribution Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF
NOTE] and the denominator of which is $__________ by (ii) the aggregate amount,
if any, payable from the Note Distribution Account in respect of principal on
the Class A-3 Notes pursuant to Section 3.1 of the Indenture; provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the ________ ____ Distribution Date (the "Class A-3 Final Scheduled Payment
Date"). The Issuer will pay interest on this Note at the rate per annum shown
above on each Payment Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date). Interest on this Note will accrue for each Payment
Date from the most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid, from December
__, 1996. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Noteholders' Interest Distributable Amount and the Noteholders'
Principle Distributable Amount on each Payment Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
NATIONSFINANCIAL AUTO OWNER
TRUST 1996-1
By: ________________________,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
By:__________________________
Name:
Title:
Date:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:
_______________________, not in its
individual capacity but solely as
Trustee,
By:______________________
Authorized Signatory
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 ___% Asset Backed Notes (herein called the "Class
A-3 Notes"), all issued under an Indenture dated as of November 30, 1996 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and _______________________, as trustee (the "Trustee", which
term includes any successor Trustee under the Indenture, and the "Indenture
Collateral Agent", which term includes any successor Indenture Collateral Agent
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A-3 Notes, the Class A-1 Notes and the Class A-2 Notes (together,
the "Notes") are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January __, 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Scheduled Distribution Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(b) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable (i) on the date on which an Event of Default
shall have occurred and be continuing so long as an Insurer Default shall not
have occurred and be continuing or (ii) if an Insurer Default shall have
occurred and be continuing, on the date on which an Event of Default shall have
occurred and be continuing and the Trustee or the Holders of the Notes
representing at least 66-2/3% of the Outstanding Amount of the Notes have
declared the Notes to be immediately due and payable in the manner provided in
Section 5.2 of the Indenture. All principal payments on the Class A-3 Notes
shall be made pro rata to the Class A-3 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Trustee, in the
name of and on behalf of the Issuer, will notify the Person who was the Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
prior to such Distribution Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-3 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.1(a) of the Indenture, in whole, but not in part, at the option of the
Servicer (with the consent of the Insurer under certain circumstances), on any
Payment Date on or after the date on which the Pool Balance is less than or
equal to 5% of the Original Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the General Partner, the Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the General
Partner, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the General Partner, the Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor, the General Partner, or the Issuer or join
in any institution against the Depositor, the General Partner, or the Issuer of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings, under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee or
the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be 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 and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither
________________________ in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on, or performance of, or omission to perform, any
of the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purposes of
binding the interests of the Owner Trustee in the assets of the Issuer. The
Holder of this Note by the acceptance hereof agrees that except as expressly
provided in the Indenture or the Basic Documents, in the case of an Event of
Default under the Indenture, the Holder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto _______________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated: ___________ _______________________1
Signature Guaranteed:
- --------
1 NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
Exhibit 4.2
TRUST AGREEMENT
between
NATIONSFINANCIAL FUNDING CORPORATION
and
-----------------------
Owner Trustee
Dated as of November 30, 1996
<PAGE>
Table of Contents
Page
ARTICLE I Definitions.......................................................
Section 1.1. Capitalized Terms..............................
ARTICLE II Organization.....................................................
Section 2.1. Name ......................................
Section 2.2. Office.........................................
Section 2.3. Purposes and Powers............................
Section 2.4. Appointment of Owner Trustee...................
Section 2.5. Initial Capital Contribution of
Trust Estate.................................
Section 2.6. Declaration of Trust...........................
Section 2.7. Liability of Affiliated Purchaser as
General Partner..............................
Section 2.8. Title to Trust Property........................
Section 2.9. Situs of Trust.................................
Section 2.10. Representations and Warranties
of the Depositor.............................
Section 2.11. Representations and Warranties
of the Affiliated Purchaser..................
Section 2.12. Federal Income Tax Allocations.................
Section 2.13. Covenants of the General Partner...............
Section 2.14. Covenants of the Owners........................
ARTICLE III Trust Certificates and Transfer of
Interests.....................................................
Section 3.1. Initial Ownership..............................
Section 3.2. The Trust Certificates.........................
Section 3.3. Authentication of Trust Certificates...........
Section 3.4. Registration of Transfer and
Exchange of Trust Certificates...............
Section 3.5. Mutilated, Destroyed, Lost or
Stolen Trust Certificates....................
Section 3.6. Persons Deemed Certificateholders..............
Section 3.7. Access to List of Certificate-
holders' Names and Addresses.................
Section 3.8. Maintenance of Office or Agency................
Section 3.9. Appointment of Certificate Paying Agent........
Section 3.10. [Reserved].....................................
Section 3.11. [Reserved].....................................
Section 3.12. Disposition by the General Partner.............
Section 3.13. ERISA Restrictions.............................
Section 3.14. Book-Entry Trust Certificates..................
Section 3.15. Notices to Clearing Agency.....................
Section 3.16. Definitive Trust Certificates..................
ARTICLE IV Actions by Owner Trustee.........................................
Section 4.1. Prior Notice to Owners
with Respect to Certain Matters..............
Section 4.2. Action by Certificateholders with
Respect to Certain Matters...................
Section 4.3. Action by Certificateholders with
Respect to Bankruptcy........................
Section 4.4. Restrictions on Certificateholders'
Power........................................
Section 4.5. Majority Control...............................
Section 4.6. Rights of Insurer..............................
ARTICLE V Application of Trust Funds:
Certain Duties.................................
Section 5.1. Establishment of Certificate Distribution
Account......................................
Section 5.2. Application of Funds in
Certificate Distribution Account.............
Section 5.3. [Reserved].....................................
Section 5.4. Method of Payment..............................
Section 5.5. No Segregation of Monies; No
Interest.....................................
Section 5.6. Accounting and Reports to the
Noteholders, Certificateholders,
the Internal Revenue Service and
Others.......................................
Section 5.7. Signature on Returns; Tax
Matters Partner..............................
ARTICLE VI Authority and Duties of Owner
Trustee........................................
Section 6.1. General Authority..............................
Section 6.2. General Duties.................................
Section 6.3. Action upon Instruction........................
Section 6.4. No Duties Except as Specified in
this Agreement or in Instructions............
Section 6.5. No Action Except under Specified
Documents or Instructions....................
Section 6.6. Restrictions...................................
ARTICLE VII Concerning the Owner Trustee....................................
Section 7.1. Acceptance of Trust and Duties.................
Section 7.2. Furnishing of Documents........................
Section 7.3. Representations and Warranties.................
Section 7.4. Reliance; Advice of Counsel....................
Section 7.5. Not Acting in Individual Capacity..............
Section 7.6. Owner Trustee Not Liable for
Trust Certificates or
Receivables..................................
Section 7.7. Owner Trustee May Own Trust
Certificates and Notes.......................
Section 7.8. Payments from Owner Trust Estate...............
Section 7.9. Doing Business in Other Jurisdictions..........
ARTICLE VIII Compensation of Owner Trustee..................................
Section 8.1. Owner Trustee's Fees and Expenses..............
Section 8.2. Indemnification................................
Section 8.3. Payments to the Owner Trustee..................
Section 8.4. Non-recourse Obligations.......................
ARTICLE IX Termination of Trust Agreement...................................
Section 9.1. Termination of Trust Agreement.................
Section 9.2. Dissolution upon Bankruptcy of the
General Partner .............................
ARTICLE X Successor Owner Trustees and Additional
Owner Trustees.................................
Section 10.1. Eligibility Requirements for Owner
Trustee......................................
Section 10.2. Resignation or Removal of Owner
Trustee......................................
Section 10.3. Successor Owner Trustee........................
Section 10.4. Merger or Consolidation of Owner
Trustee......................................
Section 10.5. Appointment of Co-Trustee or
Separate Trustee.............................
ARTICLE XI Miscellaneous....................................................
Section 11.1. Supplements and Amendments.....................
Section 11.2. No Legal Title to Owner Trust
Estate in Certificateholders.................
Section 11.3. Limitations on Rights of Others................
Section 11.4. Notices........................................
Section 11.5. Severability...................................
Section 11.6. Separate Counterparts..........................
Section 11.7. Third-Party Beneficiaries......................
Section 11.8. [Reserved].....................................
Section 11.9. No Petition....................................
Section 11.10. No Recourse....................................
Section 11.11. Headings.......................................
Section 11.12. GOVERNING LAW..................................
Section 11.13. [Reserved].....................................
Section 11.14. Servicer.......................................
EXHIBITS
Exhibit A Form of Trust Certificate
Exhibit B Form of Certificate of Trust
Exhibit C Form of Certificate Depository Agreement
<PAGE>
TRUST AGREEMENT dated as of
November 30, 1996 between NATIONSFINANCIAL
FUNDING CORPORATION, a Delaware
corporation, and _____________________, a
Delaware banking corporation as Owner
Trustee.
ARTICLE I
Definitions
SECTION 1.1. Capitalized Terms. For all purposes of this Agreement,
capitalized terms used herein and not otherwise defined have the meanings
assigned to them in Exhibit A to the Sale and Servicing Agreement, which also
contains rules as to usage and construction that shall be applicable herein.
ARTICLE II
Organization
SECTION 2.1. Name. There is hereby formed a trust to be known as
"NationsFinancial Auto Owner Trust 1996-1", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2. Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address as the Owner
Trustee may designate by written notice to the Certificateholders and the
Depositor.
SECTION 2.3. Purposes and Powers. (a) The purpose of the Trust is, and the
Trust shall have the power and authority, to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and
the Trust Certificates pursuant to this Agreement, and to
sell the Notes and the Trust Certificates;
(ii) with the proceeds of the sale of the Notes and the
Trust Certificates, to fund the Spread Account and to pay
the organizational, start-up and transactional expenses of
the Trust and to pay the balance to the Depositor pursuant
to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and
convey the Trust Estate (other than the Certificate Policy
and the Certificate Distribution Account) to the Indenture
Collateral Agent pursuant to the Indenture for the benefit
of the Insurer and the Indenture Trustee on behalf of the
Noteholders and to hold, manage and distribute to the
Certificateholders and the Seller pursuant to the terms of
the Sale and Servicing Agreement any portion of the Trust
Estate released from the Lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under
the Basic Documents to which it is a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient
to accomplish the foregoing or are incidental thereto or
connected therewith; and
(vi) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in
connection with conservation of the Owner Trust Estate and
the making of distributions to the Certificateholders and
the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4. Appointment of Owner Trustee. The Depositor hereby appoints
________________ as trustee of the Trust effective as of the date hereof, to
have all the rights, powers and duties set forth herein.
SECTION 2.5. Initial Capital Contribution of Trust Estate. The Depositor
hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as
of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt
in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate and shall be
deposited in the Certificate Distribution Account.
SECTION 2.6. Declaration of Trust. _________________ hereby declares that
it will hold the Owner Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Owners, subject to the
obligations of the Trust under the Basic Documents. It is the intention of the
parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership.
The parties agree that, unless otherwise required by appropriate tax
authorities, the Trust will file or cause to be filed annual or other necessary
returns, reports and other forms consistent with the characterization of the
Trust as a partnership for such tax purposes. Effective as of the date hereof,
the Owner Trustee shall have all rights, powers and duties set forth herein and
to the extent not inconsistent herewith, in the Business Trust Statute with
respect to accomplishing the purposes of the Trust. The Owner Trustee shall file
the Certificate of Trust with the Secretary of State.
SECTION 2.7. Liability of Affiliated Purchaser as General Partner. (a) The
General Partner shall pay organizational expenses of the Trust as they may arise
or shall, upon the request of the Owner Trustee, promptly reimburse the Owner
Trustee for any such expenses paid by the Owner Trustee. The General Partner
shall also be liable directly to and will indemnify the injured party for all
losses, claims, damages, liabilities and expenses of the Trust (including
Expenses, to the extent not paid out of the Owner Trust Estate) to the extent
that the General Partner would be liable if the Trust were a partnership under
the Delaware Revised Uniform Limited Partnership Act in which the General
Partner were a general partner; provided, however, that the General Partner
shall not be liable for any losses incurred by an Owner in the capacity of an
investor in the Trust Certificates or a Note Owner in the capacity of an
investor in the Notes. In addition, any third party creditors of the Trust
(other than in connection with the obligations described in the preceding
sentence for which the General Partner shall not be liable) shall be deemed
third party beneficiaries of this paragraph. The obligations of the General
Partner under this paragraph shall be evidenced by the Trust Certificates
described in Section 3.12, which for purposes of the Business Trust Statute
shall be deemed to be a separate class of Trust Certificates from all other
Trust Certificates issued by the Trust.
(b) No Owner, other than to the extent set forth in clause (a), shall
have any personal liability for any liability or obligation of the Trust.
SECTION 2.8. Title to Trust Property. (a) Legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
(b) The Owners shall not have legal title to any part of the Trust
Property. The Owners shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance
with Articles V and IX. No transfer, by operation of law or otherwise, of
any right, title or interest by any Certificateholder of its ownership
interest in the Owner Trust Estate shall operate to terminate this
Agreement or the Trust hereunder or entitle any transferee to an accounting
or to the transfer to it of legal title to any part of the Trust Property.
SECTION 2.9. Situs of Trust. The Trust will be located and administered in
the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York. Payments will be received by the Trust only in Delaware or New York
and payments will be made by the Trust only from Delaware or New York. The Trust
shall not have any employees in any state other than Delaware; provided however,
that nothing herein shall restrict or prohibit the Owner Trustee, in its
individual capacity, the Servicer or any agent of the Trust from having
employees within or without the State of Delaware. The only office of the Trust
will be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor makes the following representations and warranties on which the Owner
Trustee relies in accepting the Owner Trust Estate in trust and issuing the
Certificates and upon which the Insurer relies in issuing the Policies:
(a) Organization and Good Standing. The Depositor is duly
organized and validly existing as a Delaware corporation with
power and authority to own its properties and to conduct its
business as such properties are currently owned and such business
is now conducted and is proposed to be conducted pursuant to this
Agreement and the Basic Documents.
(b) Due Qualification. The Affiliated Purchaser is duly
qualified to do business as a foreign corporation in good
standing, and has obtained all necessary licenses and approvals,
in all jurisdictions in which the ownership or lease of its
property, the conduct of its business and the performance of its
obligations under this Agreement and the Basic Documents requires
such qualification, except when failure to be so qualified would
not have a material adverse effect upon the business and affairs
of the Depositor.
(c) Power and Authority. The Depositor has the corporate
power and authority to execute and deliver this Agreement and to
carry out its terms; the Depositor has full power and authority to
sell and assign the property to be sold and assigned to and deposited
with the Trust and the Depositor has duly authorized such sale and
assignment and deposit to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate
action.
(d) No Consent Required. No consent, license, approval or
authorization or registration or declaration with, any Person or with
any governmental authority, bureau or agency is required in
connection with the execution, delivery or performance of this
Agreement and the Basic Documents by the Depositor, except for such
as have been obtained, effected or made.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the certificate of incorporation or by-laws of the
Depositor, or any material indenture, agreement or other instrument to
which the Depositor is a party or by which it is bound; nor result in
the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate
any law or, to the best of the Depositor's knowledge, any order, rule
or regulation applicable to the Depositor of any court or of any
Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or
its properties.
(f) No Proceedings. There are no proceedings or
investigations pending or, to its knowledge threatened against the
Affiliated Purchaser before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality having jurisdiction over it or its properties (A)
asserting the invalidity of this Agreement or any of the Basic
Documents, (B) seeking to prevent the issuance of the Certificates or
the Notes or the consummation of any of the transactions contemplated
by this Agreement or any of the Basic Documents, or (C) seeking any
determination or ruling that might materially and adversely affect
its performance of its obligations
under, or the validity or enforceability of, this Agreement
or any of the Basic Documents.
SECTION 2.11. Representations and Warranties of the Affiliated Purchaser.
The Affiliated Purchaser, as the General Partner, makes the following
representations and warranties on which the Owner Trustee relies in accepting
the Owner Trust Estate in trust and issuing the Certificates and upon which the
Insurer relies in issuing the Policies:
(a) Organization and Good Standing. The Affiliated Purchaser
is duly organized and validly existing as a Delaware corporation with
power and authority to own its properties and to conduct its business
as such properties are currently owned and such business is now
conducted and is proposed to be conducted pursuant to this Agreement
and the Basic Documents.
(b) Due Qualification. It is duly qualified to do business
as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property, the conduct of its business and
the performance of its obligations under this Agreement requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect upon the business and affairs of the
Affiliated Purchaser.
(c) Power and Authority. The Affiliated Purchaser has the
corporate power and authority to execute and deliver this Agreement
and to carry out its terms; and the execution, delivery and
performance of this Agreement and the Basic Documents has been duly
authorized by the Affiliated Purchaser by all necessary corporate
action.
(d) No Consent Required. No consent, license, approval or
authorization or registration or declaration with, any Person or with
any governmental authority, bureau or agency is required in
connection with the execution, delivery or performance of this
Agreement and the Basic Documents by the Affiliated Purchaser, except
for such as have been obtained, effected or made.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms
hereof do not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of
time) a default under, the certificate of incorporation or by-laws of
the Affiliated Purchaser, or any material indenture, agreement or
other instrument to which the Affiliated Purchaser is a party or by
which it is bound; nor result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any law or, to
the best of the Affiliated Purchaser's knowledge, any
order, rule or regulation applicable to the Affiliated Purchaser of
any court or of any Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Affiliated Purchaser or its properties.
(f) No Proceedings. There are no proceedings or
investigations pending or, to its knowledge threatened against it
before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over it
or its properties (A) asserting the invalidity of this Agreement or
any of the Basic Documents, (B) seeking to prevent the issuance of
the Certificates or the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic
Documents, or (C) seeking any determination or ruling that might
materially and adversely affect its performance of its obligations
under, or the validity or enforceability of, this Agreement or any of
the Basic Documents.
(g) Demand Note. It has been duly capitalized by the delivery of
a demand note (the "Demand Note") from NationsBank Corporation in the
amount of $1,000,000 which Demand Note has not been canceled, waived
or terminated. The proceeds of such Demand Note have not been used and
will not be used to pay (i) any of the expenses of the Depositor in
connection with the transactions contemplated by the Basic Documents
or (ii) the purchase price for the Certificates purchased pursuant to
Section 3.12. Such Demand Note is enforceable against NationsBank
Corporation, subject to its terms, and subject to applicable
bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization and similar laws now or hereafter in effect relating to
creditors' rights generally and court decisions with respect thereto,
and subject to general principles of equity (whether applied in a
proceeding at law or in equity).
SECTION 2.12. Federal Income Tax Allocations. Net income of the Trust for
any month as determined for Federal income tax purposes (and each item of
income, gain, loss, credit and deduction entering into the computation thereof)
shall be allocated:
(a) to the extent of available net income, among the
Certificateholders as of the first Record Date following the end of
such month, in proportion to their ownership of principal amount of
Trust Certificates on such date, an amount of net income up to the sum
of (i) the Certificateholders' Monthly Interest Distributable Amount
for such month, (ii) interest on the excess, if any, of the
Certificateholders' Interest Distributable Amount for the preceding
Distribution Date over the amount in respect of interest at the
Certificate Rate that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date, to the
extent permitted by law, at the Certificate Rate from such preceding
Distribution Date through the current Distribution Date, and (iii) the
portion of the market discount on the Receivables accrued during such
month that is allocable to the excess of the initial aggregate
principal amount of the Trust Certificates over their initial
aggregate issue price; and
(b) to the General Partner, to the extent of any remaining net
income.
If the net income of the Trust for any month is insufficient for the
allocations described in clause (a) above, subsequent net income shall first be
allocated to make up such shortfall before being allocated as provided in clause
(b). Net losses of the Trust, if any, for any month as determined for Federal
income tax purposes (and each item of income, gain, loss, credit and deduction
entering into the computation thereof) shall be allocated to the General Partner
to the extent the General Partner is reasonably expected as determined by the
Servicer to bear the economic burden of such net losses, then net losses shall
be allocated among the Certificateholders as of the first Record Date following
the end of such month in proportion to their ownership of principal amount of
Trust Certificates on such Record Date until the principal balance of the Trust
Certificates is reduced to zero. The General Partner is authorized to modify the
allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the General Partner, the Certificateholders, or as otherwise required by
the Code.
SECTION 2.13. Covenants of the General Partner. The General Partner agrees
and covenants for the benefit of each Owner, the Insurer and the Owner Trustee,
during the term of this Agreement, and to the fullest extent permitted by
applicable law, that:
(a) it shall not assign, sell, convey, pledge, transfer,
reconvey, cancel, forgive, compromise or otherwise dispose of the
Demand Note held by it, in whole or in part;
(b) it shall not sell, assign, transfer, give or encumber,
by operation of law or otherwise, in whole or in part, the interest
evidenced by its Trust Certificates acquired pursuant to Section 3.12
without the consent of the Insurer;
(c) other than pursuant to Section 2.7 or in connection with
routine administrative matters, it shall not create, incur or suffer
to exist any indebtedness or engage in any business, except, in each
case, as permitted by its certificate of incorporation and the Basic
Documents;
(d) it shall not, for any reason, institute proceedings for
the Trust to be adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the
Trust, or file a petition seeking or consenting to reorganization or
relief under any applicable federal or state law relating to the
bankruptcy of the Trust, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the Trust or a substantial part of the property of the
Trust or cause the Trust to make any assignment for the benefit of
creditors, or admit in writing the inability of the Trust to pay its
debts generally as they become due, or declare or effect a moratorium
on the debt of the Trust or take any action in furtherance of any
such action;
(e) it shall obtain from each counterparty to each Basic
Document to which it or the Trust is a party and each other agreement
entered into on or after the date hereof to which it or the Trust is
a party, an agreement by each such counterparty that prior to the
occurrence of the event specified in Section 9.1(e) such counterparty
shall not institute against, or join any other Person in instituting
against, it or the Trust, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar
proceedings under the laws of the United States or any state of the
United States;
(f) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it
to be adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against it, or
file a petition seeking or consenting to reorganization or relief
under any applicable federal or state law relating to bankruptcy, or
consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of it or a
substantial part of its property, or make any assignment for the
benefit of creditors, or admit in writing its inability to pay its
debts generally as they become due, or declare or effect a moratorium
on its debt or take any action in furtherance of any such action; and
(g) it shall not make any distribution other than to the
Trust or unless the aggregate net worth of the General Partner
following such distribution shall be at least equal to the Minimum
Net Worth unless the General Partner shall deliver to the Owner
Trustee, the Trustee and the Insurer an Opinion of Counsel to the
effect that the failure to maintain such Minimum Net Worth shall not
cause the Trust to be an association taxable as a corporation or a
publicly traded partnership.
SECTION 2.14. Covenants of the Owners. Each Owner by becoming a beneficial
owner of the Book-Entry Trust Certificate agrees:
(a) to be bound by the terms and conditions of the
Certificates of which such Owner is the beneficial owner and of this
Agreement, including any supplements or amendments hereto and to
perform the obligations of an Owner as set forth therein or herein,
in all respects as if it were a signatory hereto. This undertaking is
made for the benefit of the Trust, the Owner Trustee, the Insurer and
all other Owners present and future;
(b) to hereby appoint the General Partner as such Owner's
agent and attorney-in-fact to sign any federal income tax information
return filed on behalf of the Trust and agree that, if requested by
the Trust, it will sign such federal income tax information return in
its capacity as holder of an interest in the Trust. Each Owner also
hereby agrees that in its tax returns it will not take any position
inconsistent with those taken in any tax returns filed by the Trust;
(c) if such Owner is other than an individual or other
entity holding its Certificate through a broker who reports
securities sales on Form 1099-B, to notify the Owner Trustee of any
transfer by it of a Certificate in a taxable sale or exchange, within
30 days of the date of the transfer; and
(d) until the completion of the events specified in
Section 9.1(e), not to, for any reason, institute
proceedings for the Trust or the General Partner to be adjudicated a
bankrupt or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against the Trust, or file a petition seeking
or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Trust or a
substantial part of its property, or cause or permit the Trust to
make any assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become due,
or declare or effect a moratorium on its debt or take any action in
furtherance of any such action.
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
SECTION 3.2. The Trust Certificates. The Trust Certificates shall be issued
in denominations of $1,000 and integral multiples thereof; provided, however,
that Trust Certificates may be issued to the General Partner pursuant to Section
3.12 in such denominations as to represent at least 1% of the initial
Certificate Balance. The Trust Certificates shall be executed on behalf of the
Trust by manual or facsimile signature of an authorized officer of the Owner
Trustee. Trust Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be validly issued and entitled
to the benefit of this Agreement, notwithstanding that such individuals or any
of them shall have ceased to be so authorized prior to the authentication and
delivery of such Trust Certificates or did not hold such offices at the date of
authentication and delivery of such Trust Certificates. A transferee of a Trust
Certificate shall become a Certificateholder, and shall be entitled to the
rights and subject to the obligations of a Certificateholder hereunder, upon due
registration of such Trust Certificate in such transferee's name pursuant to
Section 3.4.
SECTION 3.3. Authentication of Trust Certificates. Concurrently with the
initial sale of the Receivables to the Trust pursuant to the Sale and Servicing
Agreement, the Owner Trustee shall cause the Trust Certificates in an aggregate
principal amount equal to the initial Certificate Balance to be executed on
behalf of the Trust, authenticated and delivered to or upon the written order of
the Depositor, signed by its chairman of the board, its president or any vice
president, its treasurer or any assistant treasurer without further corporate
action by the Depositor, in authorized denominations. No Trust Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Trust Certificate a certificate
of authentication substantially in the form set forth in Exhibit A, executed by
the Owner Trustee or ____________________ as the Owner Trustee's authentication
agent, by manual signature; such authentication shall constitute conclusive
evidence that such Trust Certificate shall have been duly authenticated and
delivered hereunder. All Trust Certificates shall be dated the date of their
authentication.
SECTION 3.4. Registration of Transfer and Exchange of Trust Certificates.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.8, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. _____________________ shall
be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause _____________________ as its
authenticating agent to authenticate and deliver), in the name of the designated
transferee or transferees, one or more new Trust Certificates in authorized
denominations of a like class and aggregate face amount dated the date of
authentication by the Owner Trustee or any authenticating agent. At the option
of a Holder, Trust Certificates may be exchanged for other Trust Certificates of
the same class in authorized denominations of a like aggregate amount upon
surrender of the Trust Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.8.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Certificateholder or his attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Certificate Registrar, which requirements include
membership or participation in the Securities Transfer Agent's Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Certificate Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act. Each Trust Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently disposed
of by the Owner Trustee in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Trust Certificates. If
(a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar, the Owner Trustee and
(unless an Insurer Default shall have occurred and be continuing) the Insurer,
such security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Trust Certificate shall have
been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee, or _____________________, as the Owner
Trustee's authenticating agent, shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a
new Trust Certificate of like class, tenor and denomination. In connection with
the issuance of any new Trust Certificate under this Section, the Owner Trustee
or the Certificate Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Trust Certificate issued pursuant to this Section shall
constitute conclusive evidence of an ownership interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Certificate shall be found at any time.
SECTION 3.6. Persons Deemed Certificateholders. Every Person by virtue of
becoming a Certificateholder or Owner in accordance with this Agreement shall be
deemed to be bound by the terms of this Agreement. Prior to due presentation of
a Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar and the Insurer and any agent of the Owner Trustee, the
Certificate Registrar and the Insurer, may treat the Person in whose name any
Trust Certificate shall be registered in the Certificate Register as the Owner
of such Trust Certificate for the purpose of receiving distributions pursuant to
Section 5.2 and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar or the Insurer nor any agent of the Owner
Trustee, the Certificate Registrar or the Insurer shall be bound by any notice
to the contrary.
SECTION 3.7. Access to List of Certificateholders' Names and Addresses. The
Owner Trustee shall furnish or cause to be furnished to the Servicer, the
Depositor or (unless an Insurer Default shall have occurred and be continuing)
the Insurer, within 15 days after receipt by the Owner Trustee of a request
therefor from such Person in writing, a list, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more Holders
of Trust Certificates or one or more Holders of Trust Certificates evidencing
not less than 25% of the Certificate Balance apply in writing to the Owner
Trustee, and such application states that the applicants desire to communicate
with other Certificateholders with respect to their rights under this Agreement
or under the Trust Certificates and such application is accompanied by a copy of
the communication that such applicants propose to transmit, then the Owner
Trustee shall, within five Business Days after the receipt of such application,
afford such applicants access during normal business hours to the current list
of Certificateholders. Each Holder, by receiving and holding a Trust
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
the Servicer the Owner Trustee or the Insurer or any agent thereof accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan in the City of New York, an office or
offices or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates ---------------------,
- ---------------------------------------, as its principal corporate trust office
for such purposes. The Owner Trustee shall give prompt written notice to the
Depositor, the Certificateholders and (unless an Insurer Default shall have
occurred and be continuing) the Insurer of any change in the location of the
Certificate Register or any such office or agency.
SECTION 3.9. Appointment of Certificate Paying Agent. The Certificate
Paying Agent shall make distributions to Certificateholders from the Certificate
Distribution Account pursuant to Section 5.2 and shall report the amounts of
such distributions to the Owner Trustee. Any Certificate Paying Agent shall have
the revocable power to withdraw funds from the Certificate Distribution Account
for the purpose of making the distributions referred to above. The Owner Trustee
may revoke such power and remove the Certificate Paying Agent if the Owner
Trustee determines in its sole discretion that the Certificate Paying Agent
shall have failed to perform its obligations under this Agreement in any
material respect. The Certificate Paying Agent shall initially be
_____________________, and any co-paying agent chosen by the Owner Trustee, and
acceptable to the Servicer. The Certificate Paying Agent shall be permitted to
resign upon 30 days' written notice to the Owner Trustee and the Servicer. In
the event that the Owner Trustee shall no longer be the Certificate Paying
Agent, the Owner Trustee shall appoint a successor to act as Certificate Paying
Agent (which shall be a bank or trust company). The Owner Trustee in its
individual capacity shall cause such successor Certificate Paying Agent or any
additional Certificate Paying Agent appointed by the Owner Trustee to execute
and deliver to the Owner Trustee and (unless an Insurer Default shall have
occurred and be continuing) the Insurer an instrument in which such successor
Certificate Paying Agent or additional Certificate Paying Agent shall agree with
the Owner Trustee that as Certificate Paying Agent, such successor Certificate
Paying Agent or additional Certificate Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Certificate Paying Agent shall return all unclaimed
funds to the Owner Trustee and upon removal of a Certificate Paying Agent such
Certificate Paying Agent shall also return all funds in its possession to the
Owner Trustee. The provisions of Sections 7.1, 7.3, 7.4 and 8.1 shall apply to
the Owner Trustee also in its role as Certificate Paying Agent, for so long as
the Owner Trustee shall act as Certificate Paying Agent and, to the extent
applicable, to any other paying agent appointed hereunder. Any reference in this
Agreement to the Certificate Paying Agent shall include any co-paying agent
unless the context requires otherwise.
SECTION 3.10. [Reserved]
SECTION 3.11. [Reserved]
SECTION 3.12. Disposition by the General Partner. On
- ---------------------------------- the Closing Date, the Affiliated Purchaser
shall purchase for adequate consideration and retain beneficial and record
ownership of Trust Certificates representing at least 1% of the initial
Certificate Balance, which Trust Certificates shall be issued in definitive
form. Any attempted transfer of any Trust Certificate that would reduce such
interest of the General Partner to below 1% of the Certificate Balance shall be
void; provided, however, -------- ------- that such Trust Certificate may be
transferred to a successor General Partner pursuant to Section 9.2. The Owner
Trustee shall cause any Trust Certificate issued to the General Partner to
contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE."
SECTION 3.13. ERISA Restrictions. The Certificates may not be acquired by
or for the account of (i) an employee benefit plan (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
that is subject to the provisions of Title 1 of ERISA, (ii) a plan described in
Section 4975(e)(1) of the Internal Revenue Code of 1985, as amended, or (iii)
any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding a
Certificate, the Holder thereof shall be deemed to have represented and
warranted that it is not a Benefit Plan.
SECTION 3.14. Book-Entry Trust Certificates. The
- ----------------------------- Trust Certificates, upon original issuance, will
be issued in the form of a typewritten Trust Certificate or Trust Certificates
representing Book-Entry Trust Certificates, to be delivered by or on behalf of
the Trust to The Depository Trust Company, the initial Clearing Agency;
provided, however, that one Definitive -------- ------- Trust Certificate (as
defined below) may be issued to the Affiliated Purchaser, as General Partner
pursuant to Section 3.12. Such Book-Entry Trust Certificate shall initially be
registered on the Certificate Register in the name of Cede & Co., the nominee of
the initial Clearing Agency, and no beneficial owner (other than the General
Partner) will receive a Definitive Trust Certificate representing such
beneficial owner's interest in such Trust Certificate, except as provided in
Section 3.16. Unless and until Definitive Trust Certificates have been issued to
beneficial owners pursuant to Section 3.16:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Certificate Registrar and the Owner Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Agreement relating to the Book-Entry Trust Certificates (including
the payment of principal of and interest on the Book-Entry Trust
Certificates and the giving of instructions or directions to Owners
of Book-Entry Trust Certificates) as the sole Holder of Book-Entry
Trust Certificates and shall have no obligations to the Owners
thereof;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this
Section shall control;
(iv) the rights of the Owners of the Book-Entry Trust
Certificates shall be exercised only through the Clearing Agency and
shall be limited to those established by law and agreements between
such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement,
unless and until Definitive Trust Certificates are issued pursuant to
Section 3.16, the Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
payments of principal of and interest on the Book-Entry Trust
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to
be taken based upon instructions or directions of Holders of Trust
Certificates evidencing a specified percentage of the Certificate
Balance, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to
such effect from Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the
beneficial interest in the Book-Entry Trust Certificates and has
delivered such instructions in writing to the Owner Trustee.
SECTION 3.15. Notices to Clearing Agency. Whenever a notice or other
communication to the Owners is required under this Agreement, unless and until
Definitive Trust Certificates shall have been issued to Owners pursuant to
Section 3.16, the Owner Trustee shall give all such notices and communications
specified herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners, except to the General Partner.
SECTION 3.16. Definitive Trust Certificates. If (i) the Servicer advises
the Owner Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Trust
Certificates, and the Servicer is unable to locate a qualified successor, (ii)
the Servicer at its option advises the Owner Trustee in writing that it elects
to terminate the book-entry system through the Clearing Agency or (iii) after
the occurrence of an Event of Default, Owners of Certificates representing
beneficial interests aggregating at least a majority of the Certificate Balance
advise the Clearing Agency in writing that the continuation of a book-entry
system through the Clearing Agency is no longer in the best interest of the
Owners of Trust Certificates, then the Clearing Agency shall notify all Owners
and the Owner Trustee of the occurrence of any such event and of the
availability of the Definitive Trust Certificates to Owners requesting the same.
Upon surrender to the Owner Trustee of the typewritten Trust Certificate or
Trust Certificates representing the Book-Entry Trust Certificates by the
Clearing Agency, accompanied by registration instructions, the Owner Trustee
shall execute and authenticate the Definitive Trust Certificates in accordance
with the instructions of the Clearing Agency. Neither the Certificate Registrar
nor the Owner Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Trust Certificates, the Owner
Trustee shall recognize the Holders of the Definitive Trust Certificates as
Certificateholders. The Definitive Trust Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof.
ARTICLE IV
Actions by Owner Trustee
SECTION 4.1. Prior Notice to Owners with Respect to Certain Matters. With
respect to the following matters, the Owner Trustee shall not take action unless
at least 30 days before the taking of such action, the Owner Trustee shall have
notified the Certificateholders in writing of the proposed action and the
Certificateholders shall not have notified the Owner Trustee in writing prior to
the 30th day after such notice is given that such Certificateholders have
withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute or unless such amendment would not
materially and adversely affect the interests of the Owners);
(b) the amendment of the Indenture by a supplemental
indenture in circumstances where the consent of any
Noteholder is required;
(c) the amendment of the Indenture by a supplemental
indenture in circumstances where the consent of any
Noteholder is not required and such amendment materially
adversely affects the interest of the Certificateholders;
or
(d) except pursuant to Section 11.1(b) of the Sale and
Servicing Agreement, the amendment, change or modification of the
Sale and Servicing Agreement, except to cure any ambiguity or defect
or to amend or supplement any provision in a manner that would not
materially adversely affect the interests of the Certificateholders.
The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar, Certificate Paying Agent or
Certificate Registrar within five Business Days
thereof.
SECTION 4.2. Action by Certificateholders with Respect to Certain Matters.
The Owner Trustee shall not have the power, except upon the direction of the
Certificateholders or the Insurer in accordance with the Basic Documents, to (a)
remove the Servicer under the Sale and Servicing Agreement pursuant to Section
8.1 thereof or (b) except as expressly provided in the Basic Documents, sell the
Receivables after the termination of the Indenture. The Owner Trustee shall take
the actions referred to in the preceding sentence only upon written instructions
signed by the Certificateholders and the furnishing of indemnification
satisfactory to the Owner Trustee by the Certificateholders.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy. The
Owner Trustee shall not have the power to, and shall not, commence any
proceeding or other actions contemplated by Section 2.13(d) relating to the
Trust without the prior written consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) and the unanimous prior approval
of all Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power. (a) The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
(b) No Certificateholder shall have any right by
virtue or by availing itself of any provisions of this Agreement
to institute any suit, action, or proceeding in equity or at law upon or under
or with respect to this Agreement or any Basic Document, unless the
Certificateholders are the Instructing Party pursuant to Section 6.3 and unless
a Certificateholder previously shall have given to the Owner Trustee a written
notice of default and of the continuance thereof, as provided in this Agreement,
and also unless Certificateholders evidencing not less than 25% of the
Certificate Balance shall have made written request upon the Owner Trustee to
institute such action, suit or proceeding in its own name as Owner Trustee under
this Agreement and shall have offered to the Owner Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Owner Trustee, for 30 days after its
receipt of such notice, request, and offer of indemnity, shall have neglected or
refused to institute any such action, suit, or proceeding, and during such
30-day period no request or waiver inconsistent with such written request has
been given to the Owner Trustee pursuant to and in compliance with this Section
or Section 6.3; it being understood and intended, and being expressly covenanted
by each Certificateholder with every other Certificateholder and the Owner
Trustee, that no one or more Holders of Certificates shall have any right in any
manner whatever by virtue or by availing itself or themselves of any provisions
of this Agreement to affect, disturb, or prejudice the rights of the Holders of
any other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 4.4, each and every
Certificateholder and the Owner Trustee shall be entitled to such relief as can
be given either at law or in equity. Nothing in this Agreement shall be
construed as giving the Certificateholders any right to make a claim under the
Certificate Policy.
SECTION 4.5. Majority Control. No Certificate Owner shall have any right to
vote or in any manner otherwise control the operation and management of the
Trust except as expressly provided in this Agreement. Except as expressly
provided herein, any action that may be taken by the Certificateholders under
this Agreement may be taken by the Holders of Trust Certificates evidencing not
less than a majority of the Certificate Balance. Except as expressly provided
herein, any written notice of the Certificateholders delivered pursuant to this
Agreement shall be effective if signed by Holders of Certificates evidencing not
less than a majority of the Certificate Balance at the time of the delivery of
such notice.
SECTION 4.6. Rights of Insurer. Notwithstanding anything to the contrary in
the Basic Documents, without the prior written consent of the Insurer (so long
as no Insurer Default shall have occurred and be continuing), the Owner Trustee
shall not (i) remove the Servicer, (ii) initiate any claim, suit or proceeding
by the Trust or compromise any claim, suit or proceeding brought by or against
the Trust, other than with respect to the enforcement of any Receivable or any
rights of the Trust thereunder, (iii) authorize the merger or consolidation of
the Trust with or into any other business trust or other entity (other than in
accordance with Section 3.10 of the Indenture) or (iv) amend the Certificate of
Trust.
ARTICLE V
Application of Trust Funds:
Certain Duties
SECTION 5.1. Establishment of Certificate Distribution Account. (a) The
Owner Trustee, for the benefit of the Certificateholders, shall establish and
maintain in the name of the Trust an Eligible Deposit Account (the "Certificate
Distribution Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders.
(b) The Owner Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Certificate Distribution
Account and in all proceeds thereof. If, at any time, the Certificate
Distribution Account ceases to be an Eligible Deposit Account, the Owner
Trustee shall within five Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency and, so long as no
Insurer Default shall have occurred and be continuing, the Insurer may
consent) establish a new Certificate Distribution Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such
new Certificate Distribution Account.
(c) All amounts held in the Certificate Distribution Account shall, to
the extent permitted by applicable laws, rules and regulations, be
invested, by the Owner Trustee at the Servicer's written direction, in
Eligible Investments that mature not later than one Business Day prior to
the Distribution Date for the Monthly Period to which such amounts relate.
Investments in Eligible Investments shall be made in the name of the Trust,
and such investments shall not be sold or disposed of prior to their
maturity. Subject to the other provisions hereof, the Owner Trustee shall
have sole control over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment, if any,
shall be delivered directly to the Owner Trustee. All Investment Earnings
on funds in the Certificate Distribution Account shall be distributed on
the next Distribution Date pursuant to Section 5.6 of the Sale and
Servicing Agreement.
SECTION 5.2. Application of Funds in Certificate Distribution Account. (a)
On each Distribution Date, the Owner Trustee will, based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date pursuant to Section 4.9 of the Sale and Servicing Agreement, distribute to
Certificateholders, to the extent of the funds available, amounts deposited in
the Certificate Distribution Account pursuant to Sections 5.6(b) and 9.1 of the
Sale and Servicing Agreement on such Distribution Date in the following order of
priority:
(i) first, from the amounts deposited in the Certificate
Distribution Account pursuant to Section 5.6(b)(v) or Section
9.1(b)(v) of the Sale and Servicing Agreement, to the
Certificateholders, on a pro rata basis, an amount equal to the
Certificateholders' Interest Distributable Amount; and
(ii) second, from the amounts deposited in the Certificate
Distribution Account pursuant to Section 5.6(b)(vi) or Section
9.1(b)(vi) of the Sale and Servicing Agreement, to the
Certificateholders, on a pro rata basis, an amount equal to the
Certificateholders' Principal
Distributable Amount.
(b) On the Distribution Date following the date on which amounts
received in respect of the Seller's or the Servicer's exercise of its
option to purchase the corpus of the Trust pursuant to Section 9.1(a) of
the Sale and Servicing Agreement are deposited in the Certificate
Distribution Account, the Owner Trustee will distribute such amounts taking
into account any concurrent distribution made pursuant to Section 5.2(a):
(i) first, to the Certificateholders, on a pro rata
basis, an amount equal to the Certificateholders' Interest
Distributable Amount; and
(ii) second, to the Certificateholders, on a pro rata
basis, for amounts due and unpaid on the Certificates for
principal.
(c) On the Distribution Date on which Insolvency Proceeds are
deposited in the Certificate Distribution Account pursuant to Section
9.1(b) of the Sale and Servicing Agreement (or on the Distribution Date
immediately following such deposit if such proceeds are not deposited in
the Certificate Distribution Account on a Distribution Date), the Owner
Trustee will distribute the Insolvency Proceeds so deposited in the
Certificate Distribution Account taking into account any concurrent
distribution made pursuant to Section 5.2(a):
(i) first, to the Certificateholders, on a pro rata
basis, an amount equal to the Certificateholders' Interest
Distributable Amount; and
(ii) second, to the Certificateholders, on a pro rata
basis, for amounts due and unpaid on the Certificates for
principal.
(d) On the Distribution Date following the date on which the Indenture
Trustee makes payments of money or property in respect of liquidation of
the Trust Property pursuant to Section 5.06 of the Indenture and deposits
funds received in connection with such liquidation in the Certificate
Distribution Account, the Owner Trustee will distribute such funds taking
into account any concurrent distribution made pursuant to Section 5.2(a):
(i) first, to the Certificateholders, on a pro rata
basis, an amount equal to the Certificateholders' Interest
Distributable Amount; and
(ii) second, to the Certificateholders, on a pro rata
basis, for amounts due and unpaid on the Certificates for
principal; and
(e) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement provided to the Owner Trustee by the
Servicer pursuant to Section 5.7 of the Sale and Servicing Agreement on
such Distribution Date.
(f) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall
reduce the amount otherwise distributable to the Certificateholder in
accordance with this Section. The Owner Trustee is hereby authorized and
directed to retain from amounts otherwise distributable to the
Certificateholders sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the
Owner Trustee from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome
of such proceedings). The amount of any withholding tax imposed with
respect to a Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Trust and remitted to
the appropriate taxing authority. If there is a possibility that
withholding tax is payable with respect to a distribution (such as a
distribution to a non-US Certificateholder), the Owner Trustee may in it
sole discretion withhold such amounts in accordance with this clause (f).
In the event that an Owner wishes to apply for a refund of any such
withholding tax, the Owner Trustee shall reasonably cooperate with such
Certificateholder in making such claim so long as such Certificateholder
agrees to reimburse the Owner Trustee for any out-of-pocket expenses
incurred.
(g) Any funds remaining in the Certificate Distribution Account after
distribution of all amounts specified in this Section 5.2 shall be
distributed to the General Partner.
SECTION 5.3. [Reserved.]
SECTION 5.4. Method of Payment. Subject to Section 9.1(c),
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if
(i) such Certificateholder shall have provided to the Certificate Registrar
appropriate written instructions at least five Business Days prior to such
Distribution Date and such Holder's Trust Certificates in the aggregate evidence
a denomination of not less than $1,000,000 or (ii) such Certificateholder is the
General Partner, or an Affiliate thereof, or, if not, by check mailed to such
Certificateholder at the address of such holder appearing in the Certificate
Register; provided, however, that, unless Definitive Trust Certificates have
been issued pursuant to Section 3.16, with respect to Trust Certificates
registered on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), distributions will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Notwithstanding the foregoing, the final distribution in respect of any
Trust Certificate (whether on the Final Scheduled Distribution Date or
otherwise) will be payable only upon presentation and surrender of such Trust
Certificate at the office or agency maintained for that purpose by the Owner
Trustee pursuant to Section 3.8.
SECTION 5.5. No Segregation of Monies; No Interest. Subject to Sections 5.1
and 5.2, monies received by the Owner Trustee hereunder need not be segregated
in any manner except to the extent required by law and may be deposited under
such general conditions as may be prescribed by law, and the Owner Trustee shall
not be liable for any interest thereon.
SECTION 5.6. Accounting and Reports to the Noteholders, Certificateholders,
the Internal Revenue Service and Others. Subject to Sections 10.1(b)(iii) and
10.1(c) of the Sale and Servicing Agreement, the General Partner shall (a)
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis on the accrual method of accounting, (b) deliver (or cause to be
delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1) to enable each Certificateholder to prepare its Federal and state
income tax returns, (c) file or cause to be filed such tax returns relating to
the Trust (including a partnership information return, Form 1065), and direct
the Owner Trustee to make such elections as may from time to time be required or
appropriate under any applicable state or Federal statute or rule or regulation
thereunder so as to maintain the Trust's characterization as a partnership for
Federal income tax purposes and (d) collect or cause to be collected any
withholding tax as described in and in accordance with Section 5.2(c) with
respect to income or distributions to Certificateholders. The Owner Trustee
shall make all elections pursuant to this Section as directed by the General
Partner. The Owner Trustee shall sign all tax information returns filed pursuant
to this Section 5.6 and any other returns as may be required by law, and in
doing so shall rely entirely upon, and shall have no liability for information
provided by, or calculations provided by, the General Partner. The Owner Trustee
shall elect under Section 1278 of the Code to include in income currently any
market discount that accrues with respect to the Receivables. The Owner Trustee
shall not make the election provided under Section 754 of the Code.
SECTION 5.7. Signature on Returns; Tax Matters Partner. (a) Notwithstanding
the provisions of Section 5.6, the Owner Trustee shall sign on behalf of the
Trust the tax returns of the Trust, unless applicable law requires a
Certificateholder or an Owner to sign such documents, in which case such
documents shall be signed by the General Partner.
(b) The General Partner shall be the "tax matters
partner" of the Trust pursuant to the Code.
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is named
as a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is named as a party and
any amendment thereto, in each case, in such form as the Depositor shall approve
as evidenced conclusively by the Owner Trustee's execution thereof, and on
behalf of the Trust, to direct the Trustee to authenticate and deliver Class A-1
Notes in the aggregate principal amount of $_____________, Class A-2 Notes in
the aggregate principal amount of $_____________ and Class A-3 Notes in the
aggregate principal amount of $_____________. In addition to the foregoing, the
Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust pursuant to the Basic Documents. The Owner Trustee is
further authorized from time to time to take such action as the Instructing
Party recommends with respect to the Basic Documents so long as such activities
are consistent with the terms of the Basic Documents.
SECTION 6.2. General Duties. It shall be the duty of the Owner Trustee to
discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Sale and Servicing Agreement and to
administer the Trust in the interest of the Owners, subject to the Basic
Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Servicer has agreed in the Sale and Servicing
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be liable
for the default or failure of the Servicer to carry out its obligations under
the Sale and Servicing Agreement.
SECTION 6.3. Action upon Instruction. (a) Subject to Article IV and the
terms of the Spread Account Agreement, the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or the Certificateholders (if
an Insurer Default shall have occurred and be continuing) (the "Instructing
Party") shall have the exclusive right to direct the actions of the Owner
Trustee in the management of the Trust, so long as such instructions are not
inconsistent with the express terms set forth herein or in any Basic Document.
The Instructing Party shall not instruct the Owner Trustee in a manner
inconsistent with this Agreement or the Basic Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner Trustee or
is contrary to the terms hereof or of any Basic Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or
any Basic Document, the Owner Trustee shall promptly give notice (in such
form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in
accordance with any written instruction of the Certificateholders received,
the Owner Trustee shall not be liable on account of such action to any
Person. If the Owner Trustee shall not have received appropriate
instruction within ten days of such notice (or within such shorter period
of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or
refrain from taking such action, not inconsistent with this Agreement or
the Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such
action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any
such provision is ambiguous as to its application, or is, or appears to be,
in conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to
the Certificateholders requesting instruction and, to the extent that the
Owner Trustee acts or refrains from acting in good faith in accordance with
any such instruction received, the Owner Trustee shall not be liable, on
account of such action or inaction, to any Person. If the Owner Trustee
shall not have received appropriate instruction within 10 days of such
notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it
may, but shall be under no duty to, take or refrain from taking such
action, not inconsistent with this Agreement or the Basic Documents, as it
shall deem to be in the best interests of the Certificateholders, and shall
have no liability to any Person for such action or inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any Basic Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any Liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee (solely in its
individual capacity) and that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 6.5. No Action Except under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.3.
SECTION 6.6. Restrictions. The Owner Trustee shall not take any action (a)
that is inconsistent with the purposes of the Trust set forth in Section 2.3 or
(b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trust and Duties. The Owner Trustee accepts the
trust hereby created and agrees to perform its duties hereunder with respect to
such trust but only upon the terms of this Agreement. The Owner Trustee also
agrees to disburse all moneys actually received by it constituting part of the
Owner Trust Estate upon the terms of the Basic Documents and this Agreement. The
Owner Trustee in its individual capacity shall not be answerable or accountable
hereunder or under any Basic Document under any circumstances, except (i) for
its own willful misconduct, bad faith or negligence, (ii) in the case of the
inaccuracy of any representation or warranty contained in Section 7.3 expressly
made by the Owner Trustee in its individual capacity, (iii) for liabilities
arising from the failure of the Owner Trustee to perform obligations expressly
undertaken by it in the last sentence of Section 6.4 hereof, (iv) for any
investments issued by the Owner Trustee or any branch or affiliate thereof in
its commercial capacity or (v) for taxes, fees or other charges on, based on or
measured by, any fees, commissions or compensation received by the Owner Trustee
in its individual capacity. In particular, but not by way of limitation (and
subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any
error of judgment made by a Responsible Officer of the
Owner Trustee;
(b) the Owner Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in
accordance with the instructions of the Servicer or any
Certificateholder;
(c) no provision of this Agreement or any Basic Document
shall require the Owner Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its rights
or powers hereunder or under any Basic Document if the Owner Trustee
shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be
liable for indebtedness evidenced by or arising under any
of the Basic Documents, including the principal of and
interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the
due execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any of the Owner Trust
Estate or for or in respect of the validity or sufficiency of the
Basic Documents, other than the certificate of authentication on the
Trust Certificates, and the Owner Trustee shall in no event assume or
incur any liability, duty or obligation to the Insurer, Trustee,
Indenture Collateral Agent, the Collateral Agent, any Noteholder or
to any Certificateholder, other than as expressly provided for herein
and in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Insurer, the Trustee or the Servicer under any of
the Basic Documents or otherwise and the Owner Trustee shall have no
obligation or liability to perform the obligations of the Trust under
this Agreement or the Basic Documents that are required to be
performed by the Insurer under the Certificate Policy, by the Trustee
under the Indenture or the Servicer under the Sale and Servicing
Agreement; and
(g) the Owner Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement,
or to institute, conduct or defend any litigation under this
Agreement or otherwise or in relation to this Agreement or any Basic
Document, at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to
the Owner Trustee security or indemnity satisfactory to it against
the costs, expenses and liabilities that may be incurred by the Owner
Trustee therein or thereby. The right of the Owner Trustee to perform
any discretionary act enumerated in this Agreement or in any Basic
Document shall not be construed as a duty, and the Owner Trustee
shall not be answerable for other than its negligence, bad faith or
willful misconduct in the performance of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee shall furnish to
the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents.
SECTION 7.3. Representations and Warranties. The Owner Trustee in its
individual capacity hereby represents and warrants to the Depositor, the Owners
and the Insurer (which shall have relied on such representations and warranties
in issuing the Policies), that:
(a) It is a Delaware banking corporation, duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who
is duly authorized to execute and deliver this Agreement on its
behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or Delaware state law, governmental rule
or regulation governing the banking or trust powers of the Owner
Trustee or any judgment or order binding on it, or constitute any
default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound.
SECTION 7.4. Reliance; Advice of Counsel. (a) The Owner Trustee shall incur
no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to be signed
by the proper party or parties. The Owner Trustee may accept a certified copy of
a resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter the
method of the determination of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate, signed by the
president or any vice president or by the treasurer, secretary or other
authorized officers of the relevant party, as to such fact or matter, and such
certificate shall constitute full protection to the Owner Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trust hereunder and
in the performance of its duties and obligations under this Agreement
or the Basic Documents, the Owner Trustee (i) may act directly or
through its agents or attorneys pursuant to agreements entered into
with any of them, and the Owner Trustee shall not be liable for the
conduct or misconduct of such agents or attorneys if such agents or
attorneys shall have been selected by the Owner Trustee with
reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed
by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written
opinion or advice of any such counsel, accountants or other such
persons and not contrary to this Agreement or any Basic Document.
SECTION 7.5. Not Acting in Individual Capacity. Except as expressly
provided herein or in any other Basic Document, in accepting the trust hereby
created _____________________ acts solely as Owner Trustee hereunder and not in
its individual capacity and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Basic Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Trust Certificates or
Receivables. The recitals contained herein and in the Trust Certificates (other
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Basic Document or of the Trust Certificates (other than the signature and
countersignature of the Owner Trustee on the Trust Certificates) or the Notes,
or of any Receivable or related documents. The Owner Trustee shall at no time
have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Receivable, or the perfection and priority of
any security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments to
be distributed to Certificateholders under this Agreement or the Noteholders
under the Indenture, including: the existence, condition and ownership of any
Financed Vehicle; the existence and enforceability of any insurance thereon; the
existence and contents of any Receivable on any computer or other record
thereof; the validity of the assignment of any Receivable to the Trust or of any
intervening assignment; the completeness of any Receivable; the performance or
enforcement of any Receivable; the compliance by the Depositor or the Servicer
with any warranty or representation made under any Basic Document or in any
related document or the accuracy of any such warranty or representation or any
action of the Trustee or the Servicer or any subservicer taken in the name of
the Owner Trustee.
SECTION 7.7. Owner Trustee May Own Trust Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Trust Certificates or Notes and may deal with the Depositor, the Trustee and
the Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8. Payments from Owner Trust Estate. All payments to be made by
the Owner Trustee under this Agreement or any of the Basic Documents to which
the Trust or the Owner Trustee is a party shall be made only from the income and
proceeds of the Owner Trust Estate and only to the extent that the Owner Trust
shall have received income or proceeds from the Owner Trust Estate to make such
payments in accordance with the terms hereof. _____________________, or any
successor thereto, in its individual capacity, shall not be liable for any
amounts payable under this Agreement or any of the Basic Documents to which the
Trust or the Owner Trustee is a party.
SECTION 7.9. Doing Business in Other Jurisdictions. Notwithstanding
anything contained to the contrary, neither _____________________ or any
successor thereto, nor the Owner Trustee shall be required to take any action in
any jurisdiction other than in the State of Delaware if the taking of such
action will, even after the appointment of a co-trustee or separate trustee in
accordance with Section 10.5 hereof, (i) require the consent or approval or
authorization or order of or the giving of notice to, or the registration with
or the taking of any other action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of Delaware; (ii)
result in any fee, tax or other governmental charge under the laws of the State
of Delaware becoming payable by _____________________ (or any successor
thereto); or (iii) subject _____________________ (or any successor thereto) to
personal jurisdiction in any jurisdiction other than the State of Delaware for
causes of action arising from acts unrelated to the consummation of the
transactions by _____________________ (or any successor thereto) or the Owner
Trustee, as the case may be, contemplated hereby.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between ____________ and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the General
Partner for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder; provided,
- -------- however, that the Owner Trustee shall only be entitled to -------
reimbursement for expenses hereunder to the extent such expenses (i) are fees of
outside counsel engaged by the Owner Trustee in respect of the performance of
its obligations hereunder, but up to a dollar amount not to exceed the amount
previously agreed to with _________ and only so long as the Owner Trustee has
given the General Partner prior notice of its engagement of such counsel; or
(ii) relate to the performance of its obligations pursuant to Section 5.6
hereof.
SECTION 8.2. Indemnification. The General Partner shall be liable as
primary obligor for, and shall indemnify the Owner Trustee and its successors,
assigns, agents and servants (collectively, the "Indemnitees") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any Indemnitee in any way relating to or
arising out of this Agreement, the Basic Documents, the Owner Trust Estate, the
administration of the Owner Trust Estate or the action or inaction of the Owner
Trustee hereunder, except only that the General Partner shall not be liable for
or required to indemnify the Owner Trustee from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.1. If a claim is made against any Indemnitee which could give rise to
indemnification hereunder, such Indemnitee, upon receiving such claim, shall
give notice thereof to the General Partner; provided, however, that failure to
give or delay in giving such notice shall not release the General Partner from
any of its indemnification obligations hereunder unless and only to the extent
that the General Partner can demonstrate it was harmed thereby. The General
Partner shall be entitled to defend any such claim through counsel selected by
it (so long as such counsel is reasonably acceptable to the Indemnitee) and each
Indemnitee will extend reasonable cooperation to the General Partner and such
counsel in connection with such defense. The indemnities contained in this
Section shall survive the resignation or termination of the Owner Trustee or the
termination of this Agreement.
SECTION 8.3. Payments to the Owner Trustee. Any amounts paid to the Owner
Trustee pursuant to this Article VIII shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
SECTION 8.4. Non-recourse Obligations. Notwithstanding anything in this
Agreement or any Basic Document, the Owner Trustee agrees in its individual
capacity and in its capacity as Owner Trustee for the Trust that all obligations
of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust
shall be recourse to the Owner Trust Estate only and specifically shall not be
recourse to the assets of any Owner.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement. (a) This Agreement and the
Trust shall terminate and be of no further force or effect upon the latest of
(i) the maturity or other liquidation of the last Receivable (including the
purchase by the Servicer at its option of the corpus of the Trust as described
in Section 9.1 of the Sale and Servicing Agreement) and the subsequent
distribution of amounts in respect of such Receivables as provided in the
Related Documents, (ii) the payment to Certificateholders of all amounts
required to be paid to them pursuant to this Agreement and the payment to the
Insurer of all amounts payable or reimbursable to it pursuant to the Sale and
Servicing Agreement, or (iii) at the time provided in Section 9.2.; provided,
however, that in no event shall the trust created by this Agreement continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants living on the date of this Agreement of Rose Kennedy of the
Commonwealth of Massachusetts; and provided, further, that the rights to
indemnification under Section 8.2 shall survive the termination of the Trust.
The Servicer shall promptly notify the Owner Trustee and the Insurer of any
prospective termination pursuant to this Section 9.1. Except as provided in
Section 9.2, the bankruptcy, liquidation, dissolution, death or incapacity of
any Certificateholder or Owner, other than the General Partner as described in
Section 9.2, shall not (x) operate to terminate this Agreement or the Trust, nor
(y) entitle such Certificateholder's or Owner's legal representatives or heirs
to claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Owner Trust Estate
nor (z) otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Except as provided in clause (a), neither the Depositor nor the
General Partner nor any Certificateholder shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender their
Trust Certificates to the Certificate Paying Agent for payment of the final
distribution and cancellation, shall be given by the Owner Trustee by
letter to Certificateholders mailed within five Business Days of receipt of
notice of such termination from the Servicer given pursuant to Section
9.1(c) of the Sale and Servicing Agreement, stating (i) the Distribution
Date upon or with respect to which final payment of the Trust Certificates
shall be made upon presentation and surrender of the Trust Certificates at
the office of the Certificate Paying Agent therein designated, (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 Trust Certificates at the
office of the Certificate Paying Agent therein specified. The Owner Trustee
shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Certificate Paying Agent at the time such notice is
given to Certificateholders. Upon presentation and surrender of the Trust
Certificates, the Certificate Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant
to Section 5.2.
In the event that all of the Certificateholders shall not surrender their
Trust Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their Trust
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Trust Certificates
shall not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed, subject to
applicable escheat laws, by the Owner Trustee to the General Partner. As soon as
practicable after the termination of the Trust, the Owner Trustee shall
surrender the Certificate Policy to the Insurer for cancellation.
(d) Any funds remaining in the Trust after funds for final
distribution have been distributed or set aside for distribution shall be
distributed by the Owner Trustee to the General Partner.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with
the provisions of Section 3810 of the Business Trust Statute.
SECTION 9.2. Dissolution upon Bankruptcy of the General Partner. In the
event that an Insolvency Event shall occur with respect to the General Partner,
this Agreement shall be terminated in accordance with Section 9.1 90 days after
the date of such Insolvency Event, unless, before the end of such 90-day period,
the Owner Trustee shall have received written instructions from
Certificateholders holding a majority of the Certificate Balance (other than the
General Partner) to the effect that each such party disapproves of the
liquidation of the Receivables and termination of the Trust. Promptly after the
occurrence of any Insolvency Event with respect to the General Partner, (i) the
General Partner shall give the Trustee, the Owner Trustee and the Insurer
written notice of such Insolvency Event, (ii) the Owner Trustee shall, upon the
receipt of such written notice from the General Partner, give prompt written
notice to the Certificateholders and the Trustee of the occurrence of such event
and (iii) the Trustee shall, upon receipt of written notice of such Insolvency
Event from the Owner Trustee or the General Partner, give prompt written notice
to the Noteholders of the occurrence of such event; provided, however, that any
failure to give a notice required by this sentence shall not prevent or delay,
in any manner, a termination of the Trust pursuant to the first sentence of this
Section 9.2. Upon a termination pursuant to this Section, the Insurer or, if an
Insurer Default has occurred and is continuing, the Owner Trustee shall direct
the Trustee promptly to sell the assets of the Owner Trust Estate (other than
the Certificate Policy) in a commercially reasonable manner and on commercially
reasonable terms. The proceeds of such a sale of the assets of the Trust shall
be treated as collections under the Sale and Servicing Agreement and shall be
distributed in accordance with Section 9.1(b) thereof.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee. The Owner Trustee
shall at all times be a corporation (i) satisfying the provisions of Section
3807(a) of the Business Trust Statute; (ii) authorized to exercise corporate
trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; and (iv) acceptable to the Insurer in its sole discretion, so long
as an Insurer Default shall not have occurred and be continuing. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be discharged from the trust hereby created by giving
written notice thereof to the General Partner, the Insurer and the Servicer.
Upon receiving such notice of resignation, the General Partner shall promptly
appoint a successor Owner Trustee by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and one
copy to the successor Owner Trustee, provided that the General Partner shall
have received written confirmation from each of the Rating Agencies that the
proposed appointment will not result in an increased capital charge to the
Insurer by either of the Rating Agencies. If no successor Owner Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Owner Trustee or the Insurer
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the General Partner, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the General Partner with the consent of the Insurer (so long
as an Insurer Default shall not have occurred and be continuing) may remove the
Owner Trustee. If the General Partner shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the General Partner shall
promptly appoint a successor Owner Trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the outgoing Owner Trustee so
removed, one copy to the Insurer and one copy to the successor Owner Trustee and
payment of all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The General Partner shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
General Partner, the Servicer, the Insurer and to its predecessor Owner Trustee
an instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the General Partner and the
predecessor Owner Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Servicer shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Trustee, the Noteholders and the Rating
Agencies. If the Servicer shall fail to mail such notice within 10 days after
acceptance of appointment by the successor Owner Trustee, the successor Owner
Trustee shall cause such notice to be mailed at the expense of the Servicer.
SECTION 10.4. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Servicer and the Owner Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Owner Trustee and the Insurer to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Servicer and
the Owner Trustee may consider necessary or desirable. If the Servicer shall not
have joined in such appointment within 15 days after the receipt by it of a
request so to do, the Owner Trustee subject, unless an Insurer Default shall
have occurred and be continuing, to the approval of the Insurer (which approval
shall not be unreasonably withheld) shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as a successor trustee pursuant to
Section 10.1 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be
conferred upon and exercised or performed by the Owner Trustee and
such separate trustee or co-trustee jointly (it being understood that
such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed, the Owner Trustee shall
be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the
holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Servicer and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trust conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a
copy thereof given to the Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
Miscellaneous
SECTION 11.1. Supplements and Amendments. (a) This Agreement may be amended
by the Depositor and the Owner Trustee, with the prior written consent of the
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) and with prior written notice to the Rating Agencies, without the
consent of any of the Noteholders or the Certificateholders, (i) to cure any
ambiguity or defect or (ii) to correct, supplement or modify any provisions in
this Agreement; provided, however, that such action shall not, as evidenced by
an Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time, with the prior
written consent of the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) by the Depositor and the Owner Trustee, with prior
written notice to the Rating Agencies, with the consent of the Holders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes and,
to the extent such amendment materially and adversely affects the interests of
the Noteholders, the consent of the Holders of Certificates evidencing not less
than a majority of the Certificate Balance (which consent of any Holder of a
Certificate or Note given pursuant to this Section or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder and
on all future Holders of such Certificate or Note and of any Certificate or Note
issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Certificate or Note)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that, subject to the express rights of the Insurer under the Basic
Documents, no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Receivables or distributions that shall be required to be made for the benefit
of the Noteholders or the Certificateholders or (b) reduce the aforesaid
percentage of the Outstanding Amount of the Notes and the Certificate Balance
required to consent to any such amendment, without the consent of the Holders of
all the outstanding Notes and Holders of all outstanding Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Trustee pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2. No Legal Title to Owner Trust Estate in Certificateholders.
The Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title or interest of the Certificateholders to and in their ownership interest
in the Owner Trust Estate shall operate to terminate this Agreement or the trust
hereunder or entitle any transferee to an accounting or to the transfer to it of
legal title to any part of the Owner Trust Estate.
SECTION 11.3. Limitations on Rights of Others. Except for Section 2.7, the
provisions of this Agreement are solely for the benefit of the Owner Trustee,
the Depositor, the Certificateholders, the Servicer and, to the extent expressly
provided herein, the Trustee and the Noteholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in the Owner Trust Estate or under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 11.4. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally delivered, delivered by overnight courier
or mailed first class mail or certified mail, in each case return receipt
requested, and shall be deemed to have been duly given upon receipt, if to the
Owner Trustee, addressed to the Corporate Trust Office; if to the Depositor,
addressed to NationsFinancial Funding Corporation, 225 East John W. Carpenter
Freeway, Irving, Texas 75062, Attention: _____________________ with a copy to
NationsCredit Commercial Corporation, One Canterbury Green, Stamford,
Connecticut 06901, Attention: General Counsel; if to the holder of the Insurer,
addressed to Insurer, Financial Security Assurance Inc., 350 Park Avenue, New
York, New York 10022, Attention: Surveillance Department, Telex No.: (212) 688-
3101, Confirmation: (212) 826-0100, Telecopy Nos.: (212) 339- 3518, (212)
339-3529 (in each case in which notice or other communication to the Insurer
refers to an Event of Default, a claim on the Policies or with respect to which
failure on the part of the Insurer to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of the General Counsel and Head-Financial Guaranty
Group "URGENT MATERIAL ENCLOSED"); or, as to each party, at such other address
as shall be designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at
the address of such Holder as shown in the Certificate Register. Any notice
so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 11.5. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7. Third-Party Beneficiaries. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this
Agreement, no other Person shall have any right or obligation hereunder. Upon
issuance of the Certificate Policy, this Agreement shall also inure to the
benefit of the Insurer for so long as an Insurer Default shall not have occurred
and be continuing. Without limiting the generality of the foregoing, all
covenants and agreements in this Agreement which confer rights upon the Insurer
shall be for the benefit of and run directly to the Insurer, and the Insurer
shall be entitled to rely on and enforce such covenants, subject, however, to
the limitations on such rights provided in this Agreement and the Basic
Documents. The Insurer may disclaim any of its rights and powers under this
Agreement (but not its duties and obligations under the Policies) upon delivery
of a written notice to the Owner Trustee.
SECTION 11.8. [Reserved.]
SECTION 11.9. No Petition. The Owner Trustee (in its individual capacity
and as Owner Trustee), by entering into this Agreement, each Certificateholder,
by accepting a Trust Certificate, and the Trustee and each Noteholder by
accepting the benefits of this Agreement, hereby covenants and agrees that they
will not at any time institute against the General Partner, or join in any
institution against the General Partner of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Trust Certificates, the Notes, this Agreement or
any of the Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Seller, the Servicer, the General Partner, the Owner
Trustee, the Trustee, the Insurer or any Affiliate thereof and no recourse may
be had against such parties or their assets, except as may be expressly set
forth or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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 11.13. [Reserved].
SECTION 11.14. Servicer. The Servicer is authorized to prepare, or cause to
be prepared, execute and deliver on behalf of the Trust all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Trust or Owner Trustee to prepare, file or deliver pursuant to the Basic
Documents. Upon written request, the Owner Trustee shall execute and deliver to
the Servicer a limited power of attorney appointing the Servicer the Trust's
agent and attorney-in-fact to prepare, or cause to be prepared, execute and
deliver all such documents, reports, filings, instruments, certificates and
opinions.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed by their respective officers hereunto duly
authorized as of the day and year first above written.
-----------------------
Owner Trustee
By:---------------------------
Name:
Title:
NATIONSFINANCIAL FUNDING
CORPORATION
Depositor,
By:--------------------------
Name:
Title:
ACCEPTED AND AGREED
with respect to the
provisions relating to
the Affiliated Purchaser
and the General Partner
[AFFILIATED PURCHASER]
By: __________________
Name:
Title:
<PAGE>
EXHIBIT A
NUMBER $
R- CUSIP NO.
SEE REVERSE FOR CERTAIN DEFINITIONS
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS TRUST CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS
SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS
TRUST CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.]
[THIS CERTIFICATE IS NOT TRANSFERABLE]2
- --------
2 To be inserted on the Certificate to be held by the General
Partner.
____% ASSET BACKED CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Trust, as defined below, the property of which includes certain rights
respecting a pool of retail installment sale contracts secured by new or used
automobiles, vans or light duty trucks and sold to the Trust by NationsFinancial
Funding Corporation
(This Trust Certificate does not represent an interest in or obligation of
NationsFinancial Funding Corporation or any of its Affiliates, except to the
extent described below.)
THIS CERTIFIES THAT is the registered owner of DOLLARS nonassessable,
fully-paid, beneficial ownership interest in certain distributions of
NationsFinancial Auto Owner Trust 1996-1 (the "Trust") formed by
NationsFinancial Funding Corporation, a Delaware corporation (the "Seller"). The
Trust Certificates have a Certificate Rate of ____% per annum.
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the
within-mentioned Trust Agreement.
- ----------------------- -----------------------
not in its individual not in its individual
capacity but solely as capacity but solely as
Owner Trustee or Owner Trustee
By _____________________,
Authenticating Agent
by__________________________
by________________________
The Trust was created pursuant to a Trust Agreement dated as of November
30, 1996 (the "Trust Agreement"), between the Seller and _____________________,
as owner trustee (in such capacity, the "Owner Trustee"), a summary of certain
of the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Trust Certificates
designated as "____% Asset Backed Certificates" (herein called the "Trust
Certificates"). Also issued under the Indenture dated as of November 30, 1996,
among the Trust, ___________________________, as trustee and indenture
collateral agent, are three classes of Notes designated as "Class A-1 ______%
Asset Backed Notes" (the "Class A-l Notes"), "Class A-2 Floating
Rate Asset Backed Notes (the "Class A-2 Notes"), "Class A-3 ____% Asset Backed
Notes" (the "Class A-3 Notes", together with the Class A-2 Notes and the Class
A-1 Notes, (the "Notes"). This Trust Certificate is issued under and is subject
to the terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Trust Certificate by virtue of the acceptance
hereof assents and by which such holder is bound. The property of the Trust
includes certain rights respecting a pool of retail installment sale contracts
secured by new and used automobiles, vans or light duty trucks (the
"Receivables"), all monies due thereunder on or after Cutoff Date (other than
amounts received in connection with Collateral Protection Insurance), in the
case of Pre-Computed Receivables or received thereafter in the case of Simple
Interest Receivables, security interests in the vehicles financed thereby,
certain bank accounts and the proceeds thereof, certain proceeds from claims on
certain insurance policies and certain other rights under the Trust Agreement
and the Sale and Servicing Agreement, all right, to the and interest of the
Seller in and to the Purchase Agreement dated as of November 30, 1996 between
SunStar Acceptance Corporation and the Seller and all proceeds of the foregoing.
Under the Trust Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next Business Day
(the "Distribution Date"), commencing on ________ __, 1996, to the Person in
whose name this Trust Certificate is registered at the close of business on the
Business Day preceding such Distribution Date (the "Record Date") such
Certificateholder's fractional undivided interest in the amount to be
distributed to Certificateholders on such Distribution Date. No principal will
be paid on the Trust Certificate until the Class A-3 Notes have been paid in
full.
The holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as applicable.
The Certificates are entitled to the benefits of a financial guaranty
insurance policy (the "Certificate Policy") issued by Financial Security
Assurance Inc. (the "Insurer"), pursuant to which the Insurer has
unconditionally guaranteed payment of the Certificateholders' Interest
Distributable Amount and the Certificateholders' Principal Distributable Amount,
on each Distribution Date, all and to the extent as more fully set forth in the
Sale and Servicing Agreement.
It is the intent of the Seller, Servicer, holder of the General Partner and
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a partnership and the Certificateholders (including the General
Partner) will be treated as partners in that partnership. The General Partner
and the other Certificateholders by acceptance of a Trust Certificate, agree to
treat, and to take no action inconsistent with the treatment of, the Trust
Certificates for such tax purposes as partnership interests in the Trust.
Each Certificateholder, by its acceptance of a Trust Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the General Partner, or join in any institution against the General Partner of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Trust Certificates, the Notes, the Trust Agreement or any of the Basic
Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Trust Certificate Register without the
presentation or surrender of this Trust Certificate or the making of any
notation hereon, except that with respect to Trust Certificates registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Except as
otherwise provided in the Trust Agreement and notwithstanding the above, the
final distribution on this Trust Certificate will be made after due notice by
the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Trust Certificate at the office or agency
maintained for the purpose by the Owner Trustee in the Borough of Manhattan, The
City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the holder hereof to any benefit under the Trust
Agreement or the Sale and Servicing Agreement or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, 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.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.
NATIONSFINANCIAL AUTO OWNER TRUST
1996-1
By: _______________________
not in its individual
capacity but solely as
Owner Trustee
Dated: By: ________________________
<PAGE>
(Reverse of Trust Certificate)
The Trust Certificates do not represent an obligation of, or an interest
in, the Seller, the Servicer, the General Partner, the Owner Trustee or any
Affiliates of any of them and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated herein or in
the Trust Agreement, the Indenture or the Basic Documents. In addition, this
Trust Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections with
respect to the Receivables and payments under the Certificate Policy, all as
more specifically set forth herein and in the Sale and Servicing Agreement. The
Trust Certificates are limited in right of payment to certain collections and
recoveries respecting the Receivables, all as more specifically set forth in the
Sale and Servicing Agreement. A copy of each of the Sale and Servicing Agreement
and the Trust Agreement may be examined during normal business hours at the
principal office of the Seller, and at such other places, if any, designated by
the Seller, by any Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Trust Agreement at any
time by the Seller and the Owner Trustee with the consent of the holders of the
Notes and the Trust Certificates evidencing not less than a majority of the
outstanding Notes and the Certificate Balance. Any such consent by the holder of
this Trust Certificate shall be conclusive and binding on such holder and on all
future holders of this Trust Certificate and of any Trust Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Trust Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the holders of any of the Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing, and thereupon one or more
new Trust Certificates in authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is _____________
_______.
Except for Trust Certificates issued to the Depositor and transferred to
the General Partner, the Trust Certificates are issuable only as registered
Trust Certificates without coupons in denominations of $1,000 or integral
multiples thereof; except as otherwise provided in the Trust Agreement. As
provided in the Trust Agreement and subject to certain limitations therein set
forth, Trust Certificates are exchangeable for new Trust Certificates in
authorized denominations evidencing the same aggregate denomination, as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and any agent of
the Owner Trustee, the Certificate Registrar or the Insurer may treat the person
in whose name this Trust Certificate is registered as the owner hereof for all
purposes, and none of the Owner Trustee, the Certificate Registrar, the Insurer
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement and the
Sale and Servicing Agreement and the disposition of all property held as part of
the Trust. The Servicer of the Receivables may at its option purchase the corpus
of the Trust at a price specified in the Sale and Servicing Agreement, and such
purchase of the Receivables and other property of the Trust will effect early
retirement of the Trust Certificates; however, such right of purchase is
exercisable, subject to certain restrictions, only as of the last day of any
Monthly Period as of which the Pool Balance is 5% or less of the Original Pool
Balance.
The Trust Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
1 of ERISA, (b) a plan described in Section 4975(e) (l) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Trust Certificate, the Holder hereof shall be deemed to have represented and
warranted that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of the
Depositor, the General Partner or the Servicer, as the case may be, and the
Owner Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Certificate or of any Receivable or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Certificate shall not entitle the holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or type name and address, including postal zip
code, of assignee)
the within Trust Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
_______________________________________________ Attorney to transfer said Trust
Certificate on the books of the Trust Certificate Registrar, with full power of
substitution in the premises.
Dated:
*
Signature Guaranteed:
*
- --------------------------
* NOTICE: The signature to this assignment must correspond
with the name of the registered owner as it appears on the
face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or
participation in Stamp or such other "signature guarantee
program" as may be determined by the Certificate Registrar
in addition to, or in substitution for, Stamp, all in
accordance with the Securities Exchange Act of 1934, as
amended.
<PAGE>
EXHIBIT B
[FORM OF]
CERTIFICATE OF TRUST OF
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
THIS Certificate of Trust of NationsFinancial Auto Owner Trust 1996-1(the
"Trust"), dated as of __, 199 , is being duly executed and filed by , a and , an
individual, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is NationsFinancial
Auto Owner Trust 1996-1.
2. This Certificate of Trust will be effective __, 199 . --
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
---------------------------------,
not in its individual capacity but
solely as owner trustee of the Trust.
By:________________________________
Name:
Title:
STROOCK & STROOCK & LAVAN
Seven Hanover Square
New York, New York 10004
November 12, 1996
NationsFinancial Funding Corporation
2 Concourse Parkway, NE
Suite 745
Atlanta, Georgia 30328
Re: NationsFinancial Auto Owner Trust 1996-1
Registration Statement on Form S-3 (File No. 333-12843)
Ladies and Gentlemen:
We have acted as counsel for NationsFinancial Funding Corporation, a Delaware
corporation (the "Company"), in connection with the authorization and issuance
by NationsFinancial Auto Owner Trust 1996-1 (the "Issuer"), a limited purpose
Delaware business trust to be created by the Company, of Class A-1 Asset Backed
Notes (the "Class A-1 Notes"), Class A-2 Floating Rate Asset Backed Notes (the
"Class A-2 Notes"), Class A-3 Asset Backed Notes (the "Class A-3 Notes" and,
together with the Class A-1 Notes and the Class A-2 Notes, the "Notes") and
Asset Backed Certificates (the "Certificates" and together with the Notes, the
"Securities"). A Registration Statement on Form S-3 relating to the Securities
(the "Registration Statement") has been filed with the Securities and Exchange
Commission under the Securities Act of 1933. The Notes will be issued pursuant
to an Indenture (the "Indenture") between the Issuer and an independent trustee
(the "Indenture Trustee") and the Certificates will be issued pursuant to a
Trust Agreement (the "Trust Agreement") between the Company and an independent
trustee (the "Owner Trustee").
In connection with this opinion, we have examined copies of the articles of
incorporation and by-laws of the Company, the Trust Agreement pursuant to which
the Issuer will be formed, a form of the Indenture and forms of the Notes and
Certificates included therein, as well as the Registration Statement and the
agreements and other documents to be filed as exhibits thereto.
We also have examined the original or reproduced or certified copies of all
such records of the Company, all such agreements, certificates of officers and
representatives of the Company and others, and such other documents, papers,
statutes and authorities as we deemed necessary to form the basis of the
opinions hereinafter expressed. In such examinations, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to original documents of copies of documents
supplied to us by the Company and others. As to certain matters of fact relevant
to the opinions hereinafter expressed, we have relied upon statements and
certificates of officers of the Company and others.
Based upon the foregoing, we are of the opinion that:
1. When the issuance, execution and delivery of the Notes has been authorized by
all necessary corporate action of the Company in accordance with the provisions
of the Indenture, and when the Notes have been duly executed and delivered by
the Issuer, authenticated by the Indenture Trustee and sold as described in the
Registration Statement, assuming that the terms of the Notes are otherwise in
compliance with applicable law at such time, (a) the Notes will constitute valid
and binding obligations of the Issuer, enforceable in accordance with their
terms, and (b) the holders of such Notes will be entitled to the benefits
provided by the Indenture, subject in each case 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 in any proceeding, whether at law or in equity.
2. When the issuance, execution and delivery of the Certificates has been
authorized by all necessary corporate action of the Company in accordance with
the provisions of the Trust Agreement, and when the Certificates have been duly
executed and delivered by the Issuer, authenticated by the Owner Trustee and
sold as described in the Registration Statement, assuming that the terms of the
Certificates are otherwise in compliance with applicable law at such time, (a)
the Certificates will be legally issued, fully paid and non-assessable and (b)
the holders of the Certificates will be entitled to the benefits of the Trust
Agreement.
3. The statements set forth in the Prospectus under the heading "Federal Income
Tax Considerations," to the extent they constitute matters of law or legal
conclusions with respect thereto, are correct.
In rendering the foregoing opinions, we express no opinion as to the laws of any
jurisdiction other than the states of New York and Delaware and the federal laws
of the United States of America.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to this firm under the captions
"Summary of Terms," "Federal Income Tax Considerations" and "Legal Matters" in
the prospectus which forms a part of the Registration Statement, and to the
filing of this opinion as an exhibit to any application made by or on behalf of
the Company, the Issuer or any dealer in connection with the registration of the
Securities under the securities or blue sky laws of any state or jurisdiction.
In giving such permission, we do not admit hereby that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/S/ STROOCK & STROOCK & LAVAN
STROOCK & STROOCK & LAVAN
Exhibit 99.1
SALE AND SERVICING
AGREEMENT
among
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
Issuer,
NATIONSFINANCIAL FUNDING CORPORATION
Seller, and
SUNSTAR ACCEPTANCE CORPORATION
Servicer
Dated as of November 30, 1996
<PAGE>
Table of Contents
Page
ARTICLE I
Definitions
SECTION 1.1. Definitions and Usage...................1
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Receivables...............1
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties of
Seller..................................3
SECTION 3.1-A. Warranties as to the Receivables in
the Aggregate and Actions of the
Seller..................................8
SECTION 3.2. Repurchase upon Breach..................9
SECTION 3.3. Custody of Receivable Files........... 10
SECTION 3.4. Duties of Servicer as Custodian....... 11
SECTION 3.5. Instructions; Authority To Act........ 12
SECTION 3.6. Custodian's Indemnification........... 12
SECTION 3.7. Effective Period and Termination...... 13
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. Duties of Servicer.................... 14
SECTION 4.2. Collection and Allocation of
Receivable Payments................... 14
SECTION 4.3. Realization upon Receivables.......... 15
SECTION 4.4. Physical Damage Insurance............. 16
SECTION 4.5. Maintenance of Security Interests
in Financed Vehicles.................. 16
SECTION 4.6. Covenants of Servicer................. 17
SECTION 4.7. Purchase of Receivables upon Breach... 17
SECTION 4.8. Servicing Fee......................... 18
SECTION 4.9. Servicer's Certificate................ 18
SECTION 4.10. Annual Statement as to Compliance;
Notice of Default..................... 19
SECTION 4.11. Annual Independent Certified Public
Accountants' Report................... 20
SECTION 4.12. Access to Certain Documentation and
Information Regarding Receivables..... 20
SECTION 4.13. Servicer Expenses..................... 20
SECTION 4.14. Appointment of Subservicer............ 21
SECTION 4.15. Obligations under Basic Documents..... 21
ARTICLE V
Distributions; Spread Account;
Statements to Certificateholders and Noteholders
SECTION 5.1. Establishment of Trust Accounts....... 21
SECTION 5.2. Collections........................... 24
SECTION 5.3. Application of Collections............ 25
SECTION 5.4. Withdrawals from Spread Account....... 26
SECTION 5.5. Additional Deposits................... 26
SECTION 5.6. Distributions......................... 26
SECTION 5.7. Statements to Certificateholders
and Noteholders....................... 28
SECTION 5.8. Net Deposits.......................... 29
SECTION 5.9. Optional Deposits by the Insurer...... 29
ARTICLE VA
The Certificate Policy
SECTION 5A.1. Claims Under Policy................... 30
SECTION 5A.2. Preference Claims; Direction of
Proceedings........................... 31
SECTION 5A.3. Surrender of Policy................... 32
ARTICLE VI
The Seller
SECTION 6.1. Representations of the Seller......... 32
SECTION 6.2. Corporate Existence................... 34
SECTION 6.3. Liability of Seller; Indemnities.......35
SECTION 6.4. Merger or Consolidation of, or
Assumption of the Obligations of,
Seller.................................37
SECTION 6.5. Limitation on Liability of Seller
and Others.............................37
SECTION 6.6. Seller May Own Certificates or Notes...38
ARTICLE VII
The Servicer
SECTION 7.1. Representations of Servicer............38
SECTION 7.2. Indemnities of Servicer................40
SECTION 7.3. Merger or Consolidation of, or
Assumption of the Obligations of,
Servicer...............................41
SECTION 7.4. Limitation on Liability of Servicer
and Others............................ 42
SECTION 7.5. Servicer Not To Resign................ 42
ARTICLE VIII
Default
SECTION 8.1. Servicer Default...................... 43
SECTION 8.2. Appointment of Successor.............. 45
SECTION 8.3. [RESERVED]............................ 45
SECTION 8.4. Notification to Noteholders and
Certificateholders.................... 45
SECTION 8.5. Waiver of Past Defaults............... 46
ARTICLE IX
Termination
SECTION 9.1. Optional Purchase of All Receivables... 46
ARTICLE X
Administrative Duties of the Servicer
SECTION 10.1. Administrative Duties.................. 48
SECTION 10.2. Records................................ 51
SECTION 10.3. Additional Information to be
Furnished to the Issuer................ 51
ARTICLE XI
Miscellaneous Provisions
SECTION 11.1. Amendment............................. 51
SECTION 11.2. Protection of Title to Trust.......... 52
SECTION 11.3. Notices............................... 55
SECTION 11.4. Assignment............................ 56
SECTION 11.5. Limitations on Rights of Others....... 56
SECTION 11.6. Severability.......................... 57
SECTION 11.7. Separate Counterparts................. 57
SECTION 11.8. Headings.............................. 57
SECTION 11.9. Governing Law......................... 57
SECTION 11.10. Assignment to Indenture Trustee....... 57
SECTION 11.11. Nonpetition Covenants................. 57
SECTION 11.12. Limitation of Liability of Owner
Trustee and Indenture Trustee......... 58
SECTION 11.13. Independence of the Servicer.......... 58
SECTION 11.14. No Joint Venture...................... 59
SECTION 11.15. Third-Party Beneficiaries............. 59
SECTION 11.16. Disclaimer by Insurer................. 59
<PAGE>
SCHEDULES
Schedule A - Schedule of Receivables
Schedule B - Location of Receivables
EXHIBITS
Exhibit A - Definitions and Usage
Exhibit B - Form of Monthly Certificateholder Statement
Exhibit C - Form of Monthly Noteholder Statement
Exhibit D - Form of Servicer's Certificate
Exhibit E - Form of Accountants Letter
<PAGE>
SALE AND SERVICING AGREEMENT (the
"Agreement") dated as of November 30, 1996, among
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1, a
Delaware business trust (the "Issuer"),
NATIONSFINANCIAL FUNDING CORPORATION, a Delaware
corporation (the "Seller"), and SUNSTAR ACCEPTANCE
CORPORATION, a Delaware corporation (the
"Servicer").
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with retail motor vehicle installment sale contracts acquired by
SunStar Acceptance Corporation from an Affiliate or from motor vehicle dealers;
WHEREAS the Seller has purchased such receivables from SunStar Acceptance
Corporation and is willing to sell such receivables to the Issuer;
WHEREAS the Servicer is willing to service all such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions and Usage. For all purposes of this Agreement,
capitalized terms used herein, unless the context otherwise requires, shall have
the meanings specified in Exhibit A hereto, which also contains rules as to
usage and construction that shall be applicable herein.
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Seller on the Closing Date of the net
proceeds from the sale of the Notes and the Certificates and the other amounts
to be distributed from time to time to the Seller in accordance with the terms
of this Agreement, the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations set
forth herein), all right, title and interest of the Seller in and to:
(a) the Receivables, and all moneys received thereon after the
Cutoff Date and, in the case of Precomputed Receivables, certain
moneys received on or prior to the Cutoff Date that relate to
Scheduled Payments due after the Cutoff Date to be deposited with the
Trust pursuant to Section 5.2;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables and any other interest of the
Seller in such Financed Vehicles;
(c) any proceeds with respect to the Receivables from claims on
any physical damage, credit life or disability insurance policies
covering Financed Vehicles or Obligors and any proceeds from the
liquidation of the Receivables;
(d) any proceeds from any Receivable repurchased by a Dealer,
pursuant to a Dealer Agreement, as a result of a breach of
representation or warranty in the related Dealer Agreement;
(e) all rights under any Service Contracts on the related
Financed Vehicles;
(f) the related Receivable Files;
(g) all of the Seller's rights and benefits, but none of its
obligations or burdens, under the Purchase Agreement, including the
Seller's rights under the Purchase Agreement, and the delivery
requirements, the representations and warranties and the cure and
repurchase obligations of SunStar Acceptance Corporation under the
Purchase Agreement; and
(h) the proceeds of any and all of the foregoing (the items
specified in clauses (a) through (h) are referred to herein as the
"Trust Property").
It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Trust Property from the Seller to the Trust and the beneficial interest in
and title to the Receivables and the other Trust Property shall not be part of
the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that, notwithstanding
the intent of the Seller, the transfer and assignment contemplated hereby is
held not to be a sale, this Agreement shall constitute a grant of a security
interest in the property referred to in this Section 2.1 for the benefit of the
Noteholders and the Certificateholders.
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties of Seller. The Seller makes the
following representations and warranties as to each Receivable on which the
Issuer is deemed to have relied in acquiring the Receivables and upon which the
Insurer shall be deemed to rely in issuing the Policies. Such representations
and warranties speak as of the execution and delivery of this Agreement and as
of the Closing Date, but shall survive the sale, transfer and assignment of the
Receivables to the Issuer and the pledge thereof to the Indenture Trustee
pursuant to the Indenture.
(a) Characteristics of Receivables. The Receivable has been fully
and properly executed by the parties thereto and (i) has been
originated by a Dealer in connection with the retail sale of a
Financed Vehicle in the ordinary course of such Dealer's business, and
has been purchased by the Seller from SunStar Acceptance Corporation,
which in turn, shall have purchased such Receivable from such Dealer
or from an Affiliate which purchased it from such a Dealer in the
ordinary course of SunStar Acceptance Corporation's (or its
Affiliate's) business and in accordance with its underwriting
standards in effect at such time and shall have been validly assigned
by SunStar Acceptance Corporation to the Seller, (ii) is secured by a
valid, subsisting and enforceable first priority security interest in
favor of SunStar Acceptance Corporation (or its Affiliate) in the
Financed Vehicle (subject to administrative delays and clerical errors
on the part of applicable government agencies and to any statutory or
other lien arising by operation of law which is prior to such security
interest and subject to the effect of bankruptcy, insolvency,
moratorium, conservatorship, receivership, reorganization, fraudulent
conveyance and similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto), which security
interest has been assigned by SunStar Acceptance Corporation to the
Seller, is assignable together with such Receivable, and has been so
assigned by the Seller to the Trust, (iii) contains or is accompanied
by a security agreement which contains customary and enforceable
provisions such that the rights and remedies of the secured party are
adequate for realization of the benefits of the security interest in
the subject collateral (subject to the effect of bankruptcy,
insolvency, moratorium, conservatorship, receivership, reorganization,
fraudulent conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto),
(iv) provided at origination for level monthly payments (provided,
that the last payment may be different from the level monthly
payment), which fully amortize the Amount Financed over the original
term, (v) in the case of a Precomputed Receivable, shall provide for,
in the event that such Contract is prepaid, a prepayment that fully
pays the Principal Balance and includes, if such prepayment is made
after the fifteenth day of the applicable monthly payment period, a
full month's interest for such payment period at the Annual Percentage
Rate, and (vi) provides for interest at the related APR.
(b) Schedule of Receivables. The information set forth in the
Schedule of Receivables with respect to such Receivable has been
produced from the Computer Tape and was true and correct as of the
close of business of the Servicer on the Cutoff Date; and the
Principal Balance of the Receivable as of the Cutoff Date has been
accurately and correctly calculated.
(c) Compliance with Laws. To the knowledge of the Seller, the
Receivable, and the sale of the related Financed Vehicle, complied at
the time it was originated or made, and will comply as of the Closing
Date, in all material respects with all requirements of applicable
federal, state, and local laws, and regulations thereunder, including,
to the extent applicable, usury laws, the Federal Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act,
Federal Reserve Board Regulations B and Z, and any other applicable
consumer credit, equal opportunity, and disclosure laws; provided,
however, that if, notwithstanding the knowledge of the Seller, any
Receivable, or the sale of the related Financed Vehicle, fails to
comply with applicable law in the manner and to the extent set forth
herein, the Seller shall repurchase such Receivable in accordance with
the terms and conditions set forth in Section 3.2, but such failure to
comply with such laws shall not constitute a breach of this warranty
except for purposes of Section 3.2.
(d) Binding Obligation. The Receivable constitutes the genuine,
legal, valid, and binding payment obligation in writing of the
Obligor, enforceable in all material respects by the holder thereof in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, conservatorship, receivership, liquidation and other
similar laws affecting creditors' rights in general, equitable
principles and laws and judicial decisions relating to consumers'
rights or creditors' actions, which laws and decisions, however, will
not prevent such Receivable from being adequate for the realization of
the benefits intended to be conferred thereby.
(e) No Government Obligor. The Obligor on the Receivable is not
the United States of America or any state thereof or any local
government, or any agency, department, political subdivision or
instrumentality of the United States of America or any state thereof
or any local government.
(f) Receivables in Force. The Receivable has not been satisfied,
subordinated, or rescinded and the related Financed Vehicle has not
been released from the lien granted by the Receivable in whole or in
part.
(g) No Amendment or Waiver. No material provision of the
Receivable has been amended, waived, altered or modified in any
respect, except as reflected in the Receivable File or in SunStar
Acceptance Corporation's data processing system or records, and no
such amendment, waiver, alteration or modification causes such
Receivable not to conform to the other warranties contained in this
Section.
(h) No Defenses. The Receivable is not subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the material terms of the
Receivable, or the exercise of any material right thereunder, will not
render the Receivable unenforceable in whole or in part or subject to
any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and the Seller has not received written notice
of the assertion of any such right of rescission, setoff, counterclaim
or defense asserted with respect thereto.
(i) No Liens. The Seller has not received written notice of any
Liens or claims, including Liens for work, labor, materials or unpaid
state or federal taxes relating to the Financed Vehicle, that are or
may be Liens prior to, or equal in priority to or coordinate with, the
Lien granted by the Receivable.
(j) No Default. Except for payment delinquencies continuing for a
period of not more than thirty (30) days as of the Cutoff Date, to the
knowledge of the Seller (i) no default, breach, violation, or event
permitting acceleration under the terms of any Receivable exists; and
(ii) no continuing condition, that with notice or lapse of time, or
both, would constitute a default, breach, violation, or event
permitting acceleration under the terms of any Receivable has arisen;
and the Seller has not waived any of the foregoing; provided, however,
that if, notwithstanding the knowledge of the Seller, any of the
events specified in (i) or (ii) above exists or has arisen with
respect to a Receivable, the Seller shall repurchase such Receivable
in accordance with the terms and conditions of Section 3.2, with the
existence of such events not constituting a breach of this warranty,
except for purposes of Section 3.2. Notwithstanding the foregoing, if
an event specified in (i) or (ii) above exists or has arisen with
respect to an Obligor's obligation to maintain insurance on the
related Financed Vehicle, and in such case the Servicer intends to
place CPI within 45 days of notice of such failure to maintain
insurance, such event shall not constitute a breach of this warranty.
(k) Insurance. The Financed Vehicle securing such Receivable is
required by the Receivable to be insured against theft or damage under
an Insurance Policy.
(l) Good Title. Immediately prior to the transfer and assignment
herein contemplated, the Receivable had not been sold, assigned,
pledged or otherwise conveyed by the Seller to any Person, and the
Seller had good and marketable title to the Receivable free and clear
of any encumbrance, equity, lien, pledge, charge, claim, security
interest or other right or interest of any other Person, was the sole
owner thereof and had full right and power to transfer and assign the
Receivable to the Trust. Immediately upon the transfer and assignment
of the Receivable to the Trust, the Trust shall have good and
marketable title to the Receivable, free and clear of any encumbrance,
equity, lien, pledge, charge, claim, security interest or other right
or interest of any other Person; and all filings and actions required
by the UCC with respect to the transfer to the Trust of Receivables
associated with the sale of the same have been accomplished for the
purpose of complying with the UCC provisions governing the relative
priority of interests of parties in the Receivables.
(m) Lawful Assignment. The Receivable has not been originated in,
and is not subject to the laws of, any jurisdiction under which the
sale, transfer or assignment of such Receivable hereunder or pursuant
to transfers of the Notes or Certificates are unlawful, void, or
voidable.
(n) All Filings Made. All filings have been made, including
filings under the UCC, which are necessary in any jurisdiction to
cause the ownership and title interests of the Issuer in the
Receivables to be afforded priority over competing claims of the
holders of security interests or other claims against whom such
filings can assure priority.
(o) Valid Security Interest. On the Closing Date, there will
exist a valid, subsisting and enforceable first priority perfected
security interest in the Financed Vehicle securing the Receivable
(subject to administrative delays and clerical errors on the part of
the applicable government agencies and to any statutory or other lien
arising by operation of law which is prior to such security interest).
With respect to the foregoing, the Seller hereby covenants to take all
action necessary such that, at such time as enforcement of such
security interest is sought, there shall exist a valid, subsisting and
enforceable first priority perfected security interest in the Financed
Vehicle for the benefit of the Issuer (subject to administrative
delays and clerical errors on the part of applicable government
agencies and any statutory or other lien arising by operation of law
which is prior to such interest).
(p) Capacity of Parties. To the knowledge of the Seller, all
parties to the Receivable had capacity to execute the Receivable;
provided, however, that if, notwithstanding the knowledge of the
Seller, all parties to any Receivable did not have the capacity to
execute such Receivable, the Seller shall repurchase such Receivable
in accordance with the terms and conditions of Section 3.2, with the
existence of such lack of capacity not constituting a breach of this
warranty, except for purposes of Section 3.2.
(q) One Original. Only one original of each Receivable was
executed.
(r) Obligations; No Impairment. The Seller has duly fulfilled all
obligations on its part to be fulfilled under, or in connection with,
the Receivable and has done nothing to impair the rights of the
Issuer, the Noteholders or the Certificateholders in the Receivable or
the proceeds thereof.
(s) No Fraud or Misrepresentation. To the knowledge of the
Seller, the Receivable was originated by a Dealer and sold by such
Dealer to the Seller without any conduct constituting fraud or
misrepresentation against the Obligor on the part of such Dealer;
provided, however, that if, notwithstanding the knowledge of the
Seller, any Receivable was originated and sold under conduct
constituting fraud or misrepresentation against the Obligor on the
part of such Dealer, the Seller shall repurchase such Receivable in
accordance with the terms and conditions of Section 3.2, with the
existence of such conduct not constituting a breach of this warranty,
except for purposes of Section 3.2.
(t) Possession. Immediately prior to the Closing Date, the Seller
(or an Affiliate) will have possession of the Receivable File, and
there are and there will be no custodial agreements in effect
materially and adversely affecting the right or ability of the Seller
to make, or cause to be made, any delivery required hereunder.
(u) Bulk Transfer Laws. The transfer, assignment and conveyance
of the Receivable and Receivable Files by the Seller pursuant to this
Agreement is not subject to bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
(v) No Bankruptcies. No Obligor on any Receivable is currently,
or was following the execution of the related Contract, the subject of
a bankruptcy proceeding except with respect to Obligors for whom a
plan of reorganization has been confirmed by a bankruptcy court.
(w) Chattel Paper. Each Receivable constitutes "chattel paper" as
defined in the UCC.
SECTION 3.1-A. Warranties as to the Receivables in the Aggregate and
Actions of the Seller. The Seller hereby makes the following warranties as to
the Receivables on which the Issuer and the Insurer shall be deemed to have
relied in acquiring the Receivables. Unless otherwise indicated, such warranties
shall speak as of the execution and delivery of this Agreement, but shall
survive the sale, transfer, and assignment of the Receivables to the Issuer and
the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Amounts. The Aggregate Principal Balance, as of the Cutoff
Date, of the Receivables is equal to the Original Pool Balance.
(b) Individual Characteristics. The Receivables have the
following individual characteristics as of the close of business of
the Servicer on the Cutoff Date: (i) the obligations of the Obligors
on the Receivables are secured by security interests in the respective
new or used automobiles, vans or light trucks which were purchased
thereunder; (ii) each Receivable has an APR of at least 15% and not
more than 30%; (iii) each Receivable had a remaining maturity of not
less than 3 months and not more than 59 months; (iv) each Receivable
had, as of the Cutoff Date, a remaining principal balance of not more
than $30,000; (v) no Financed Vehicle had been repossessed as of the
Cutoff Date under the related Contract; (vi) no Receivable is a
Liquidated Receivable as of the Cutoff Date; (vii) each Receivable is
a retail motor vehicle installment sales contract; (viii) each
Receivable, at origination, provided for allocation of payments
between principal and interest by the Simple Interest Method, the Rule
of 78s Method or the Actuarial Method; (ix) each Receivable, at
origination, had an original term to maturity of less than or equal to
60 months; (x) no Receivable was acquired as part of a bulk transfer
or bulk acquisition other than from SunStar Acceptance Corporation
(California); and (xi) at least one payment has been made by an
Obligor with respect to each Receivable.
(c) Aggregate Characteristics. The Receivables had the following
characteristics in the aggregate as of the Cutoff Date: (i)
approximately _____% of the Original Pool Balance was attributable to
loans for purchases of new Financed Vehicles, and approximately _____%
of the Original Pool Balance was attributable to loans for purchases
of used Financed Vehicles; (ii) the weighted average APR of the
Receivables was approximately _____%; (iii) there were _______
Receivables; (iv) the average Principal Balance of the Receivables was
approximately $______; (v) the weighted average original term and
weighted average remaining term of the Receivables were approximately
____ months and ____ months, respectively.
(d) Computer Tape. The Computer Tape was complete and accurate as
of the Cutoff Date and included a description of the same Receivables
that are described in the Schedule of Receivables.
(e) Marking Records. On or before the Closing Date, the Seller
will have caused the portions of the Computer Tape relating to the
Receivables to be clearly and unambiguously marked to show that such
Receivables constitute part of the Owner Trust Estate.
(f) No Assignment. As of the Closing Date, the Seller shall not
have taken any action to convey any right to any Person that would
result in such Person having a right to payments received under the
Policies, the Dealer Agreements (insofar as they relate to the
Receivables) or payments due under the Receivables that is senior to,
or equal with, that of the Trust.
(g) Location of Receivable Files. The Receivable Files shall be
kept at one or more of the locations listed in Schedule B hereto.
(h) Adverse Selection. No selection procedures adverse to the
Noteholders or the Certificateholders were utilized in selecting the
Receivables from those owned by the Servicer which met the selection
criteria contained in this Agreement.
SECTION 3.2. Repurchase upon Breach. (a) The Seller, the Servicer, the
Insurer or the Owner Trustee, as the case may be, shall inform the other parties
to this Agreement and the Indenture Trustee promptly, in writing, upon the
discovery of any breach of the Seller's representations and warranties made
pursuant to Sections 3.1 and 3.1-A. As of the last day of the second (or, if the
Seller so elects, the first) month following the discovery by the Seller or
receipt by the Seller of notice from any of the Seller, the Servicer, the
Insurer or the Owner Trustee of such breach, unless such breach is cured by such
date, the Seller shall have an obligation to repurchase any Receivable in which
the interests of the Noteholders or the Certificateholders or the Insurer are
materially and adversely affected by any such breach as of such date. The
"second month" shall mean the month following the month in which discovery
occurs or notice is given, and the "first month" shall mean the month in which
discovery occurs or notice is given. In consideration of and simultaneously with
the repurchase of the Receivable, the Seller shall remit, or cause SunStar
Acceptance Corporation or an Affiliate to remit, to the Collection Account the
Purchase Amount in the manner specified in Section 5.5 and the Issuer shall
execute such assignments and other documents reasonably requested by such person
in order to effect such repurchase. The sole remedy of the Issuer, the Owner
Trustee, the Indenture Trustee, the Noteholders or the Certificateholders with
respect to a breach of representations and warranties pursuant to Sections 3.1
and 3.1-A and the agreement contained in this Section shall be the repurchase of
Receivables pursuant to this Section, subject to the conditions contained
herein, or to enforce the obligation of SunStar Acceptance Corporation to the
Seller to repurchase such Receivables pursuant to the Purchase Agreement.
Neither the Owner Trustee nor the Indenture Trustee shall have a duty to conduct
any affirmative investigation as to the occurrence of any conditions requiring
the repurchase of any Receivable pursuant to this Section.
(b) Pursuant to Section 2.1 of this Agreement, the Seller
conveyed to the Trust all of the Seller's right, title and interest in
its rights and benefits, but none of its obligations or burdens, under
the Purchase Agreement including the Seller's rights under the
Purchase Agreement and the delivery requirements, the representations
and warranties and the cure or repurchase obligations of SunStar
Acceptance Corporation thereunder. The Seller hereby represents and
warrants to the Trust that such assignment is valid, enforceable and
effective to permit the Trust to enforce such obligations of SunStar
Acceptance Corporation under the Purchase Agreement.
SECTION 3.3. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Issuer hereby
revocably appoints the Servicer and, with respect to Receivable Files located in
California, the Subservicer, and the Servicer and, with respect to Receivable
Files located in California, the Subservicer, hereby accept such appointment, to
act as the respective agent of the Issuer and the Indenture Trustee as custodian
of the following documents or instruments which are hereby constructively
delivered to the Indenture Trustee, as of the Cutoff Date, as pledgee of the
Issuer with respect to each Receivable:
(a) the original Receivable;
(b) a record of the information supplied by the Obligor in the
original credit application;
(c) the original certificate of title or such documents that the
Servicer or the Subservicer, as the case may be, shall keep on file,
in accordance with its customary procedures, evidencing the security
interest of SunStar Acceptance Corporation or SunStar Acceptance
Corporation (California) in the Financed Vehicle (it being understood
that the original certificates of title generally are not delivered to
the Seller for 120 days but that promptly upon delivery they shall be
delivered to the Servicer as custodian hereunder); and
(d) any and all other documents that the Servicer or the
Subservicer, as the case may be, shall keep on file, in accordance
with its customary procedures, relating to a Receivable, an Obligor or
a Financed Vehicle.
SECTION 3.4. Duties of Servicer as Custodian. (a) Safekeeping. The Servicer
shall hold the Receivable Files on behalf of the Issuer and the Indenture
Trustee and maintain such accurate and complete accounts, records and computer
systems pertaining to each Receivable File as shall enable the Issuer to comply
with this Agreement. In performing its duties as custodian the Servicer shall
act with reasonable care, using that degree of skill and attention that the
Servicer exercises with respect to the receivable files relating to all
comparable automotive receivables that the Servicer services for itself or
others, and in any event with no less degree of skill and care than would be
exercised by a prudent servicer or custodian of non-prime retail motor vehicle
installment sales contracts. The Servicer shall conduct, or cause to be
conducted, periodic audits of the Receivable Files held by it under this
Agreement and of the related accounts, records and computer systems, in such a
manner as shall enable the Owner Trustee, the Insurer or the Indenture Trustee
to verify the accuracy of the Servicer's record keeping. The Servicer shall
promptly report to the Issuer, the Insurer and the Indenture Trustee any
material failure on its part to hold the Receivable Files and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure.
(b) Maintenance of Records. The Servicer, shall maintain each
Receivable File at its or the Subservicer's office or the office
of any Affiliate, specified in Schedule B to this Agreement or at
such other office or offices as shall be specified to the Issuer, the
Indenture Trustee, the Owner Trustee and the Insurer by written notice
not later than 10 days after a change in location to a location not
specified in Schedule B.
(c) Access to Records. The Servicer will provide, on the Closing
Date, an Officer's Certificate stating that the Receivable Files
contain all materials which are required to be kept therein by Section
3.3(a), (b), (c) and (d).
Upon reasonable prior notice, the Servicer shall make available to the
Issuer, the Indenture Trustee, the Insurer, or any duly authorized
representatives, attorneys or auditors of any of the foregoing, a list of
locations of, and access to, the Receivable Files and records and computer
systems maintained by the Servicer at such times during normal business hours as
the Issuer, the Indenture Trustee or the Insurer shall instruct.
(d) Release of Documents. Upon written instruction from the
Indenture Trustee or the Insurer, at any time following a Servicer
Default or termination of the Servicer's appointment pursuant to
Section 3.7, the Servicer shall as soon as practicable release any
Receivable File to the Indenture Trustee, the Indenture Trustee's
agent, or the Indenture Trustee's designee, as the case may be, or the
Insurer, as the case may be, at such place or places as the Indenture
Trustee or the Insurer, as the case may be, may designate.
SECTION 3.5. Instructions; Authority To Act. The Servicer shall be deemed
to have received proper instructions with respect to the Receivable Files upon
its receipt of written instructions signed by a Trust Officer of the Indenture
Trustee. A copy of such instructions shall be furnished by the Indenture Trustee
to the Insurer. The Indenture Trustee shall not have any duty or obligation to
provide the Servicer with any such instructions with respect to the Receivable
Files.
SECTION 3.6. Custodian's Indemnification. The Servicer as custodian shall
indemnify and hold harmless the Trust, the Insurer, the Owner Trustee and the
Indenture Trustee and each of their officers, directors, employees and agents
for any and all liabilities, obligations, losses, compensatory damages,
payments, costs or expenses (including reasonable attorneys' fees and expenses)
that may be imposed on, incurred by or asserted against the Trust, the Owner
Trustee or the Indenture Trustee or any of their officers, directors, employees
and agents as the result of any improper act or omission in any way relating to
the maintenance and custody by the Servicer as custodian of the Receivable
Files; provided, however, that the Servicer shall not be liable to the Trust,
the Owner Trustee, the Indenture Trustee or the Insurer, as the case may be, for
any portion of any such amount resulting from the willful misfeasance, bad faith
or negligence of the Owner Trustee, the Indenture Trustee or the Insurer, as the
case may be. If a claim is made against any indemnitee which could give rise to
indemnification hereunder, such indemnitee, upon receiving such claim, shall
give notice thereof to the Servicer; provided, however, that failure to give or
delay in giving such notice shall not release the Servicer from any of its
indemnification obligations hereunder unless and only to the extent that the
Servicer can demonstrate it was harmed thereby. The Servicer shall be entitled
to defend any such claim through counsel selected by it (so long as such counsel
is reasonably acceptable to the indemnitee) and each indemnitee will extend
reasonable cooperation to the Servicer and such counsel in connection with such
defense. This provision shall not be considered to limit the Servicer's or any
other party's rights, obligations, liabilities, claims or defenses which arise
as a matter of law or pursuant to any other provision of this Agreement.
SECTION 3.7. Effective Period and Termination. The Servicer's appointment
as custodian shall become effective as of the Cutoff Date and shall continue in
full force and effect until terminated pursuant to this Section 3.7. If SunStar
Acceptance Corporation shall resign as Servicer in accordance with the
provisions of this Agreement or if all of the rights and obligations of any
Servicer shall have been terminated under Section 8.1, the appointment of such
Servicer as custodian shall be terminated, in the same manner as the Servicer
may be terminated under Section 8.1. The Indenture Trustee or, with the consent
of the Indenture Trustee, the Owner Trustee may, in each case, with the consent
of the Insurer, and the Insurer may, terminate the Servicer's appointment as
custodian (so long as no Insurer Default shall have occurred and be continuing)
upon the occurrence of an Insurance Agreement Event of Default, upon written
notification to the Servicer and the Indenture Trustee or Insurer, as the case
may be. As soon as practicable after any termination of such appointment, the
Servicer shall deliver the Receivable Files to the Indenture Trustee or the
Indenture Trustee's agent at such place or places as the Indenture Trustee, with
the consent of the Insurer, or the Insurer may reasonably designate in writing.
If the Servicer shall be terminated as custodian hereunder for any reason but
shall continue to serve as Servicer, the Indenture Trustee shall, or shall cause
its agent to, make the Receivable Files available to the Servicer during normal
business hours upon reasonable notice so as to permit the Servicer to perform
its obligations as Servicer hereunder.
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. Duties of Servicer. The Servicer, as agent for the Issuer and
the Insurer (to the extent provided herein), shall manage, service, administer
and make collections on the Receivables (other than Purchased Receivables) with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others, and in any event with no less degree of skill and care
than would be exercised by a prudent servicer of non-prime retail motor vehicle
installment sales contracts. The Servicer's duties shall include collection and
posting of all payments, responding to inquiries of Obligors on such
Receivables, investigating delinquencies, sending payment statements to
Obligors, accounting for collections and furnishing monthly and annual
statements to the Owner Trustee, the Indenture Trustee and the Insurer with
respect to distributions. Subject to the provisions of Section 4.2, the Servicer
shall follow its customary standards, policies and procedures in performing its
duties as Servicer. Without limiting the generality of the foregoing, the
Servicer is authorized and empowered to execute and deliver, on behalf of
itself, the Issuer, the Owner Trustee, the Indenture Trustee, the Insurer, the
Certificateholders and the Noteholders or any of them, any and all instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing such Receivables. If the Servicer shall commence a
legal proceeding to enforce a Receivable, the Issuer (in the case of a
Receivable other than a Purchased Receivable) shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Receivable to
the Servicer. If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce a Receivable on the ground that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
Owner Trustee shall, at the Servicer's expense and direction, take steps to
enforce such Receivable, including bringing suit in its name or the name of the
Trust, the Indenture Trustee, the Certificateholders or the Noteholders. The
Owner Trustee and the Insurer shall upon the written request of the Servicer
furnish the Servicer with any powers of attorney and other documents reasonably
necessary or appropriate (as certified to the Owner Trustee and/or the Insurer
by the Servicer) to enable the Servicer to carry out its servicing and
administrative duties hereunder.
SECTION 4.2. Collection and Allocation of Receivable Payments. (a) The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others, and
in any event with no less degree of skill and care than would be exercised by a
prudent servicer of non-prime retail motor vehicle installment sales contracts.
The Servicer shall allocate collections between principal and interest in
accordance with its customary servicing procedures.
(b) The Servicer may not grant deferments or modify the original due
dates of a Receivable (other than a Liquidated Receivable);
provided, however, that the Servicer may (i) grant one deferral
with respect to a Receivable of one month for each year of the
term
of the Contract with a maximum of five deferrals over
the life of the Contract, provided that such deferrals need not
be granted in each year but may aggregated over the life of the
Contract, (ii) change the original due date once during the term
of a Receivable to a new due date within
20 days of the original scheduled due date of such Receivable
and (iii) grant deferments or modify the original due dates of a
Receivable with respect to a Receivable for which a court of
appropriate jurisdiction in a bankruptcy or
insolvency proceeding shall have issued an order reducing the
amount owed on such Receivable or otherwise modifying or
restructuring the scheduled payments or other terms on such
Receivable; provided, however, that the Servicer may not
defer the date for final payment by the Obligor of any Receivable
beyond the last day of the Monthly Period preceding the Final
Scheduled Maturity Date. The Servicer may in its discretion waive
any late payment charge or any other fees
that may be collected in the ordinary course of servicing a
Receivable. The Servicer shall not other than pursuant to a court
order agree to any reduction of (i) the original APR, (ii) the
amount of any Scheduled Payment on a Precomputed Receivable or the
original regular Scheduled Payment on a Simple
Interest Receivable, or (iii) the Principal Balance of any
Receivable.
SECTION 4.3. Realization upon Receivables. On behalf of the Issuer and the
Insurer, the Servicer shall use its best efforts, consistent with its customary
servicing procedures, to repossess or otherwise convert the ownership of the
Financed Vehicle securing any Receivable as to which the Servicer shall have
determined eventual payment in full is unlikely. From time to time, as
appropriate for servicing or foreclosing upon any Receivable, the Owner Trustee
shall, upon written request of the Servicer, execute such documents as shall be
reasonably necessary to prosecute any such proceedings. The Servicer shall
follow such customary and usual practices and procedures as it shall deem
necessary or advisable in its servicing of automotive receivables, which may
include reasonable efforts to realize proceeds from Receivables required to be
repurchased by a Dealer, pursuant to a Dealer Agreement, as a result of a breach
of representation or warranty in the related Dealer Agreement. The foregoing
shall be subject to the provision that, in any case in which the Financed
Vehicle shall have suffered damage, the Servicer shall not expend funds in
connection with the repair or the repossession of such Financed Vehicle unless
it shall determine in its reasonable discretion that such repair and/or
repossession will increase the Net Liquidation Proceeds.
SECTION 4.4. Physical Damage Insurance. (a) The Servicer shall, in
accordance with its customary servicing procedures, determine whether to require
that each Obligor shall have obtained and shall maintain fire, theft and
collision insurance or comprehensive and collision insurance covering the
Financed Vehicle as of the execution of the Receivable. If an Obligor fails to
maintain such insurance, the Servicer shall take such action (if any) with
respect to the provisions in each Receivable requiring that physical damage and
theft insurance be maintained on the applicable Financed Vehicle as the Servicer
takes with respect to such provisions in similar retail motor vehicle
installment sales contracts it services for its own account. Accordingly, by way
of example, in the event of a breach of such provisions in any Receivable, the
Servicer may, among other things, seek (a) to enforce such provisions, (b)
advance funds itself to obtain such insurance, or (c) take no action, in each
case so long as its response is the same in the case of similar contracts it
services for its own account. Such insurance and any commissions or finance
charges collected by the Servicer in connection therewith shall be in an amount
permitted by applicable law, and the Servicer shall disclose to the related
Obligor all information with respect to such insurance, expense reimbursements
and finance charges as required by applicable law.
(b) The Servicer, or any affiliate of the Servicer, may, to the
extent permitted by law (i) enter into agreements with one or more
insurers or other Persons pursuant to which the Servicer or such
affiliate will earn fees, and be reimbursed for expenses, in
connection with any insurance policy purchased by an Obligor
including, without limitation, any hazard insurance policy (whether or
not such hazard insurance policy is purchased on behalf of an Obligor
pursuant to the provisions of any Contract), or any other insurance
policy whatsoever and (ii) in connection with the foregoing, to
solicit, or permit and assist any insurer or any agent thereof to
solicit (including, without limitation, providing such insurer or
agent a list of Obligors including name, address or other information)
any Obligor.
SECTION 4.5. Maintenance of Security Interests in Financed Vehicles. (a)
The Servicer shall, in accordance with its customary servicing procedures, take
such steps as are necessary to maintain perfection of the security interest
created by each Receivable in the related Financed Vehicle in favor of the
Originator. The Servicer is hereby authorized to take such steps as are
necessary to reperfect such security interest in favor of the applicable
Originator on behalf of the Issuer and the Indenture Collateral Agent in the
event of the relocation of a Financed Vehicle or for any other reason.
(b) Upon the occurrence of a Servicer Default, and subject to the
other provisions of this Agreement, the Insurer may (so long as an
Insurer Default shall not have occurred and be continuing) instruct
the Owner Trustee and the Servicer to take or cause to be taken, or,
if an Insurer Default shall have occurred, the Owner Trustee and the
Servicer shall take or cause to be taken, such action as may, in the
opinion of counsel to the Insurer (or, if an Insurer Default shall
have occurred and be continuing, counsel to the Owner Trustee), be
necessary to perfect or reperfect the security interests in the
Financed Vehicles securing the Receivables in the name of the Trust by
amending the title documents of such Financed Vehicles or by such
other reasonable means as may, in the opinion of counsel to the
Insurer or the Owner Trustee (as applicable), be necessary or prudent.
The Servicer hereby agrees to pay all expenses related to such
perfection or reperfection and to take all action necessary therefor.
SECTION 4.6. Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or payment in full less a deficiency which the Servicer
would not attempt to collect in accordance with its customary procedures or in
connection with repossession or except as may be required by an insurer in order
to receive proceeds from insurance covering such Financed Vehicle, nor shall the
Servicer impair the rights of the Issuer, the Indenture Trustee, the Indenture
Collateral Agent, the Insurer, the Certificateholders or the Noteholders in such
Receivables (it being understood that no action of the Servicer taken in
compliance with the terms of this Agreement shall be deemed to impair such
rights).
SECTION 4.7. Purchase of Receivables upon Breach. The Seller, the Servicer,
the Insurer or the Owner Trustee shall inform the other parties and the
Indenture Trustee promptly, in writing, upon the discovery of any breach of the
Servicer's covenants pursuant to Section 4.2(b), 4.4, 4.5 or 4.6, or of any
breach of the Servicer's representations and warranties made pursuant to Section
7.1(b). As of the last day of the second (or, if the Servicer so elects, the
first) month following the discovery by the Servicer or receipt by the Servicer
of notice from any of the Seller, the Servicer, the Insurer, the Owner Trustee
or the Indenture Trustee of such breach, unless such breach is cured by such
date, the Servicer shall be obligated to purchase any Receivable in which the
interests of the Noteholders or the Certificateholders are materially and
adversely affected by such breach as of such date. The "second month" shall mean
the month following the month in which discovery occurs or notice is given, and
the "first month" shall mean the month in which discovery occurs or notice is
given. In consideration of the purchase of any such Receivable pursuant to the
preceding sentence, the Servicer shall remit the Purchase Amount in the manner
specified in Section 5.5. The sole remedy of the Issuer, the Indenture Trustee,
the Insurer, the Noteholders or the Certificateholders with respect to a breach
pursuant to Section 4.2(b), 4.4, 4.5 or 4.6, or to a breach of representations
and warranties pursuant to Section 7.1(b), shall be limited to the purchase of
Receivables in accordance with this Section 4.7. The Indenture Trustee and the
Owner Trustee shall have no duty to conduct any affirmative investigation as to
the occurrence of any condition requiring the purchase of any Receivable
pursuant to this Section 4.7.
SECTION 4.8. Servicing Fee. The Servicing Fee for a Distribution Date shall
equal the sum of the Base Servicing Fee, the Supplemental Servicing Fee, all
Investment Earnings on the Collection Account plus any reimbursement pursuant to
Section 7.2. The Servicer also shall be entitled to retain from collections the
Base Servicing Fee and the Supplemental Servicing Fee, as provided herein. The
Servicer, in its discretion at its election, may defer receipt of all or any
portion of the Servicing Fee for any Monthly Period to and until a later Monthly
Period for any reason, including in order to avoid a shortfall in any payments
due on any Notes or Certificates. Any such deferred amount shall be payable to
(or may be retained from subsequent collections by) the Servicer on demand.
SECTION 4.9. Servicer's Certificate. (a) No later than 12:00 noon New York
City time on each Determination Date, the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee, the Insurer, the Collateral Agent and each
Rating Agency a Servicer's Certificate containing, among other things, (i) all
information necessary to enable the Indenture Trustee to make any withdrawal and
deposit required by Section 5.6(b), 5.6(c) and 5.6(d), to give any notice
required by Section 5.4 or 5A.1 and to make the distributions required by
Section 5.6 and 5.7, (ii) all information necessary to enable the Indenture
Trustee to send the statements required by Section 5.7 to the Owner Trustee, the
Noteholders, each Rating Agency and the Insurer, (iii) a listing of all
Receivables purchased during the related Monthly Period, identifying the
Receivables so purchased, and (iv) all information necessary to enable the
Indenture Trustee to reconcile all deposits to, and withdrawals from, the
Collection Account for the related Monthly Period and Distribution Date,
including the accounting required by Section 5.8. In addition, with respect to
the Servicer's Certificate furnished to the Indenture Trustee and the Owner
Trustee, Receivables purchased by the Servicer or the Seller or which were paid
in full during the related Monthly Period shall be identified by account number
(as set forth in the Schedule of Receivables). The Indenture Trustee shall not
be under any obligation to confirm or reconcile the information provided
pursuant to Section 4.9(a)(iv).
(b) In addition to the information required by Section 4.9(a),
the Servicer shall include in the copy of the Servicer's Certificate
delivered to the Insurer (i) the Delinquency Ratio, Average
Delinquency Ratio, Net Loss Rate and Average Net Loss Rate for such
Determination Date, (ii) whether any Trigger Event has occurred as of
such Determination Date, (iii) whether any Trigger Event that may have
occurred as of a prior Determination Date is Deemed Cured as of such
Determination Date, and (iv) whether to the knowledge of the Servicer
an Insurance Agreement Event of Default has occurred.
(c) If the Servicer's Certificate contains a manifest error, the
Insurer's written notice to the Servicer, the Owner Trustee and the
Indenture Trustee containing the corrected information shall be deemed
to amend such Servicer's Certificate.
SECTION 4.10. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to the Owner Trustee, the Indenture Trustee and the
Insurer, on or before April 30 of each year beginning April 30, 1998, an
Officer's Certificate, dated as of the preceding December 31, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
(or, in the case of the first such report, during the period from the Closing
Date to December 31, 1997) and of its performance under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof. The Indenture Trustee shall send a
copy of such certificate and the report referred to in Section 4.11 to the
Rating Agencies. A copy of such certificate and the report referred to in
Section 4.11 may be obtained by any Certificateholder by a request in writing to
the Owner Trustee addressed to the Corporate Trust Office or by any Noteholder
by a request in writing to the Indenture Trustee addressed to the Corporate
Trust Office. Upon the telephone request of the Owner Trustee, the Indenture
Trustee will promptly furnish the Owner Trustee a list of Noteholders as of the
date specified by the Owner Trustee. Each Noteholder, by its acceptance of a
Note, shall be deemed to agree that the Indenture Trustee shall be under no
liability for providing the list of Noteholders to the Owner Trustee as
described in the immediately preceding sentence.
(b) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Insurer and the Rating Agencies, promptly after
having obtained knowledge thereof, but in no event later than five (5)
Business Days thereafter, written notice in an Officer's Certificate
of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 8.1(a), (b) or
(c).
SECTION 4.11. Annual Independent Certified Public Accountants' Report. The
Servicer shall cause a firm of independent certified public accountants(who may
also render other services to the Servicer and the Seller and their Affiliates)
to deliver to the Seller, the Owner Trustee, the Indenture Trustee and the
Insurer on or before April 30 of each year commencing April 30, 1998, a report
summarizing the results of applying certain agreed upon procedures to the
monthly Servicer's Certificates and to management's assertions relating to its
compliance with the provisions of this Agreement in accordance with the
attestation standards established by the American Institute of Certified Public
Accountants. Such firm shall apply the agreed-upon procedures to the sections of
the monthly Servicer's Certificates and sections of this Agreement with which
independent public accountants generally possess adequate professional knowledge
and which are reasonably subject to positive assurance by them, except for such
exceptions as they believe to be immaterial and such other exceptions as shall
be set forth in such report.
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Indenture
Trustee, the Owner Trustee, the Certificateholders and the Insurer reasonable
access to the Receivable Files in such cases where the Indenture Trustee or the
Certificateholders shall be required by applicable statutes or regulations to
review such documentation as demonstrated by evidence satisfactory to the
Servicer in its reasonable judgment. Access shall be afforded without charge,
but only upon reasonable request (not less than 72 hours prior notice) and
during the normal business hours at the respective offices of the Servicer.
Nothing in this Section shall affect the obligation of the Servicer to observe
any applicable law prohibiting disclosure of information regarding the Obligors
and the failure of the Servicer to provide access to information as a result of
such obligation shall not constitute a breach of this Section. Any
Certificateholder, by its acceptance of a Certificate, shall be deemed to have
agreed to keep any information obtained by it pursuant to this Section 4.12
confidential, except as may be required by law.
SECTION 4.13. Servicer Expenses. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder and under
any of the Basic Documents, including fees and disbursements of independent
accountants, taxes imposed on the Servicer and expenses incurred in connection
with distributions and reports to Certificateholders and Noteholders.
SECTION 4.14. Appointment of Subservicer. The Servicer may at any time
appoint a subservicer, including SunStar Acceptance Corporation (California)
which is hereby so appointed, to perform all or any portion of its obligations
as Servicer or custodian hereunder; provided, however, that the Rating Agency
Condition shall have been satisfied in connection therewith other than with
respect to SunStar Acceptance Corporation (California); provided further that
the Servicer shall remain obligated and be liable to the Issuer, the Owner
Trustee, the Indenture Trustee, the Insurer, the Certificateholders and the
Noteholders for the servicing and administering of the Receivables in accordance
with the provisions hereof without diminution of such obligation and liability
by virtue of the appointment of such subservicer and to the same extent and
under the same terms and conditions as if the Servicer alone were servicing and
administering the Receivables. The fees and expenses of the subservicer shall be
as agreed between the Servicer and its subservicer from time to time and none of
the Issuer, the Owner Trustee, the Indenture Trustee, the Insurer, the
Certificateholders or the Noteholders shall have any responsibility therefor.
Any such subservicer shall perform its duties with the same standard of care
applicable to the Servicer pursuant to Section 4.1 of this Agreement.
SECTION 4.15. Obligations under Basic Documents. The Servicer shall perform
all of its obligations under the Basic Documents.
ARTICLE V
Distributions; Spread Account;
Statements to Certificateholders and Noteholders
SECTION 5.1. Establishment of Trust Accounts. (a)
(i) The Servicer, for the benefit of the Indenture Trustee on
behalf of the Noteholders, the Owner Trustee on behalf of the
Certificateholders, and the Insurer, shall establish and maintain in
the name of the Indenture Collateral Agent an Eligible Deposit Account
(the "Collection Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the
Indenture Trustee on behalf of the Noteholders, the Owner Trustee on
behalf of the Certificateholders and the Insurer. The Collection
Account shall initially be established with the Indenture Trustee.
Investment Earnings on funds in the Collection Account shall be paid
to the Servicer.
(ii) The Servicer, for the benefit of the Indenture Trustee on
behalf of the Noteholders, shall establish and maintain in the name of
the Indenture Collateral Agent an Eligible Deposit Account (the "Note
Distribution Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Indenture
Trustee on behalf of the Noteholders and the Insurer. The Note
Distribution Account shall initially be established with the Indenture
Trustee.
(b) Funds on deposit in the Collection Account and the Note
Distribution Account (collectively, the "Trust Accounts") and the
Certificate Distribution Account shall be invested by the Indenture
Collateral Agent with respect to Trust Accounts and by the Owner
Trustee with respect to the Certificate Distribution Account (or any
custodian with respect to funds on deposit in any such account) in
Eligible Investments selected in writing by the Servicer (pursuant to
standing instructions or otherwise); provided, however, it is
understood and agreed that neither the Indenture Collateral Agent nor
the Owner Trustee shall be liable for any loss arising from such
investment in Eligible Investments. All such Eligible Investments
shall be held by or on behalf of the Indenture Collateral Agent or the
Owner Trustee, as applicable, for the benefit of the Noteholders
and/or the Certificateholders, as applicable. Other than as permitted
by the Rating Agencies and the Insurer, funds on deposit in the
Collection Account, the Note Distribution Account and the Certificate
Distribution Account shall be invested in Eligible Investments that
will mature so that such funds will be available at the close of
business on the Business Day immediately preceding the following
Distribution Date or, if the Class A-1 Notes have not been paid in
full prior to such date, at the close of business on the Business Day
prior to the Class A-1 Final Scheduled Distribution Date.
(c) (i) The Indenture Collateral Agent shall possess all right,
title and interest in all funds on deposit from time to time in the
Trust Accounts and in all proceeds thereof (excluding all Investment
Earnings on the Collection Account) and all such funds, investments,
proceeds and income shall be part of the Owner Trust Estate. Except as
otherwise provided herein, the Trust Accounts shall be under the sole
dominion and control of the Indenture Collateral Agent for the benefit
of the Noteholders and the Certificateholders, or the Noteholders, as
the case may be, and the Insurer. If, at any time, any of the Trust
Accounts or the Certificate Distribution Account ceases to be an
Eligible Deposit Account, the Indenture Collateral Agent (or the
Servicer on its behalf) or the Owner Trustee, as applicable, shall
within 10 Business Days (or such longer period as to which each Rating
Agency and the Insurer may consent) establish a new Trust Account or a
new Certificate Distribution Account, as applicable, as an Eligible
Deposit Account and shall transfer any cash and/or any investments to
such new Trust Account or a new Certificate Distribution Account, as
applicable. In connection with the foregoing, the Servicer agrees
that, in the event that any of the Trust Accounts are not accounts
with the Indenture Trustee, the Servicer shall notify the Indenture
Trustee in writing promptly upon any of such Trust Accounts ceasing to
be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the Indenture
Collateral Agent, and with respect to the Certificate Distribution
Account, the Owner Trustee, agrees, by its respective acceptance
hereof, that:
(A) any Trust Account Property or any property in the
Certificate Distribution Account that is held in deposit accounts
shall be held solely in the Eligible Deposit Accounts subject to
the penultimate sentence of Section 5.1(c)(i); and, except as
otherwise provided herein, each such Eligible Deposit Account
shall be subject to the exclusive custody and control of the
Indenture Collateral Agent with respect to the Trust Accounts and
the Owner Trustee with respect to the Certificate Distribution
Account, and the Indenture Collateral Agent or the Owner Trustee,
as applicable, shall have sole signature authority with respect
thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Collateral Agent in
accordance with paragraph (a) of the definition of "Delivery" and
shall be held, pending maturity or disposition, solely by the
Indenture Collateral Agent or a financial intermediary (as such
term is defined in Section 8-313(4) of the UCC) acting solely for
the Indenture Collateral Agent;
(C) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered in accordance with
paragraph (b) of the definition of "Delivery" and shall be
maintained by the Indenture Collateral Agent, pending maturity or
disposition, through continued book-entry registration of such
Trust Account Property as described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (C) above shall be delivered to the Indenture Collateral
Agent in accordance with paragraph (c) of the definition of
"Delivery" and shall be maintained by the Indenture Collateral
Agent, pending maturity or disposition, through continued
registration of the Indenture Collateral Agent's (or its
nominee's) ownership of such security.
(d) The Servicer shall have the power, revocable by the
Insurer or, with the consent of the Insurer, by the Indenture
Trustee or by the Owner Trustee with the consent of the Indenture
Trustee, to instruct the Indenture Collateral Agent to make
withdrawals and payments from the Trust Accounts for the purpose
of permitting the Servicer or the Owner Trustee to carry out its
respective duties hereunder or permitting the Indenture Trustee
to carry out its duties under the Indenture.
SECTION 5.2. Collections. (a) The Servicer shall remit within two Business
Days of receipt thereof to the Collection Account all payments by or on behalf
of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds, both as collected during the Monthly
Period less any payments owed thereon to the Servicer or the Subservicer.
Notwithstanding the foregoing, for so long as SunStar Acceptance Corporation is
acting as the Servicer, the Servicer shall be permitted to make remittances of
such collections and any other proceeds of the Receivables with respect to the
preceding calendar month to the Collection Account in next-day funds or
immediately available funds by 12:30 p.m. New York City time on the Business Day
immediately preceding the applicable Distribution Date if the specific terms and
conditions set forth below are satisfied and only for so long as such terms and
conditions are satisfied:
(i) the Servicer shall be SunStar Acceptance
Corporation or any other successor Servicer
pursuant to Section 8.2;
(ii) there exists no Servicer Default;
(iii) if the Servicer does not have a short term debt
rating or deposit rating, as applicable, of at
least A-1 from Standard & Poor's and P-1 from
Moody's, a guaranty, letter of credit, surety bond
or other similar instrument is issued
covering all payments by or on behalf of the
Obligors with respect to the Receivables (other
than Purchased Receivables) and all Liquidation
Proceeds held by SunStar Acceptance Corporation or
its successor, which is acceptable to the Rating
Agencies and the Insurer and issued by an entity
which has a short-term debt or deposit rating, as
applicable, of at least A-1 from Standard & Poor's
and P-1 from Moody's; and
(iv) the Servicer, the Indenture Trustee, the Seller and
the Insurer shall not have received any notice from
either of the Rating Agencies that failure to
deposit such funds more frequently will result in a
reduction or withdrawal of the then current rating
on the Notes or the Certificates by either of the
Rating Agencies.
The Indenture Trustee shall not be deemed to have knowledge of any event or
circumstance under clause (ii) above that would require remittance by the
Servicer of all payments by or on behalf of the Obligors with respect to the
Receivables (other than Purchased Receivables) and all Liquidation Proceeds to
the Collection Account two Business Days after receipt thereof unless the
Indenture Trustee has received notice of such event or circumstances from the
Seller, the Servicer or the Insurer in an Officer's Certificate or from Holders
of Notes evidencing not less than 25% of the outstanding principal amount of the
Notes or Holders of Certificates evidencing not less than 25% of the outstanding
Certificate Balance, as applicable. For purposes of this Article V, the phrase
"payments by or on behalf of Obligors" shall mean payments made with respect to
the Receivables by Persons other than the Servicer or the Seller.
(b) The Servicer will be entitled to be reimbursed from amounts on
deposit in the Collection Account with respect to a Monthly Period for
amounts previously deposited in the Collection Account but later determined
by the Servicer to have resulted from mistaken deposits or postings or
checks returned for insufficient funds. The amount to be reimbursed
hereunder shall be paid to the Servicer on the related Distribution Date
pursuant to Section 5.6(b)(ii) upon certification by the Servicer of such
amounts and the provision of such information to the Indenture Trustee and
the Insurer as may be necessary in the opinion of the Insurer to verify the
accuracy of such certification.
(c) The Servicer may, but shall not be required to, deposit CPI Funds
in the Collection Account.
SECTION 5.3. Application of Collections. All collections for the Monthly
Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor, (other than Supplemental Servicing Fees
with respect to such Receivable, to the extent collected) shall be applied
first, in the case of Precomputed Receivables, to the Scheduled Payment and, in
the case of Simple Interest Receivables, to the extent of the related Scheduled
Payment, to interest and principal in accordance with the Simple Interest
Method. In each case, any excess shall be released to the Servicer to the extent
any amount is owed to it or an Affiliate relating to Collateral Protection
Insurance, and any amount remaining thereafter shall be applied to reduce the
principal balance of the related Receivable. No portion of any payment by or on
behalf of an Obligor will be applied to the satisfaction of any amounts owing as
a result of Collateral Protection Insurance having been placed for an Obligor
until such Obligor's Scheduled Payment shall have been satisfied.
All amounts collected that are payable to the Servicer as Supplemental
Servicing Fees hereunder shall, other than as provided in Section 5.8, be
deposited in the Collection Account and paid to the Servicer in accordance with
Section 5.6(b)(ii).
SECTION 5.4. Withdrawals from Spread Account. (a) In the event that the
Servicer's Certificate with respect to any Determination Date shall state that
the amount of the Available Funds with respect to such Determination Date is
less than the sum of the amounts payable on the related Distribution Date
pursuant to clauses (i) through (vi) of Section 5.6(b) or on the Class A-1 Final
Scheduled Distribution Date pursuant to clauses (i) and (ii) of Section 5.6(c)
(such deficiency being a "Deficiency Claim Amount") then on the Deficiency Claim
Date immediately preceding such Distribution Date or Class A-1 Final Scheduled
Distribution Date, as applicable, the Indenture Trustee shall deliver to the
Collateral Agent, the Insurer and the Servicer, by hand delivery, telex or
facsimile transmission, a written notice (a "Deficiency Notice") specifying the
Deficiency Claim Amount for such Distribution Date, the Note Policy Claim
Amount, if any, and the Certificate Policy Claim Amount, if any. Such Deficiency
Notice shall direct the Collateral Agent to remit such Deficiency Claim Amount
(to the extent of the funds available to be distributed pursuant to the Spread
Account Agreement) to the Indenture Trustee for deposit in the Collection
Account on the related Distribution Date or Class A-1 Final Scheduled
Distribution Date, as applicable.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New York
City time, on the fourth Business Day preceding such Distribution Date or
Class A-1 Final Scheduled Distribution Date, as applicable. The amounts
distributed by the Collateral Agent to the Indenture Trustee pursuant to a
Deficiency Notice shall be deposited by the Indenture Trustee into the
Collection Account pursuant to Section 5.5.
SECTION 5.5. Additional Deposits. The Servicer and the Seller, and SunStar
Acceptance Corporation, as applicable, shall deposit or cause to be deposited in
the Collection Account on the fourth Business Day after the Determination Date
following the date on which such obligations are due the aggregate Purchase
Amount with respect to Purchased Receivables. On or before each Draw Date, the
Indenture Trustee shall remit to the Collection Account any amounts delivered to
the Indenture Trustee by the Collateral Agent.
SECTION 5.6. Distributions. (a) [RESERVED]
(b) On each Distribution Date other than the Distribution Date on
which Insolvency Proceeds are to be distributed, the Indenture Trustee
shall (based solely on the information contained in the Servicer's
Certificate delivered with respect to the related Determination Date)
distribute the following amounts and in the following order of priority:
(i) from the Distribution Amount, to each of the Indenture
Trustee and the Owner Trustee, their respective accrued and unpaid
trustees' fees and expenses and any accrued and unpaid fees and
expenses of the Indenture Collateral Agent (in each case, to the
extent such fees have not been previously paid by the Servicer);
(ii) from the Distribution Amount, to the Servicer, the Base
Servicing Fee for the related Monthly Period, any Supplemental
Servicing Fees for the related Monthly Period, and any amounts
specified in Section 5.2(b), to the extent the Servicer has not
reimbursed itself in respect of such amounts pursuant to Section 5.9
and to the extent not retained by the Servicer;
(iii) from the Distribution Amount, to the Note Distribution
Account, the Noteholders' Interest Distributable Amount;
(iv) from the Distribution Amount, to the Note Distribution
Account, the Noteholders' Principal Distributable Amount;
(v) from the Distribution Amount, to the Owner Trustee for
deposit in the Certificate Distribution Account, the
Certificateholders' Interest Distributable Amount;
(vi) from the Distribution Amount, to the Owner Trustee for
deposit in the Certificate Distribution Account, the
Certificateholders' Principal Distributable Amount;
(vii) from the Available Funds, to the Insurer, to the extent of
any amounts owing to the Insurer under the Insurance Agreement and not
paid;
(viii) from Available Funds, to the Collateral Agent, amounts for
deposit in the Spread Account up to the Specified Spread Account
Requirement; and
(ix) from Available Funds, to the Seller, 99% of the remaining
funds and, to the General Partner, 1% of the remaining funds;
provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing, following the
occurrence of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iii),
5.1(v) or 5.1(vi) of the Indenture, or (C) following the receipt of Insolvency
Proceeds pursuant to Section 9.1(b), amounts deposited in the Note Distribution
Account and the Certificate Distribution Account (including any Insolvency
Proceeds) shall be paid to the Noteholders and the Certificateholders in
accordance with the provisions of Section 5.6 of the Indenture.
(c) On the Class A-1 Final Scheduled Distribution Date, the
Indenture Trustee shall (based solely on the information contained in
the Servicer's Certificate delivered with respect to the related
Determination Date) distribute the following amounts and in the
following order of priority:
(i) from the Class A-1 Distribution Amount, to the Note
Distribution Account, the sum of (x) the Noteholders' Monthly Interest
Distributable Amount for the Class A-1 Notes (calculated as if the
Class A-1 Final Scheduled Distribution Date were a Distribution Date)
and (y) the Noteholders' Interest Carryover Shortfall for the Class
A-1 Notes (calculated as if the Class A-1 Final Scheduled Distribution
Date were a Distribution Date); and
(ii) from the Class A-1 Distribution Amount, to the Note
Distribution Account, the Noteholders' Principal Distributable Amount
for the Class A-1 Notes.
(d) In the event that the Collection Account is maintained with an
institution other than the Indenture Collateral Agent, the Servicer shall
instruct and cause such institution to make all deposits and distributions
pursuant to Section 5.6(b) and Section 5.6(c) on the related Distribution Date
or Class A-1 Final Scheduled Distribution Date, as applicable.
SECTION 5.7. Statements to Certificateholders and Noteholders. On or prior
to each Determination Date, the Servicer shall provide to the Indenture Trustee
(with a copy to the Insurer and the Rating Agencies) for the Indenture Trustee
to forward to each Noteholder of record, to each Paying Agent, if any, and to
the Owner Trustee for the Owner Trustee to forward to each Certificateholder of
record, a statement substantially in the form of Exhibit B and Exhibit C,
respectively, setting forth at least the following information with respect to
distributions on the related Distribution Date as to the Notes and the
Certificates to the extent applicable:
(i) the amount of such distribution allocable to
principal of each Class of Notes and to the Certificate
Balance of the Certificates;
(ii) the amount of such distribution allocable to
interest on or with respect to each Class of Notes and to
the Certificates;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Spread Account or pursuant to a claim on the Note
Policy or the Certificate Policy;
(iv) the Pool Balance as of the close of business on
the last day of the preceding Monthly Period;
(v) the aggregate outstanding principal amount of each Class of
the Notes, the Note Pool Factor for each such Class, the Certificate
Balance and the Certificate Pool Factor after giving effect to
payments allocated to principal reported under (i) above;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Monthly Period and/or due but unpaid with
respect to such Monthly Period or prior Monthly Periods, as the case
may be;
(vii) the Noteholders' Interest Carryover Shortfall,
the Certificateholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, and the
Certificateholders' Principal Carryover Shortfall;
(viii) the amount of the aggregate Realized Losses,
if any, for the second preceding Monthly Period; and
(ix) the aggregate Purchase Amounts for Receivables, if any,
that were repurchased in such period.
Each amount set forth pursuant to paragraph (i), (ii), (iii), (vi) and (vii)
above shall be expressed as a dollar amount per $1,000 of the initial principal
balance of the Notes (or Class thereof) or the initial Certificate Balance, as
applicable.
SECTION 5.8. Net Deposits. As an administrative convenience, unless the
Servicer is required to remit collections within two Business Days of receipt
thereof, the Servicer will be permitted to make the deposit of collections on
the Receivables and Purchase Amounts for or with respect to each Monthly Period
net of distributions to be made to the Servicer with respect to such Monthly
Period. The Servicer, however, will account to the Owner Trustee, the Indenture
Trustee, the Indenture Collateral Agent, the Noteholders and the
Certificateholders as if all deposits, distributions and transfers were made
individually.
SECTION 5.9. Optional Deposits by the Insurer. The Insurer shall at any
time, and from time to time, with respect to a Distribution Date, have the
option (but shall not be required, except in accordance with the terms of a
Policy) to deliver amounts to the Indenture Collateral Agent for deposit into
the Collection Account for any of the following purposes: (i) to provide funds
in respect of the payment of fees or expenses of any provider of services to the
Trust with respect to such Distribution Date, or (ii) to include such amount to
the extent that without such amount a draw would be required to be made on the
Note Policy or the Certificate Policy.
ARTICLE VA
The Certificate Policy
SECTION 5A.1. Claims Under Policy. (a) In the event that the Indenture
Trustee has delivered a Deficiency Notice with respect to any Determination
Date, if the Certificate Policy Claim Amount for the related Distribution Date
is greater than zero, the Owner Trustee shall furnish to the Insurer (with a
copy to the Servicer) no later than 12:00 noon New York City time on the related
Draw Date a completed Notice of Claim in the amount of the Certificate Policy
Claim Amount. Amounts paid by the Insurer under the Certificate Policy shall be
deposited by the Owner Trustee into the Certificate Distribution Account for
payment to Certificateholders on the related Distribution Date (or promptly
following payment on a later date as set forth in the Certificate Policy). The
"Certificate Policy Claim Amount" for any Distribution Date shall equal the
lesser of (i) the sum of the Certificateholders' Interest Distributable Amount
and the Certificateholders' Principal Distributable Amount (in each case, less
the amount thereof distributable to the General Partner) for such Distribution
Date and (ii) the excess, if any, of the amount required to be distributed
pursuant to clauses (i) - (vi) of Section 5.6(b) over the Distribution Amount
and any Note Policy Claim Amounts for such Distribution Date.
(b) Any notice delivered by the Owner Trustee to the Insurer
pursuant to subsection 5A.1(a) shall specify the Certificate Policy
Claim Amount claimed under the Certificate Policy and shall constitute
a "Notice of Claim" under the Certificate Policy. In accordance with
the provisions of the Certificate Policy, the Insurer is required to
pay to the Owner Trustee the Certificate Policy Claim Amount properly
claimed thereunder by 12:00 noon, New York City time, on the earlier
of (i) the third Business Day following receipt on a Business Day of
the Notice of Claim, and (ii) the applicable Distribution Date. Any
payment made by the Insurer under the Certificate Policy shall be
applied solely to the payment of the Certificates, and for no other
purpose.
(c) The Owner Trustee shall (i) receive as attorney-in-fact of
each Certificateholder any Certificate Policy Claim Amount from the
Insurer and (ii) deposit the same in the Certificate Distribution
Account for disbursement to the Certificateholders as set forth in the
Trust Agreement. Any and all Certificate Policy Claim Amounts
disbursed by the Owner Trustee from claims made under the Certificate
Policy shall not be considered payment by the Trust or from the Spread
Account with respect to such Certificates, and shall not discharge the
obligations of the Trust with respect thereto. The Insurer shall, to
the extent it makes any payment with respect to the Certificates,
become subrogated to the rights of the recipients of such payments to
the extent of such payments. Subject to and conditioned upon any
payment with respect to the Certificates by or on behalf of the
Insurer, the Owner Trustee shall assign to the Insurer all rights to
the payment of interest or principal with respect to the Certificates
which are then due for payment to the extent of all payments made by
the Insurer and the Insurer may exercise any option, vote, right,
power or the like with respect to the Certificates to the extent that
it has made payment pursuant to the Certificate Policy. To evidence
such subrogation, the Certificate Registrar shall note the Insurer's
rights as subrogee upon the register of Certificateholders upon
receipt from the Insurer of proof of payment by the Insurer of any
Certificateholders' Interest Distributable Amount or
Certificateholders' Principal Distributable Amount.
(d) The Owner Trustee shall be entitled to enforce on behalf of
the Certificateholders the obligations of the Insurer under the
Certificate Policy. Notwithstanding any other provision of this
Agreement, the Certificateholders are not entitled to make a claim
directly under the Certificate Policy or institute proceedings
directly against the Insurer.
SECTION 5A.2. Preference Claims; Direction of Proceedings. (a) In the event
that the Owner Trustee has received a certified copy of an order of the
appropriate court that any Certificateholders' Interest Distributable Amount or
Certificateholders' Principal Distributable Amount paid on a Certificate has
been avoided in whole or in part as a preference payment under applicable
bankruptcy law, the Owner Trustee shall so notify the Insurer, shall comply with
the provisions of the Certificate Policy to obtain payment by the Insurer of
such avoided payment, and shall, at the time it provides notice to the Insurer,
notify Holders of the Certificates by mail that, in the event that any
Certificateholder's payment is so recoverable, such Certificateholder will be
entitled to payment pursuant to the terms of the Certificate Policy. Pursuant to
the terms of the Certificate Policy, the Insurer will make such payment on
behalf of the Certificateholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order (as defined in
the Certificate Policy) and not to the Owner Trustee or any Certificateholder
directly (unless a Certificateholder has previously paid such payment to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy, in which
case the Insurer will make such payment to the Owner Trustee for distribution to
such Certificateholder upon proof of such payment reasonably satisfactory to the
Insurer).
(b) The Owner Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which a responsible
officer of the Owner Trustee has actual knowledge) seeking the
avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (a "Preference
Claim") of any distribution made with respect to the Certificates.
Each Holder, by its purchase of Certificates, and the Owner Trustee
hereby agree that so long as an Insurer Default shall not have
occurred and be continuing, the Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct
all matters relating to such Preference Claim including, without
limitation, (i) the direction of any appeal of any order relating to
any Preference Claim and (ii) the posting of any surety, supersedeas
or performance bond pending any such appeal at the expense of the
Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as
set forth in Section 5A.1(c), the Insurer shall be subrogated to, and
each Certificateholder and the Owner Trustee hereby delegate and
assign, to the fullest extent permitted by law, the rights of the
Owner Trustee and each Certificateholder in the conduct of any
proceeding with respect to a Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such
Preference Claim.
SECTION 5A.3. Surrender of Policy. The Owner Trustee shall surrender the
Certificate Policy to the Insurer for cancellation upon the expiration of such
policy in accordance with the terms thereof.
ARTICLE VI
The Seller
SECTION 6.1. Representations of the Seller. The Seller makes the following
representations on which the Insurer shall be deemed to have relied in executing
and delivering the Policies and on which the Issuer is deemed to have relied in
acquiring the Receivables. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date, and shall survive the
sale of the Receivables to the Issuer and the pledge thereof to the Indenture
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller is duly organized and
validly existing as a corporation in good standing under the laws of the
State of Delaware with the corporate power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is now conducted, and had at all relevant times,
and has, the power, authority and legal right to acquire and own the
Receivables.
(b) Due Qualification. The Seller is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property, including the Receivables, or the conduct of its business
shall require such qualifications, except where failure to obtain the same
would not have a material adverse effect upon the rights of the Issuer, the
Noteholders or the Certificateholders.
(c) Power and Authority of the Seller. The Seller has the corporate
power and authority to execute and deliver this Agreement and to perform
its obligations under each of the Basic Documents to which the Seller is a
party; the Seller has full corporate power and authority to sell and assign
the property to be sold and assigned to and deposited with the Issuer and
the Seller has duly authorized such sale and assignment to the Issuer by
all necessary corporate action; and the execution, delivery and performance
of each of the Basic Documents to which the Seller is a party has been duly
authorized by the Seller by all necessary corporate action.
(d) Binding Obligation. This Agreement and each of the Basic Documents
to which the Seller is a party constitute legal, valid and binding
obligations of the Seller, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect
relating to creditors' rights generally and subject to general principles
of equity (whether applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not result in any
breach of any of the terms and provisions of, nor constitute (with or
without notice or lapse of time or both) a default under, the certificate
of incorporation or by-laws of the Seller, or any material indenture,
agreement or other instrument to which the Seller is a party or by which it
is bound; nor result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor, to the
best of its knowledge, violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(f) No Proceedings. There are no proceedings or investigations pending
against the Seller or, to its best knowledge, threatened against the
Seller, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (i) asserting the invalidity of this Agreement or any of the
Basic Documents, the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic Documents,
(iii) seeking any determination or ruling that could reasonably be expected
to have a material and adverse effect on the performance by the Seller of
its obligations under, or the validity or enforceability of the Basic
Documents, the Notes or the Certificates or (iv) that might adversely
affect the federal income tax attributes of the Issuer, the Notes or the
Certificates.
(g) All Consents. All authorizations, consents, orders or approvals of
or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Seller in connection with the execution
and delivery by the Seller of this Agreement or any of the Basic Documents
to which it is a party and the performance by the Seller of the
transactions contemplated by this Agreement or any of the Basic Documents
to which it is a party, have been duly obtained, effected or given and are
in full force and effect, except where failure to obtain the same would not
have a material adverse effect upon the rights of the Issuer, the
Noteholders or the Certificateholders.
(h) Chief Executive Office. The chief executive office of the Seller
is at 225 East John W. Carpenter Freeway, 7th Floor, Irving, Texas 75062.
SECTION 6.2. Corporate Existence. (a) During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Seller as a legal
entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall maintain corporate records and books of
account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the Seller
shall not commingle its assets and funds with those of its Affiliates;
(iii) the Seller shall hold such appropriate meetings of its
Board of Directors (or obtain appropriate director's consents) as are
necessary to authorize all the Seller's corporate actions required by
law to be authorized by the Board of Directors, shall keep minutes of
such meetings and of meetings of its stockholder(s) and observe all
other customary corporate formalities (and any successor Seller not a
corporation shall observe similar procedures in accordance with its
governing documents and applicable law);
(iv) the Seller shall at all times hold itself out to the public
under the Seller's own name as a legal entity separate and distinct
from its Affiliates; and
(v) all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
SECTION 6.3. Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trust, the Insurer, the Indenture Trustee and the
Indenture Collateral Agent from and against any taxes that may at any time
be asserted against any such Person with respect to the transactions
contemplated in this Agreement and any of the Basic Documents (except any
income taxes arising out of fees paid to the Owner Trustee or the Indenture
Trustee and except any taxes to which the Owner Trustee or the Indenture
Trustee may otherwise be subject to), including any sales, gross receipts,
general corporation, tangible personal property, privilege or license taxes
(but, in the case of the Issuer, not including any taxes asserted with
respect to, federal or other income taxes arising out of distributions on
the Certificates and the Notes) and costs and expenses in defending against
the same.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee and the Indenture Trustee from and against any taxes that
may at any time be asserted against any of the foregoing with respect to
the transactions contemplated herein or in the other Basic Documents, if
any, including, without limitation, any sales, gross receipts, general
corporation, tangible personal property, privilege, or license taxes (but
not including any taxes asserted with respect to, and as of the date of,
the sale, transfer and assignment of the Owner Trust Estate to the Trust or
the issuance and original sale of the Notes and the Certificates, or
asserted with respect to ownership of the Receivables or the other Owner
Trust Estate, or federal or other applicable state income taxes arising out
of the transactions contemplated by this Agreement and the other Basic
Documents) and costs and expenses in defending against the same.
(c) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, and the Indenture Collateral
Agent, the Insurer, the Certificateholders and the Noteholders from and
against any loss, liability or expense incurred by reason of (i) the
Seller's willful misfeasance, bad faith or negligence in the performance of
its duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of federal or state securities laws in connection with
the offering and sale of the Notes and the Certificates, except to the
extent such violation results from information contained in the offering
materials used in connection with the offering and distribution of the
Securities that was expressly provided in writing by the indemnified party
for use in such offering materials.
(d) The Seller shall indemnify, defend and hold harmless the Owner
Trustee and its officers, directors, employees and agents from and against
any and all costs, expenses, losses, claims, damages and liabilities
arising out of, or incurred in connection with the acceptance or
performance of the trusts and duties set forth herein and in the Basic
Documents except to the extent that such cost, expense, loss, claim, damage
or liability shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Owner Trustee.
(e) If a claim is made against an indemnitee which could give rise to
indemnification pursuant to this Section 6.3, the indemnitee upon receiving
such claim, shall give notice thereof to the Seller; provided, however,
that failure to give or delay in giving such notice shall not release the
Seller from any of its indemnification obligations hereunder unless and
only to the extent that the Seller can demonstrate it was harmed thereby.
The Seller shall be entitled to defend any such claim through counsel
selected by it (so long as such counsel is reasonably acceptable to the
indemnitee) and the indemnitee will extend reasonable cooperation to the
Seller and such counsel in connection with such defense.
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee, the Indenture Trustee or the Indenture Collateral Agent
and the termination of this Agreement or the Indenture or the Trust Agreement,
as applicable, and shall include reasonable fees and expenses of counsel and
other expenses of litigation. If the Seller shall have made any indemnity
payments pursuant to this Section and the Person to or on behalf of whom such
payments are made thereafter shall collect any of such amounts from others, such
Person shall promptly repay such amounts to the Seller, without interest.
SECTION 6.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (a) into which the Seller may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Seller shall
be a party, or (c) which may succeed to the properties and assets of the Seller
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement; provided, however, that (i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 3.1 shall
have been breached and no Servicer Default, and no event which, after notice or
lapse of time, or both, would become a Servicer Default, shall have happened and
be continuing, (ii) the Seller shall have delivered to the Owner Trustee, and
the Indenture Trustee and the Insurer an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and (iii) the Seller shall have
delivered to the Owner Trustee and the Indenture Trustee an Opinion of Counsel
stating that, in the opinion of such counsel, either (A) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee, respectively, in the Receivables and
reciting the details of such filings or (B) no such action shall be necessary to
preserve and protect such interest. The Seller shall provide notice of any
merger, consolidation or succession pursuant to this Section to each Rating
Agency and the Insurer. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
(i), (ii) and (iii) above shall be conditions to the consummation of the
transactions referred to in clauses (a), (b) or (c) above.
SECTION 6.5. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 6.6. Seller May Own Certificates or Notes. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document. Notes or Certificates so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority, or distinction as among all
of the Notes or Certificates, provided, however, that any Notes or Certificates
owned by the Seller or any Affiliate thereof, during the time such Notes or
Certificates are owned by them, will not be entitled to the benefits of the
Policies. The Seller shall notify the Owner Trustee, the Indenture Trustee and
the Insurer promptly after it or any of its Affiliates become the owner of a
Certificate or a Note.
ARTICLE VII
The Servicer
SECTION 7.1. Representations of Servicer. The Servicer makes the following
representations on which the Insurer shall be deemed to have relied in executing
and delivering the Policies and on which the Issuer is deemed to have relied in
acquiring the Receivables. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date, and shall survive the
sale of the Receivables to the Issuer and the pledge thereof to the Indenture
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the
state of its incorporation, with the corporate power and authority to own
its properties and to conduct its business as such properties are currently
owned and such business is now conducted, and had at all relevant times,
and has, the power, authority and legal right to acquire, own, sell and
service the Receivables and to hold the Receivable Files as custodian.
(b) Due Qualification. The Servicer is duly qualified to do business
and has obtained all necessary licenses and approvals in all jurisdictions
in which the ownership or lease of property or the conduct of its business
(including the servicing of the Receivables as required by this Agreement)
shall require such qualifications, and was duly qualified and had all
licenses in all relevant jurisdictions required for the origination of the
Receivables, except where failure to obtain the same would not have a
material adverse effect upon the rights of the Issuer, the Noteholders or
the Certificateholders.
(c) Power and Authority of the Servicer. The Servicer has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and the execution, delivery and
performance of this Agreement have been duly authorized by the Servicer by
all necessary corporate action. All authorizations, consents, orders or
approvals of or registrations or declarations with any court, regulatory
body, administrative agency or other government instrumentality required to
be obtained, effected or given by the Servicer in connection with the
execution and delivery by the Servicer of this Agreement or any of the
Basic Documents to which it is a party and the performance by the Servicer
of the transactions contemplated by this Agreement or any of the Basic
Documents to which it is a party, have been duly obtained, effected or
given and are in full force and effect, except where failure to obtain the
same would not have a material adverse effect upon the rights of the
Issuer, the Noteholders or the Certificateholders.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect
relating to creditors' rights generally, and subject to general principles
of equity (whether applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under the certificate of
incorporation or by-laws of the Servicer, or any material indenture,
agreement or other instrument to which the Servicer is a party or by which
it shall be bound; or result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents);
or, to the best of the Servicer's knowledge, violate any law, order, rule
or regulation applicable to the Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations pending
against the Servicer, or, to its best knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties: (i) asserting the invalidity of this Agreement or any of the
Basic Documents, the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic Documents,
(iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Servicer of its obligations under,
or the validity or enforceability of this Agreement or any of the Basic
Documents, the Notes or the Certificates or (iv) relating to the Servicer
and which might adversely affect the federal income tax or ERISA attributes
of the Issuer, the Notes or the Certificates.
SECTION 7.2. Indemnities of Servicer. (a) The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement and the representations made by
the Servicer herein.
(b) The Servicer shall defend, indemnify and hold harmless the Owner
Trustee, the Indenture Trustee, the Trust, the Indenture Collateral Agent,
the Insurer, the Noteholders, the Certificateholders and the Seller from
and against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting from the use, ownership or
operation by the Servicer or any Affiliate thereof of a Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the Owner
Trustee, the Indenture Trustee, the Seller, the Trust, the Indenture
Collateral Agent, the Insurer, their respective officers, directors, agents
and employees and the Noteholders and the Certificateholders from and
against any and all costs, expenses, losses, claims, damages, and
liabilities to the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon any such Person through, the
negligence, willful misfeasance or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
If a claim is made against any indemnitee which could give rise to
indemnification under this Section, such indemnitee, upon receiving such claim,
shall give notice thereof to the Servicer; provided, however, that failure to
give or delay in giving such notice shall not release the Servicer from any of
its indemnification obligations hereunder unless and only to the extent that the
Servicer can demonstrate it was harmed thereby. The Servicer shall be entitled
to defend any such claim through counsel selected by it (so long as such counsel
is reasonably acceptable to the indemnitee) and each indemnitee will extend
reasonable cooperation to the Servicer and such counsel in connection with such
defense.
For purposes of this Section, in the event of the termination of the rights
and obligations of SunStar Acceptance Corporation (or any successor thereto
pursuant to Section 7.3) as Servicer pursuant to Section 8.1, or a resignation
by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be
the Servicer pending appointment of a successor Servicer (other than the
Indenture Trustee) pursuant to Section 8.2.
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement, the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and expenses of litigation. If
the Servicer shall have made any indemnity payments pursuant to this Section and
the recipient thereafter collects any of such amounts from others, such Person
shall promptly repay such amounts to the Servicer, without interest.
SECTION 7.3. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party or (c) which may succeed to the properties and assets
of the Servicer, substantially as a whole, or any Person, more than 50% of the
voting stock of which is owned, directly or indirectly, by NationsBank
Corporation or its successor, which Person executed an agreement of assumption
to perform every obligation of the Servicer hereunder, shall be the successor to
the Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided, however, that (i) immediately after giving
effect to such transaction, no Servicer Default and no event which, after notice
or lapse of time, or both, would become a Servicer Default shall have happened
and be continuing, (ii) the Servicer shall have delivered to the Owner Trustee
and the Indenture Trustee an Officers' Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and (iii) the Servicer shall have delivered
to the Owner Trustee and the Indenture Trustee an Opinion of Counsel stating
that, in the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Owner Trustee
and the Indenture Trustee in the Receivables and reciting the details of such
filings, or (B) no such action shall be necessary to preserve and protect such
interest. The Servicer shall provide notice of any merger, consolidation or
succession pursuant to this Section to each Rating Agency and the Insurer.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii) and (iii) above
shall be conditions to the consummation of the transactions referred to in
clauses (a), (b) or (c) above.
SECTION 7.4. Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of its directors, officers, employees or agents shall be under
any liability to the Issuer, the Noteholders or the Certificateholders, except
as provided under this Agreement, for any action taken or for refraining from
the taking of any action pursuant to this Agreement or for errors in judgment;
provided, however, that this provision shall not protect the Servicer or any
such person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement. The
Servicer or any subservicer and any of their respective directors, officers,
employees or agents may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement.
Except as provided in this Agreement the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its duties to service the Receivables in accordance with this
Agreement, and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer, may (but shall not be required to)
undertake any reasonable action that it may deem necessary or desirable to
protect the interests of the Certificateholders under the Trust Agreement and
the Noteholders under the Indenture.
SECTION 7.5. Servicer Not To Resign. Subject to the provisions of Section
7.3, the Servicer may not resign from the obligations and duties hereby imposed
on it as Servicer under this Agreement except upon determination that by reason
of a change in law the performance of its duties under this Agreement would
cause it to be in violation of law and the Insurer does not elect to waive the
obligations of the Servicer to perform the duties which render it legally unable
to act or does not elect to delegate those duties to another Person. Notice of
any such determination permitting the resignation of the Servicer shall be
communicated to the Owner Trustee, the Indenture Trustee and the Insurer at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to and satisfactory to the Owner Trustee, the Indenture Trustee and
the Insurer concurrently with or promptly after such notice. No such resignation
of the Servicer shall become effective until the Indenture Trustee or a
successor servicer shall have assumed the responsibilities and obligations of
SunStar Acceptance Corporation in accordance with Section 8.2 of this Agreement.
ARTICLE VIII
Default
SECTION 8.1. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) Any failure by the Servicer to deliver to the Owner Trustee or
Indenture Trustee for deposit in any of the Trust Accounts or the
Certificate Distribution Account any payment required to be so delivered
under the terms of the Notes, the Certificates or this Agreement that shall
continue unremedied for a period of five Business Days after written notice
of such failure is received by the Servicer from the Insurer, the Owner
Trustee or the Indenture Trustee or after discovery of such failure by an
Officer of the Servicer; or
(b) Failure by the Servicer duly to observe or to perform in any
material respect any other covenants or agreements of the Servicer or the
Seller (as the case may be) set forth in the Notes, the Certificates, this
Agreement or any other Basic Document, which failure shall (i) materially
and adversely affect the rights of either the Certificateholders or
Noteholders and (ii) continue unremedied for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given (A) to the Servicer by the Insurer, the
Owner Trustee or the Indenture Trustee or (B) to the Servicer and to the
Owner Trustee and the Indenture Trustee by the Holders of Notes evidencing
not less than 25% of the outstanding principal amount of the Notes or
Holders of Certificates evidencing not less than 25% of the outstanding
Certificate Balance, as applicable (or for such longer period, not in
excess of 120 days, as may be reasonably necessary to remedy such default;
provided that such default is capable of remedy within 120 days and the
Servicer delivers an Officers' Certificate to the Insurer, to the Owner
Trustee and the Indenture Trustee to such effect and to the effect that the
Servicer has commenced or will promptly commence, and will diligently
pursue, all reasonable efforts to remedy such default); or
(c) An Insolvency Event occurs with respect to the Servicer; or
(d) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default described in Section
5.01 of the Insurance Agreement shall have occurred;
then, and in each and every case, (i) so long as no Insurer Default shall have
occurred and be continuing, the Insurer, subject to subsection (b) of this
Section 8.1, except in the case of an event arising under Section 5.01(c) of the
Insurance Agreement or (ii) if an Insurer Default shall have occurred and be
continuing, any of the Indenture Trustee or the Holders of Notes evidencing not
less than a majority of the principal amount of the Notes then outstanding, or
the Holders (as defined in the Trust Agreement) of Certificates evidencing not
less than a majority of the outstanding Certificate Balance, as applicable, in
the case of any default which does not adversely affect the Indenture Trustee or
the Noteholders, in any case by notice given in writing to the Servicer (and to
the Indenture Trustee if given by the Insurer or, as applicable, the Noteholders
or the Certificateholders) may terminate all of the rights and obligations of
the Servicer under this Agreement. For purposes of this Section 8.1(d), any
determination of an adverse effect on the interest of the Certificateholders or
the Noteholders pursuant to Section 8.1(b) shall be made without consideration
of the availability of funds under the Policies. On or after the
receipt by the Servicer of such written notice, all authority, power,
obligations and responsibilities of the Servicer under this Agreement, whether
with respect to the Notes, the Certificates or the Receivables or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the Indenture Trustee provided that the Indenture Trustee is
not unwilling or unable to act; provided, however, that the Indenture Trustee
shall have no liability with respect to any obligation which was required to be
performed by the prior Servicer prior to the date that the Indenture Trustee
becomes the Servicer or any claim of a third party based on any alleged action
or inaction of the prior Servicer. The Indenture Trustee is authorized and
empowered by this Agreement, as successor Servicer to execute and deliver, on
behalf of the prior Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Receivables and the
other Trust Property and related documents to show the Owner Trustee as
lienholder or secured party on the related Lien Certificates, or otherwise. The
prior Servicer agrees to cooperate with the successor Servicer in effecting the
termination of the responsibilities and rights of the prior Servicer under this
Agreement, including, the transfer to the successor Servicer for administration
by it of all cash amounts that shall at the time be held by the prior Servicer
for deposit, or have been deposited by the prior Servicer, in the Collection
Account or thereafter received with respect to the
Receivables and the delivery to the successor Servicer of all Receivables Files,
records and a computer tape in readable form containing all information
necessary to enable the successor Servicer to service the Receivables and the
other Trust Property. The terminated Servicer shall grant the Indenture Trustee
(in its capacity as Indenture Trustee and/or successor Servicer), the Owner
Trustee and the Insurer reasonable access to the terminated Servicer's premises
at the Servicer's expense.
SECTION 8.2. Appointment of Successor. (a) Upon the Servicer's receipt of
notice of termination, pursuant to Section 8.1 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the earlier of (x) the date 45
days from the delivery to the Owner Trustee and the Indenture Trustee of written
notice of such resignation (or written confirmation of such notice) in
accordance with the terms of this Agreement and (y) the date upon which the
predecessor Servicer shall become unable to act as Servicer, as specified in the
notice of resignation and accompanying Opinion of Counsel. In the event of the
Servicer's termination or resignation hereunder, the Indenture Trustee shall,
provided it is not unwilling or unable to act, assume the obligations of
Servicer hereunder, and shall accept its appointment by a written assumption in
form acceptable to the Insurer. Notwithstanding the above, the Indenture
Trustee, with the prior written consent of the Insurer, or the Insurer shall, if
the Indenture Trustee shall be unwilling or legally unable so to act, appoint,
or petition a court of competent jurisdiction to appoint, any established
institution having a net worth of not less than $50,000,000 and whose regular
business shall include the servicing of automotive receivables as the successor
to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer (including the Indenture
Trustee acting as successor Servicer) shall be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating
thereto placed on the predecessor Servicer, subject to the exceptions set
forth in Section 8.2(a) hereof, and shall be entitled to the Servicing Fee
and all the subsequently accruing rights granted to the predecessor
Servicer by the terms and provisions of this Agreement.
SECTION 8.3. [RESERVED]
SECTION 8.4. Notification to Noteholders and Certificateholders. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article VIII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders and the Indenture Trustee shall give prompt written notice
thereof to Noteholders and to the Rating Agencies.
SECTION 8.5. Waiver of Past Defaults. So long as no Insurer Default shall
have occurred and be continuing, the Insurer (or, if an Insurer Default shall
have occurred and be continuing, the Holders of Notes evidencing not less than a
majority of the outstanding principal amount of the Notes, or the Holders (as
defined in the Trust Agreement) of Certificates evidencing not less than a
majority of the outstanding Certificate Balance, as applicable, in the case of
any default which does not adversely affect the Indenture Trustee or the
Noteholders) may, on behalf of all Noteholders and Certificateholders, waive any
default by the Servicer in the performance of its obligations hereunder and its
consequences, except a continuing default in making any required deposits to or
payments from any of the Trust Accounts in accordance with this Agreement. Upon
any such waiver of a past default, such default shall cease to exist, and any
Servicer 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 thereto.
ARTICLE IX
Termination
SECTION 9.1. Optional Purchase of All Receivables. (a) On the last day of
any Monthly Period as of which the Pool Balance shall be less than or equal to
5% of the Original Pool Balance, the Servicer shall have the option to purchase
the Owner Trust Estate, other than the Trust Accounts and the Certificate
Distribution Account (with the consent of the Insurer if such purchase would
result in a claim on either Policy or would result in any amount owing to the
Insurer under the Insurance Agreement remaining unpaid); provided, however, that
the amount to be paid for such purchase (as set forth in the following sentence)
shall be sufficient to pay the full amount of principal and interest then due
and payable on the Notes and the Certificates. To exercise such option, the
Servicer shall deposit pursuant to Section 5.5 in the Collection Account an
amount equal to the aggregate Purchase Amount for the Receivables (including
Receivables which are then in default), plus the fair market value of any other
property held by the Trust, and shall succeed to all interests in and to the
Trust.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.2
of the Trust Agreement, the Servicer shall instruct the Indenture Trustee
to deposit the proceeds from such sale after all payments and reserves
therefrom (including the expenses of such sale) have been made (the
"Insolvency Proceeds") in the Collection Account. On the Distribution Date
on which the Insolvency Proceeds are deposited in the Collection Account
(or, if such proceeds are not so deposited on a Distribution Date, on the
Distribution Date immediately following such deposit), the Servicer shall
instruct the Indenture Trustee to make, and the Indenture Trustee shall
make, the following deposits and distributions from the Insolvency Proceeds
and the Distribution Amount for such Distribution Date:
(i) from the Distribution Amount, to each of the Indenture
Trustee and the Owner Trustee, their respective accrued and unpaid
trustees' fees and expenses and any accrued and unpaid fees and
expenses of the Indenture Collateral Agent (in each case, to the
extent such fees have not been previously paid by the Servicer);
(ii) from the Distribution Amount, to the Servicer, the Base
Servicing Fee for the related Monthly Period, any Supplemental
Servicing Fees for the related Monthly Period, and any amounts
specified in Section 5.2(b), to the extent the Servicer has not
reimbursed itself in respect of such amounts pursuant to Section 5.9
and to the extent not retained by the Servicer;
(iii) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited
into the Note Distribution Account on such Distribution Date;
(iv) to the Note Distribution Account, the outstanding principal
amount of the Notes (after giving effect to the reduction in the
outstanding principal amount of the Notes to result from the deposits
made in the Note Distribution Account on such Distribution Date);
(v) to the Owner Trustee for deposit in the Certificate
Distribution Account, any portion of the Certificateholders' Interest
Distributable Amount not otherwise deposited into the Certificate
Distribution Account on such Distribution Date; and
(vi) to the Owner Trustee for deposit in the Certificate
Distribution Account, the Certificate Balance (after giving effect to
the reduction in the Certificate Balance to result from the deposits
made in the Certificate Distribution Account on such Distribution
Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid first to the Insurer to the extent of any amounts owing to the Insurer
under the Insurance Agreement and not paid, and second, to the extent of any
remaining funds, to the General Partner.
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee, the Indenture Trustee, the Insurer and
the Rating Agencies as soon as practicable after the Servicer has
received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and
the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders
hereunder and the Owner Trustee will succeed to the rights of, and
assume the obligations of, the Indenture Trustee pursuant to this
Agreement.
ARTICLE X
Administrative Duties of the Servicer
SECTION 10.1. Administrative Duties. (a) Duties with Respect to the
Indenture and Depository Agreements. The Servicer shall perform all its duties
and the duties of the Issuer under the Indenture and the Depository Agreements.
In addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Indenture and the
Depository Agreements. The Servicer shall monitor the performance of the Issuer
and shall advise the Owner Trustee when action is necessary to comply with the
Issuer's duties under the Indenture and the Depository Agreements. The Servicer
shall prepare for execution by the Issuer or shall cause the preparation by
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer to prepare, file
or deliver pursuant to the Indenture and the Depository Agreements. In
furtherance of the foregoing, the Servicer shall take all necessary action that
is the duty of the Issuer to take pursuant to the Indenture and the Depository
Agreements, including, pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 7.2, 7.3,
11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Basic Documents, the Servicer shall
perform such calculations and shall prepare for execution by the
Issuer or the Owner Trustee or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to
this Agreement or any of the Basic Documents, and at the request of
the Owner Trustee shall take all appropriate action that it is the
duty of the Issuer to take pursuant to this Agreement or any of the
Basic Documents, including, pursuant to Sections 2.6 and 2.12 of the
Trust Agreement. In accordance with the reasonable directions of the
Issuer or the Owner Trustee, the Servicer shall administer, perform
or supervise the performance of such other activities in connection
with the Collateral (including the Basic Documents) as are not
covered by any of the foregoing provisions and as are expressly
requested by the Issuer or the Owner Trustee and are reasonably
within the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of
the Basic Documents to the contrary, the Servicer shall be
responsible for promptly notifying the Owner Trustee in the event
that any withholding tax is imposed on
the Issuer's payments (or allocations of income) to an Owner (as
defined in the Trust Agreement) as contemplated in Section 5.2(f) of
the Trust Agreement. Any such notice shall be in writing and specify
the amount of any withholding tax required to be withheld by the
Owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the
Basic Documents to the contrary, the Servicer shall be responsible
for performance of the duties of the Issuer or the Owner Trustee and
the General Partner set forth in Section 5.6(a), (b), (c) and (d) of
the Trust Agreement with respect to, among other things, accounting
and reports to Owners (as defined in the Trust Agreement); provided,
however, that once prepared by the Servicer the Owner Trustee shall
retain responsibility for the distribution of the Schedule K-1s
necessary to enable each Certificateholder to prepare its federal and
state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer
specified in Section 10.2 and 10.3 of the Trust Agreement required to
be performed in connection with the resignation or removal of the
Owner Trustee, and any other duties expressly required to be
performed by the Servicer under this Agreement or any of the Basic
Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or
dealings shall be in accordance with any directions received from the
Issuer and shall be, in the Servicer's opinion, no less favorable to
the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on behalf
of the General Partner, all tax returns, tax elections, financial
statements and such annual or other reports of the Issuer as are
necessary for preparation of tax reports as provided in Article V of
the Trust Agreement, including forms 1099 and 1066. All tax returns
will be signed by the General Partner.
(d) Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Servicer are non-ministerial, the Servicer
shall not take any action pursuant to this Article X unless within a
reasonable time before the taking of such action, the Servicer shall
have notified the Owner Trustee and the Indenture Trustee of the
proposed action and the Owner Trustee and, with respect to items (A),
(B), (C) and (D) below, the Indenture Trustee shall not have withheld
consent or provided an alternative direction. For the purpose of the
preceding sentence, "non-ministerial matters" shall include:
NEW ONE
(A) the amendment of or any supplement to the
Indenture;
(B) the initiation of any claim or lawsuit by the
Issuer and the compromise of any action, claim or lawsuit
brought by or against the Issuer (other than in connection
with or as a counterclaim in the collection of the
Receivables);
(C) the amendment, change or modification of
this Agreement or any of the Basic Documents;
(D) the appointment of successor Note Registrars,
successor Paying Agents and successor Trustees pursuant to
the Indenture or the appointment of Successor Servicers or
the consent to the assignment by the Note Registrar, Paying
Agent or Indenture Trustee of its obligations under the
Indenture; and
(E) the removal of the Indenture Trustee.
(e) Exceptions. Notwithstanding anything to the contrary in this
Agreement, except as expressly provided herein or in the other Basic
Documents, the Servicer, in its capacity hereunder, shall not be obligated
to, and shall not, (1) make any payments to the Noteholders or
Certificateholders under the Basic Documents, (2) sell the Owner Trust
Estate pursuant to Section 5.5 of the Indenture, (3) take any other action
that the Issuer directs the Servicer not to take on its behalf or (4) in
connection with its duties hereunder assume any indemnification obligation
of any other Person.
SECTION 10.2. Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer at
any time during normal business hours.
SECTION 10.3. Additional Information to be Furnished to the Issuer. The
Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as is reasonably available to the Servicer
and as the Issuer shall reasonably request.
ARTICLE XI
Miscellaneous Provisions
SECTION 11.1. Amendment. (a) This Agreement may be amended from time to
time by the Seller, the Servicer and the Owner Trustee, with the consent of the
Indenture Trustee (which consent may not be unreasonably withheld or delayed),
with the prior written consent of the Insurer (so long as no Insurer Default has
occurred and is continuing) but without the consent of any of the Noteholders or
the Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement, to comply with any changes in the Code, or to make
any other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with the provisions of this Agreement
or the Insurance Agreement; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel delivered to Owner Trustee and the Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder; provided further that if an Insurer Default has
occurred and is continuing, such action shall not materially and adversely
affect the interests of the Insurer in the Trust.
This Agreement may also be amended from time to time by the Seller, the
Servicer and the Owner Trustee, with the consent of the Insurer, the consent of
the Indenture Trustee, the consent of the Holders of Notes evidencing not less
than a majority of the outstanding principal amount of the Notes and the consent
of the Holders (as defined in the Trust Agreement) of Certificates evidencing
not less than a majority of the Certificate Balance for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or materially accelerate or
delay the timing of, collections of payments on Receivables or distributions
that shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the outstanding
principal amount of the Notes and the Certificate Balance, the Holders of which
are required to consent to any such amendment, without the consent of the
Holders of all the outstanding Notes and the Holders (as defined in the Trust
Agreement) of all the outstanding Certificates, of each class affected thereby;
provided further, that if an Insurer Default has not occurred and is continuing,
such action shall not materially and adversely affect the interest of the
Insurer.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder and the Rating Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Noteholders or Certificateholders provided for in this
Agreement) and of evidencing the authorization of any action by Noteholders or
Certificateholders shall be subject to such reasonable requirements as the
Indenture Trustee or the Owner Trustee, as applicable, may prescribe.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
11.2(i)(1) has been delivered. The Owner Trustee and the Indenture Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Issuer's, the Owner Trustee's or the Indenture Trustee's, as applicable, own
rights, duties or immunities under this Agreement or otherwise.
(b) Notwithstanding anything to the contrary contained in subsection
11.1(a) above, the provisions of this Agreement relating to (i) the Spread
Account Agreement, the Spread Account, the Specified Spread Account
Requirement, a Trigger Event or any component definition of a Trigger Event
and (ii) any additional sources of funds which may be added to the Spread
Account or uses of funds on deposit in the Spread Account may be amended in
any respect by the Seller, the Servicer, the Insurer and the Collateral
Agent (the consent of which shall not be withheld or delayed with respect
to any amendment that does not adversely affect the Collateral Agent)
without the consent of, or notice to, the Noteholders or the
Certificateholders.
SECTION 11.2. Protection of Title to Trust. (a) The Seller shall execute
and file such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and the interests of the Indenture Collateral Agent in the Receivables
and in the proceeds thereof. The Seller shall deliver (or cause to be delivered)
to the Insurer, the Owner Trustee and the Indenture Collateral Agent
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might
make any financing statement or continuation statement filed in accordance
with paragraph (a) above seriously misleading within the meaning of ss.
9-402(7) of the UCC, unless it shall have given the Insurer, the Owner
Trustee and the Indenture Trustee at least five days' prior written notice
thereof and shall have promptly filed appropriate amendments to all
previously filed financing statements or continuation statements. Promptly
upon such filing, the Seller or the Servicer, as the case may be, shall
deliver an Opinion of Counsel in form and substance reasonably satisfactory
to the Insurer, stating either (A) all financing statements and
continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trust and the Indenture
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) no such action shall be necessary to preserve and protect such
interest.
(c) Each of the Seller and the Servicer shall have an obligation to
give the Insurer, the Owner Trustee and the Indenture Trustee at least 30
days' prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the
UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and
shall promptly file any such amendment. The Servicer shall at all times
maintain each office from which it shall service Receivables, and its
principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including
payments and recoveries made and payments owing (and the nature of each)
and (ii) reconciliation between payments or recoveries on (or with respect
to) each Receivable and the amounts from time to time deposited in the
Collection Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the
Issuer, the Servicer's master computer records (including any backup
archives) that refer to a Receivable shall indicate clearly the interest of
the Issuer and the Indenture Trustee in such Receivable and that such
Receivable is owned by the Issuer and has been pledged to the Indenture
Trustee. Indication of the Issuer's and the Indenture Trustee's interest in
a Receivable shall be deleted from or modified on the Servicer's computer
systems when, and only when, the related Receivable shall have been paid in
full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser, lender
or other transferee computer tapes, records or printouts (including any
restored from backup archives) that, if they shall refer in any manner
whatsoever to any Receivable, shall indicate clearly that such Receivable
has been sold and is owned by the Issuer and has been pledged to the
Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee and the Insurer
and their respective agents at any time during normal business hours to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivable or any other portion of the Trust Property. The
preceding sentence shall not create any duty or obligation on the part of
the Indenture Trustee to perform any such acts.
(h) Upon request, the Servicer shall furnish to the Insurer, the Owner
Trustee or to the Indenture Trustee, within five Business Days, a list of
all Receivables (by contract number and name of Obligor) then held as part
of the Trust, together with a reconciliation of such list to the Schedule
of Receivables and to each of the Servicer's Certificates furnished before
such request indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Insurer, the Owner Trustee and
the Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement
and, if required pursuant to Section 11.1, of each amendment, an
Opinion of Counsel stating that, in the opinion of such Counsel, in
form and substance reasonably satisfactory to the Insurer, either (A)
all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect
the interest of the Trust and the Indenture Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no
such action shall be necessary to preserve and protect such interest;
and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three
months after the Cutoff Date, an Opinion of Counsel, dated as of a
date during such 90-day period, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust and the Indenture
Trustee in the Receivables, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are
given, or (B) no such action shall be necessary to preserve and
protect such interest.
Each Opinion of Counsel referred to in clause (l) or (2) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable law,
cause the Certificates and the Notes to be registered with the
Commission pursuant to Section 12(b) or Section 12(g) of the Exchange
Act within the time periods specified in such sections.
SECTION 11.3. Notices. All demands, notices and communications upon or to
the Seller, the Servicer, the Owner Trustee, the Indenture Trustee or the Rating
Agencies under this Agreement shall be in writing, personally delivered, sent by
overnight courier or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller to NationsFinancial Funding Corporation, 225 East John W. Carpenter
Freeway, 7th Floor, Irving, Texas 75062, Attention: ________________ with a copy
to: (i) NationsBank Corporate Center, 100 North Tryon Street, Charlotte, North
Carolina 28255 Attention: _________________, and (ii) NationsCredit Commercial
Corporation, One Canterbury Green, Stamford, Connecticut 06901, Attention:
General Counsel (b) in the case of the Servicer to SunStar Acceptance
Corporation, Two Concourse Parkway, Suite 745, Atlanta, Georgia 30328,
Attention: _________, with a copy to: NationsCredit Commercial Corporation, One
Canterbury Green, Stamford, Connecticut 06901, Attention: General Counsel, (c)
in the case of the Issuer or the Owner Trustee, at the Corporate Trust Office of
the Owner Trustee, with a copy to ___________, (d) in the case of the Indenture
Trustee the Indenture Collateral Agent or the Collateral Agent, at the Corporate
Trust Office, (e) in the case of the Insurer, to Financial Security Assurance
Inc., 350 Park Avenue, New York, New York 10022; Attention: Senior Vice
President, Surveillance (in each case in which notice or other communication to
the Insurer refers to a Servicer Default, a claim on the Certificate Policy, a
Deficiency Notice pursuant to Section 5.4 of this Agreement or with respect to
which failure on the part of the Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head -- Financial Guaranty Group and shall be marked to indicate "URGENT
MATERIAL ENCLOSED"); (f) in the case of Moody's, to Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007; and
(g) in the case of Standard & Poor's, to Standard & Poor's Ratings Group, 25
Broadway - 15th Floor, New York, New York 10004, Attention: Asset Backed
Surveillance Department. Any notice required or permitted to be mailed to a
Noteholder or Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register or
Note Register, as applicable. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether
or not the Certificateholder or Noteholder shall receive such notice.
SECTION 11.4. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.4 and 7.3 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Owner Trustee, the Indenture Trustee and the
Insurer (or if an Insurer Default shall have occurred and be continuing the
Holders of Notes evidencing not less than 66% of the principal amount of the
outstanding Notes and the Holders of Certificates evidencing not less than 66%
of the Certificate Balance).
SECTION 11.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, the Servicer, the Issuer,
the Owner Trustee and for the benefit of the Certificateholders (including the
General Partner), the Indenture Trustee and the Noteholders, as third- party
beneficiaries. The Insurer and its successors and assigns shall be a third-party
beneficiary to the provisions of this Agreement, and shall be entitled to rely
upon and directly enforce such provisions of this Agreement so long as no
Insurer Default shall have occurred and be continuing. Except as expressly
stated otherwise herein, any right of the Insurer to direct, appoint, consent
to, approve of, or take any action under this Agreement, shall be a right
exercised by the Insurer in its sole and absolute discretion. The Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Note Policy or the Certificate Policy) upon delivery
of a written notice to the Owner Trustee. Nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 11.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.7. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.8. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.9. 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 11.10. Assignment to Indenture Trustee. The Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and/or the assignment of any or all
of the Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 11.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer and the Seller shall not, prior to
the date which is one year and one day after the termination of this Agreement
with respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, the
Servicer shall not, prior to the date that is one year and one day
after the termination of this Agreement with respect to the Seller,
acquiesce to, petition or otherwise invoke or cause the Seller to
invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Seller under
any federal or state bankruptcy, insolvency or similar law, appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator, or
other similar official of the Seller or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of
the Seller.
SECTION 11.12. Limitation of Liability of Owner Trustee and Indenture
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by ________________________ not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall ________________________ in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by ____________
_______________________________, not in its individual capacity but solely
as Indenture Trustee and in no event shall ____________
_______________________________, have any liability for the
representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely
to the assets of the Issuer.
SECTION 11.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Servicer shall have no
authority to act for or represent the Issuer or the Owner Trustee in any way and
shall not otherwise be deemed an agent of the Issuer or the Owner Trustee.
SECTION 11.14. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 11.15. Third-Party Beneficiaries. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The Insurer and its successors and assigns
shall be a third-party beneficiary to the provisions of this Agreement, and
shall be entitled to rely upon and directly to enforce such provisions of this
Agreement so long as no Insurer Default shall have occurred and be continuing.
Nothing in this Agreement, express or implied, shall give to any Person, other
than express third-party beneficiaries, the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement. Except as expressly stated otherwise herein or in the Related
Documents, any right of the Insurer to direct, appoint, consent to, approve of,
or take any action under this Agreement, shall be a right exercised by the
Insurer in its sole and absolute discretion.
SECTION 11.16. Disclaimer by Insurer. The Insurer may disclaim any of its
rights and powers under this Agreement (but not its duties and obligations under
the Policies) upon delivery of a written notice to the Owner Trustee and the
Indenture Trustee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the day and year first above written.
NATIONSFINANCIAL AUTO OWNER
TRUST 1996-1
By ____________________
not in its individual capacity but
solely as Owner Trustee on behalf
of the Trust,
By_____________________________________
Name:
Title:
NATIONSFINANCIAL FUNDING CORPORATION,
Seller,
By_____________________________________
Name:
Title:
SUNSTAR ACCEPTANCE CORPORATION,
Servicer,
By_____________________________________
Name:
Title:
ACCEPTANCE AND ACKNOWLEDGEMENT
OF SUBSERVICER
SUNSTAR ACCEPTANCE CORPORATION
(CALIFORNIA)
By:___________________________
Name:
Title:
<PAGE>
Acknowledged and Accepted:
- --------------------------,
not in its individual capacity
but solely as Indenture Trustee,
By___________________________
Name:
Title:
Acknowledged and Accepted:
- --------------------------,
not in its individual capacity
but solely as Owner Trustee,
By____________________________
Name:
Title:
Acknowledged and Accepted:
- ------------------------,
<PAGE>
not in its individual capacity
but solely as Collateral Agent
and Indenture Collateral Agent
By____________________________
Name:
Title:
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
<PAGE>
Exhibit A
DEFINITIONS AND USAGE
The following rules of construction and usage shall be applicable to any
instrument that is governed by this Exhibit:
(a) All terms defined in this Exhibit shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined
therein.
(b) As used herein, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant thereto,
accounting terms not defined in this Exhibit or in any such instrument,
certificate or other document, and accounting terms partly defined in this
Exhibit or in any such instrument, certificate or other document to the
extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of any
such instrument, certificate or other document, as applicable. To the
extent that the definitions of accounting terms in this Exhibit or in any
such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Exhibit or in any such instrument,
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in an instrument and in any certificate or other document
made or delivered pursuant thereto shall refer to such instrument,
certificate or document as a whole and not to any particular provision or
subdivision thereof; Section, Schedule and Exhibit references contained in
an instrument are references to Sections, Schedules and Exhibits in or to
such instrument unless otherwise specified; and the term "including" shall
mean "including without limitation."
(d) The definitions contained in this Exhibit are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument, statute or regulation defined or
referred to below or in any instrument or certificate that is governed by
this Exhibit means such agreement, instrument, statute or regulation as
from time to time amended, modified or supplemented and includes (in the
case of agreements or instruments) references to all attachments thereto
and instruments incorporated therein; references to a Person are also to
its permitted successors and assigns.
(f) For purposes of computing the number of days that a receivable is
delinquent under each of the Basic Documents, a payment delinquency with
respect to a Receivable is considered to have commenced on the last day of
the end of the month in which a Scheduled Payment has not been made.
DEFINITIONS
Whenever used in any instrument that is governed by this Exhibit, the
following words and phrases shall have the following meanings:
"Act" has the meaning specified in Section 11.3(a) of the Indenture.
"Actuarial Method" means the method of allocating a fixed level payment to
principal and interest, pursuant to which the portion of such payment that is
allocated to interest is equal to one-twelfth of the product of the fixed rate
of interest multiplied by the unpaid principal balance and the remainder of such
payment is allocable to principal.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. A Person shall not be
deemed to be an Affiliate of any person solely because such other Person has the
contractual right or obligation to manage such Person unless such other Person
controls such Person through equity ownership or otherwise.
"Affiliated Purchaser" means _____________, a Delaware corporation.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable during the related
Monthly Period and (ii) any Receivable that was purchased or repurchased by any
Person pursuant to the Sale and Servicing Agreement during the related Monthly
Period) as of the date of determination.
"Amount Financed" means, with respect to a Receivable, the aggregate amount
advanced or credited under such Receivable by the applicable Dealer toward the
purchase price of the Financed Vehicle and any related costs, including amounts
advanced or credited in respect of accessories, insurance premiums, service, car
club and warranty contracts, other items customarily financed as part of retail
automobile installment sales contracts or promissory notes, and related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Authorized Officer" means, with respect to the Issuer and the Servicer,
any officer of the Owner Trustee or the Servicer, as applicable, who is
authorized to act for the Owner Trustee or the Servicer, as applicable, in
matters relating to the Issuer or the Servicer and who is identified on the list
of Authorized Officers delivered by each of the Owner Trustee and the Servicer
to the Indenture Trustee on the Closing Date (as such list may be modified or
supplemented from time to time thereafter).
"Available Funds" means, with respect to any Determination Date, the sum of
(i) the Collected Funds for such Determination Date, (ii) all Purchase Amounts
deposited in the Collection Account for the related Monthly Period, (iii)
following the acceleration of the Notes pursuant to Section 5.2 of the
Indenture, the amount of money or property collected pursuant to Section 5.4 of
the Indenture since the preceding Determination Date by the Indenture Trustee or
Controlling Party for distribution pursuant to Section 5.6 of the Indenture, and
(iv) any Insolvency Proceeds received pursuant to Section 9.1(b) of the Sale and
Servicing Agreement. For purposes of determining Available Funds for the
Distribution Date following the Class A-1 Final Scheduled Distribution Date, the
amount thereof, if any, applied on the Class A-1 Final Scheduled Distribution
Date will reduce the amount of Available Funds dollar-for-dollar for such
Distribution Date.
"Average Delinquency Ratio" means, with respect to any Distribution Date,
the arithmetic average of the Delinquency Ratio for such Distribution Date and
the Delinquency Ratios for the two immediately preceding Distribution Dates.
"Average Net Loss Rate" with respect to any Distribution Date, the
arithmetic average of the Net Loss Rates for the three immediately preceding
Monthly Periods.
"Base Servicing Fee" means, with respect to any Monthly Period, the fee
payable to the Servicer for services rendered during such Monthly Period, which
shall be equal to one-twelfth of the Servicing Fee Rate multiplied by the Pool
Balance as of the first day of such Monthly Period.
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
Sale and Servicing Agreement, the Indenture, the Spread Account Agreement, the
Insurance Agreement, the Depository Agreements and other documents and
certificates delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section 3.13
of the Trust Agreement.
"Book Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10 of the Indenture.
"Book Entry Trust Certificates" means a beneficial interest in the Trust
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.14 of the Trust
Agreement.
"Business Day" means (i) with respect to the Note Policy, any day other
than a Saturday, Sunday, legal holiday or other day on which commercial banking
institutions in Wilmington, Delaware, the City of New York or any other location
of any successor Servicer, successor Owner Trustee or successor Indenture
Collateral Agent are authorized or obligated by law, executive order or
governmental decree to be closed and (ii) otherwise, a day other than a
Saturday, a Sunday or other day on which commercial banks located in the states
of Texas, Delaware or New York are authorized or obligated to be closed.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq.
"Certificate" means a Trust Certificate evidencing the beneficial interest
of a Certificateholder in the Trust, substantially in the form of Exhibit A to
the Trust Agreement.
"Certificate Balance" equals, initially, $_________ and thereafter equals
the initial Certificate Balance, reduced by all amounts allocable to principal
previously distributed to Certificateholders.
"Certificate Depository Agreement" shall mean the agreement among the
Trust, the Owner Trustee, the Servicer and The Depository Trust Company, as the
initial Clearing Agency, dated as of the Closing Date, relating to the Trust
Certificates, in the form of Exhibit C to the Trust Agreement.
"Certificate Distribution Account" shall have the meaning assigned to such
term in Section 5.1(a) of the Trust Agreement.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit B to the Trust Agreement to be filed for the Trust pursuant to Section
3810(a) of the Business Trust Statute.
"Certificate Paying Agent" shall mean any paying agent or co-paying agent
appointed pursuant to Section 3.9 of the Trust Agreement and shall initially be
the ________________.
"Certificate Policy" means the financial guaranty insurance policy issued
by the Insurer to the Owner Trustee for the benefit of the Certificateholders
with respect to the Certificates, including any endorsements thereto.
"Certificate Policy Claim Amount" shall have the meaning set forth in
Section 5A.1(a) of the Sale and Servicing Agreement.
"Certificate Pool Factor" as of the close of business on a Distribution
Date means a seven-digit decimal figure equal to the Certificate Balance as of
such Distribution Date after giving effect to principal distributions on such
date divided by the initial Certificate Balance.
"Certificate Rate" means ____% per annum.
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned and the registrar appointed pursuant to Section 3.4 of the Trust
Agreement.
"Certificateholder" shall mean the Person in whose name a Trust Certificate
is registered on the Certificate Register.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Interest Distributable
Amount and the Certificateholders' Principal Distributable Amount.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest at the Certificate Rate that was actually deposited in the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on such excess, to the extent permitted by law, at the Certificate Rate
from and including such preceding Distribution Date to but excluding the current
Distribution Date.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, interest accrued during the related Interest
Period at the Certificate Rate on the Certificate Balance immediately preceding
such Distribution Date. Interest shall be computed on the basis of a 360-day
year of twelve 30-day months for purposes of this definition.
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date, the Certificateholders' Percentage of the
Principal Distributable Amount.
"Certificateholders' Percentage" means 100% minus the Noteholders'
Percentage.
"Certificateholders' Principal Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Principal
Distributable Amount for the preceding Distribution Date, over the amount in
respect of principal that was actually deposited in the Certificate Distribution
Account on such preceding Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall for such Distribution Date; provided, however,
that the Certificateholders' Principal Distributable Amount (i) shall not exceed
the Certificate Balance and (ii) shall equal the Certificate Balance on the
Final Scheduled Distribution Date for the Certificates.
"Class" means the Class A-1 Notes, the Class A-2 Notes or the Class A-3
Notes, as the context requires.
"Class A-1 Deficiency Claim Amount" means, with respect to the
Determination Date relating to the Class A-1 Final Scheduled Distribution Date,
the excess, if any, of (i) the sum of the amounts payable on the Class A-1 Final
Scheduled Distribution Date pursuant to clauses (i) and (ii) of Section 5.6(c)
of the Sale and Servicing Agreement over (ii) the Available Funds for such
Determination Date.
"Class A-1 Distribution Amount" means, with respect to the Class A-1 Final
Scheduled Distribution Date, the sum of (i) the Available Funds for the
immediately preceding Determination Date plus (ii) the Class A-1 Deficiency
Claim Amount, if any, received and deposited in the Collection Account (from an
Insurer Optional Deposit or the Spread Account or otherwise other than from
draws under the Policies).
"Class A-1 Final Scheduled Distribution Date" means ____ __, 1997.
"Class A-1 Interest Rate" means ______% per annum (computed on the basis of
the actual number of days elapsed in a 360-day year).
"Class A-1 Notes" means the Class A-1 ______% Asset Backed Notes,
substantially in the form of Exhibit D-1 to the Indenture.
"Class A-2 Interest Rate" means, with respect to any Interest Period, LIBOR
plus ____%, subject to a maximum rate equal to __% (computed on the basis of the
actual number of days elapsed in a 360-day year).
"Class A-2 Notes" means the Class A-2 Floating Rate Asset Backed Notes,
substantially in the form of Exhibit D-2 to the Indenture.
"Class A-3 Interest Rate" means ____% per annum (computed on the basis of a
360-day year of twelve 30-day months).
"Class A-3 Notes" means the Class A-3 ____% Asset Backed Notes,
substantially in the form of Exhibit D-3 to the Indenture.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means December __, 1996.
"Code" means the Internal Revenue Code of 1986 and Treasury Regulations
promulgated thereunder.
"Collateral Agent" means the Person serving in such capacity under the
Spread Account Agreement.
"Collateral" has the meaning specified in the Granting Clause of the
Indenture.
"Collateral Protection Insurance" or "CPI" means the physical damage and
theft insurance described in Section 4.04(a) of the Sale and Servicing Agreement
which may be obtained by the Servicer if the applicable Obligor fails to do so.
"Collateral Protection Insurance Premium" means any premium for CPI
covering a Financed Vehicle.
"Collected Funds" means, with respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the Receivables,
net of CPI Funds, during the related Monthly Period, including all Net
Liquidation Proceeds collected during the related Monthly Period (but excluding
any Purchase Amounts).
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.1(a)(i) of the Sale and Servicing Agreement.
"Computer Tape" means the computer tapes or other electronic media
furnished by SunStar Acceptance Corporation to the Issuer and its assigns
describing certain characteristics of the Receivables as of the Cutoff Date.
"Contract" means a retail motor vehicle installment sale contract.
"Controlling Party" means the Insurer, so long as no Insurer Default shall
have occurred and is continuing, and the Indenture Trustee, for so long as an
Insurer Default shall have occurred and is continuing.
"Corporate Trust Office" means (i) with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee, which at the time of
execution of the Trust Agreement is ___________________________________________
Attention: ________, , or at such other address as the Owner Trustee may
designate by notice to the Certificateholders and the Depositor, or the
principal corporate trust office of any successor Owner Trustee (the address of
which the successor owner trustee will notify the Certificateholders and the
Depositor), and (ii) with respect to the Indenture Trustee, the Indenture
Collateral Agent and the Collateral Agent, the principal corporate trust office
of the Indenture Trustee, at which at any particular time its corporate trust
business shall be administered, which at the time of execution of the Indenture
is _______________________, Attention: ________, or at such other address as the
Indenture Trustee may designate from time to time by notice to the Noteholders,
the Insurer, the Servicer and the Issuer, or the principal corporate trust
office of any successor Indenture Trustee (the address of which the successor
Indenture Trustee will notify the Noteholders and the Issuer).
"CPI Funds" means amounts (including interest) owing under a Contract on
account of Collateral Protection Insurance placed on a Financed Vehicle prior to
or on or after the Cutoff Date.
"Cutoff Date" means, as to any Receivable, [November 30, 1996.]
"Dealer Agreement" means any agreement between a Dealer and SunStar
Acceptance Corporation or SunStar Acceptance Corporation (California) insofar as
such agreement relates to the acquisition of Receivables from a Dealer by,
respectively, SunStar Acceptance Corporation or SunStar Acceptance Corporation
(California).
"Dealer" means a dealer who sold a Financed Vehicle and who originated and
assigned the respective Receivable to SunStar Acceptance Corporation or SunStar
Acceptance Corporation (California).
"Deemed Cured" means, as of a Determination Date, with respect to a Trigger
Event that has occurred, that no Trigger Event shall have occurred as of such
Determination Date or as of any of the three consecutively preceding Monthly
Periods.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Deficiency Claim Amount" shall have the meaning set forth in Section
5.4(a) of the Sale and Servicing Agreement.
"Deficiency Claim Date" means, with respect to any Distribution Date, the
Business Day immediately preceding such Distribution Date.
"Deficiency Notice" shall have the meaning set forth in Section 5.4(a) of
the Sale and Servicing Agreement.
"Definitive Notes" has the meaning specified in Section 2.10 of the
Indenture.
"Definitive Trust Certificates" shall mean either or both (as the context
requires) of (i) Trust Certificates issued in certificated, fully registered
form as provided in Section 3.14 of the Trust Agreement and (ii) Trust
Certificates issued in certificated, fully registered form as provided in
Section 3.16 of the Trust Agreement.
"Delinquency Ratio" means, with respect to any Distribution Date, a
fraction, expressed as a percentage, (a) the numerator of which is equal to the
aggregate Principal Balance of all Receivables other than those for which the
related Financed Vehicle has been repossessed (and any applicable redemption
period has expired) or that were [ ] or more days delinquent with respect to a
Scheduled Payment less no more than $0.99 of such Scheduled Payment as of the
last day of the related Monthly Period and (b) the denominator of which is equal
to the Aggregate Principal Balance of the Receivables as of the first day of the
related Monthly Period.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee or its nominee or custodian by physical delivery
to the Indenture Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated
security (as defined in Section 8-102 of the UCC), transfer thereof
(i) by delivery of such certificated security endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined
in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and the sending by such financial intermediary of
a confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of appropriate
entries on its books reducing the appropriate securities account of
the transferor and increasing the appropriate securities account of a
financial intermediary by the amount of such certificated security,
the identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or
its nominee or custodian (all of the foregoing, "Physical Property"),
and, in any event, any such Physical Property in registered form shall
be in the name of the Indenture Trustee or its nominee or custodian;
and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Trust Account Property to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or
the interpretation thereof;
(b) with respect to any security issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the
Federal National Mortgage Association that is a book-entry security
held through the Federal Reserve System pursuant to Federal
book-entry regulations, the following procedures, all in accordance
with applicable law, including applicable Federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust
Account Property to an appropriate book-entry account maintained with
a Federal Reserve Bank by a financial intermediary which is also a
"depository" pursuant to applicable Federal regulations and issuance
by such financial intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Indenture Trustee
or its nominee or custodian of the purchase by the Indenture Trustee
or its nominee or custodian of such book-entry securities; the making
by such financial intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations as belonging to the
Indenture Trustee or its nominee or custodian and indicating that
such custodian holds such Trust Account Property solely as agent for
the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such
Trust Account Property to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or
regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that
is an uncertificated security under Article 8 of the UCC and that is
not governed by clause (b) above, registration on the books and
records of the issuer thereof in the name of the financial
intermediary, the sending of a confirmation by the financial
intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such uncertificated security, the making by such
financial intermediary of entries on its books and records
identifying such uncertificated certificates as belonging to the
Indenture Trustee or its nominee or custodian.
"Demand Note" shall have the meaning assigned to such term in Section
2.11(g) of the Trust Agreement.
"Depositor" shall mean the Seller in its capacity as Depositor under the
Trust Agreement.
"Depository Agreements" mean the Certificate Depository Agreement and the
Note Depository Agreement.
"Determination Date" means, with respect to any Distribution Date, the
fifth Business Day prior to the related Distribution Date or, in the case of the
Class A-1 Final Scheduled Distribution Date and the succeeding Distribution Date
if any distributions are required to be made on the Class A-1 Final Scheduled
Distribution Date, the fifth Business Day prior to such Class A-1 Scheduled
Distribution Date.
"Distribution Amount" means, with respect to a Distribution Date, the sum
of (i) the Available Funds for the immediately preceding Determination Date,
plus (ii) the Deficiency Claim Amount, if any, received (from an Insurer
Optional Deposit or the Spread Account or otherwise other than from draws under
the Policies) by the Indenture Trustee with respect to such Distribution Date.
"Distribution Date" means, with respect to each Monthly Period, the
fifteenth day of the following calendar month, or if such day is not a Business
Day, the immediately following Business Day, commencing on January __, 1997.
"Draw Date" means, with respect to any Distribution Date, and the Class A-1
Final Scheduled Distribution Date, the Business Day immediately preceding such
Distribution Date or the Class A-1 Final Scheduled Distribution Date, as
applicable.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee or any other entity specified in the Sale and Servicing
Agreement or (b) a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), which (i) has either (A) a long-term
unsecured debt rating of AAA or better by Standard & Poor's and Aaa or better by
Moody's or (B) a certificate of deposit rating of A-1+ by Standard & Poor's and
P-1 or better by Moody's or any other short-term or certificate of deposit
rating acceptable to the Rating Agencies and to the Insurer and (ii) whose
deposits are insured by the FDIC. If so qualified under clause (b) above, the
Owner Trustee or the Indenture Trustee may be considered an Eligible
Institution.
"Eligible Investments" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully
guaranteed as to timely payment by, the United States of
America;
(b) 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 the District of Columbia (or any domestic branch of a foreign
bank) and subject to supervision and examination by Federal or state
banking or depository institution authorities (including depository
receipts issued by any such institution or trust company as custodian
with respect to any obligation referred to in clause (a) above or
portion of such obligation for the benefit of the holders of such
depository receipts); provided, however, that at the time of the
investment or contractual commitment to invest therein (which shall
be deemed to be made again each time funds are reinvested following
each Distribution Date), the commercial paper or other short-term
senior unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such
depository institution or trust company) of such depository
institution or trust company shall have a credit rating from Standard
& Poor's of A-1+ and from Moody's of P-1;
(c) commercial paper having, at the time of the investment
or contractual commitment to invest therein, a rating from Standard &
Poor's of A-1+ and from Moody's of P-1;
(d) investments in money market funds (including funds for
which the Indenture Trustee or the Owner Trustee or any of their
respective Affiliates is investment manager or advisor) having a
rating from Standard & Poor's of AAA-m or AAAm-G and from Moody's of
Aaa and having been approved by the Insurer;
(e) bankers' acceptances issued by any depository
institution or trust company referred to in clause (b)
above;
(f) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United States
of America or any agency or instrumentality thereof the obligations
of which are backed by the full faith and credit of the United States
of America, in either case entered into with a depository institution
or trust company (acting as principal) referred to in clause (b)
above; and
(g) any other investment which would satisfy the Rating
Agency Condition and is consistent with the ratings of the Securities
and which, so long as no Insurer Default shall have occurred and be
continuing, has been approved by the Insurer.
Any of the foregoing Eligible Investments may be purchased
by or through the Owner Trustee or the Indenture Trustee or any of its
Affiliates.
"ERISA" shall have the meaning assigned to such term in Section 3.13 of the
Trust Agreement.
"Event of Default" has the meaning specified in Section 5.1 of the
Indenture.
"Exchange Act" means the Securities Exchange Act of 1934.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Expenses" shall have the meaning assigned to such term in Section 8.2 of
the Trust Agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means with respect to (i) the Class A-1
Notes, the ---------------- Distribution Date, (ii) the Class A-2 Notes, the
- -----------Distribution Date, (iii) the Class A-3 Notes, the --------------
Distribution Date, and (iv) the Certificates, the --------------------
Distribution Date.
"Final Scheduled Maturity Date" means ________ __, ----.
"Financed Vehicle" means an automobile or light-duty truck, van or minivan,
together with all accessions thereto, securing an Obligor's indebtedness under
the respective Receivable.
"Floor Amount" means, as of any Distribution Date, the lesser of (i) [__%]
of the sum of (x) the initial Principal Balance of each Class of Notes and (y)
the initial Certificate Balance and (ii) the greater of (a) the outstanding
Certificate Balance and (b) $100,000.
"General Partner" means the Certificateholder obligated to pay the expenses
of the Issuer pursuant to Section 2.7 of the Trust Agreement.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, grant a lien upon or a security
interest in or right of set-off against, deposit, or set over and confirm
pursuant to the Indenture. A Grant of the Collateral or of any other agreement
or instrument shall (subject to any specified exclusions) include all rights,
powers and options (but none of the obligations) of the Granting party
thereunder, including (to the extent the Granting party had the same) the
immediate and continuing right to claim for, collect, receive and give receipt
for principal and interest payments in respect of the Collateral and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring proceedings in the name of the Granting party or otherwise and generally
to do and receive anything that the Granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Guaranteed Certificate Distribution" has the meaning assigned to such term
in the Certificate Policy.
"Guaranteed Note Distribution" has the meaning assigned to such term in the
Note Policy.
"Holder" means, with respect to the Trust Agreement, a Certificateholder
and, with respect to the Indenture, a Noteholder.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Indemnitees" shall have the meaning assigned to such term in Section 8.2
of the Trust Agreement.
"Indenture" means the Indenture dated as of October 31, 1996, among the
Issuer, the Indenture Collateral Agent and the Indenture Trustee.
"Indenture Collateral Agent" means the Person acting as Indenture
Collateral Agent under the Indenture.
"Indenture Trustee" means the Person acting as Trustee under the Indenture.
"Independent" means, when used with respect to any specified Person, that
the person (a) is in fact independent of the Issuer, any other obligor upon the
Notes, the Seller and any Affiliate of any of the foregoing persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Collateral Agent under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 of the
Indenture, prepared by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Collateral Agent in the exercise of
reasonable care, and such opinion or certificate shall state that the signer has
read the definition of "Independent" herein and that the signer is Independent
within the meaning thereof.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a petition against such Person or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation or
such Person's affairs, and such petition, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insolvency Proceeds" has the meaning specified in Section 9.1(b) of the
Sale and Servicing Agreement.
"Insurance Agreement" means the Insurance and Indemnity Agreement, dated as
of October 31, 1996, among the Insurer, the Trust, the Seller and SunStar
Acceptance Corporation.
"Insurance Agreement Event of Default" means an "Event of Default" as
defined in the Insurance Agreement.
"Insurance Agreement Indenture Cross Default" has the meaning specified
therefor in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in Section 4.4 of the Sale
and Servicing Agreement) benefiting the holder of the Receivable providing loss
or physical damage, credit life, credit disability, theft, mechanical breakdown
or similar coverage with respect to the Financed Vehicle or the Obligor.
"Insurer" means Financial Security Assurance Inc., a monoline insurance
company incorporated under the laws of the State of New York, or any successor
thereto, as issuer of the Policies.
"Insurer Default" means the occurrence and continuance of any of the
following events:
(a) the Insurer shall have failed to make a payment required
under the Note Policy or the Certificate Policy in accordance with
its respective terms;
(b) The Insurer shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United
States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (ii) made a general assignment for the benefit of its
creditors, or (iii) had an order for relief entered against it under
the United States Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory authority shall
have entered a final and nonappealable order, judgment or decree (i)
appointing a custodian, trustee, agent or receiver for the Insurer or
for all or any material portion of its property or (ii) authorizing
the taking of possession by a custodian, trustee, agent or receiver
of the Insurer (or the taking of possession of all or any material
portion of the property of the Insurer).
"Insurer Issuer Secured Obligations" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Insurer under the
Indenture, the Insurance Agreement or any other Basic Document.
"Insurer Optional Deposit" means, with respect to any Distribution Date, an
amount delivered by the Insurer pursuant to Section 5.9 of the Sale and
Servicing Agreement, at its sole option, to the Indenture Collateral Agent for
deposit into the Collection Account for any of the following purposes: (i) to
provide funds in respect of the payment of fees or expenses of any provider of
services to the Trust with respect to such Distribution Date; or (ii) to include
such amount as part of the Distribution Amount or Class A-1 Final Scheduled
Distribution Amount for such Distribution Date or Class A-1 Final Scheduled
Distribution Date to the extent that without such amount a draw would be
required to be made on a Policy.
"Insurer Secured Obligations" means, with respect to the Securities, all
amounts and obligations which the Servicer, the Seller and such other parties as
may be named therein may at any time owe or be required to perform to or on
behalf of the Insurer (or any agents, accountants or attorneys for the Insurer)
under the Insurance Agreement or under any other Basic Document, regardless of
whether such amounts are owed or performance is due now or in the future,
whether liquidated or unliquidated, contingent or non-contingent.
"Interest Period" means, with respect to any Distribution Date, the period
from and including the Closing Date (in the case of the first Distribution Date)
or from and including the preceding Distribution Date to but excluding such
Distribution Date.
"Interest Rate" means, with respect to the (i) Class A-1 Notes, the Class
A-1 Interest Rate, (ii) Class A-2 Notes, the Class A-2 Interest Rate, and (iii)
Class A-3 Notes, the Class A-3 Interest Rate.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts and the Certificate Distribution Account.
"Issuer" means NationsFinancial Auto Owner Trust 1996-1, until a successor
replaces it and, thereafter means the successor, and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" and "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Issuer Secured Obligations" means the Insurer Issuer Secured Obligations
and the Trustee Issuer Secured Obligations.
"Issuer Secured Parties" means each of the Indenture Trustee in respect of
the Trustee Issuer Secured Obligations and the Insurer in respect of the Insurer
Issuer Secured Obligations.
"LIBOR" means, with respect to any Interest Period, the London interbank
offered rate for deposits in U.S. dollars having a maturity of one month
commencing on the related LIBOR Determination Date (the "Index Maturity") which
appears on Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR
Determination Date. If such rate does not appear on Telerate Page 3750, the rate
for that day will be determined on the basis of the rates at which deposits in
U.S. dollars, having the Index Maturity and in a principal amount of not less
than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the London interbank market by
the Reference Banks. The Indenture Trustee will request the principal London
office of each of such Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for that day will be the
arithmetic mean, rounded upward, if necessary to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward, of
all such quotations. If fewer than two such quotations are provided, the rate
for that day will be the arithmetic mean, rounded upward, if necessary to the
nearest 1/100,000 of % (.0000001), with five one-millionths of a percentage
point rounded upward, of the offered per annum rates one or more leading banks
in New York City, selected by the Indenture Trustee, are quoting as of
approximately 11:00 a.m., New York City time, on such LIBOR Determination Date
to leading European banks for United States dollar deposits for the Index
Maturity; provided that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, LIBOR in effect for the applicable Interest Period
will be LIBOR in effect for the previous Interest Period.
"LIBOR Determination Date" means, with respect to any Interest Period, the
day that is the second London Business Day prior to the commencement of such
Interest Period (or, in the case of the first Interest Period, with respect to
the period from December __, 1996 to but excluding January __, 1997, on the
second business day prior to December __, 1996.)
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"Lien Certificate" means, with respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
"Liquidated Receivable" means, with respect to any Determination Date, a
Receivable as to which, as of the last day of the related Monthly Period, (i)
the Servicer has determined in good faith that all amounts it expects to recover
have been received, (ii) such Receivable shall have become 180 or more days
delinquent on a recency basis, (iii) the Financed Vehicle has been sold and the
proceeds received, or (iv) a court of appropriate jurisdiction in an insolvency
proceeding shall have issued an order reducing the amount owed on such
Receivable or otherwise modifying or restructuring the scheduled payments to be
made on such Receivable.
"London Business Day" means a Business Day and a day on which banking
institutions in the City of London, England are not required or authorized by
law to be closed.
"Minimum Net Worth" means at any time of determination, and with respect to
the General Partner, net worth equal to 10% of the Certificate Balance. For the
purpose of the determination of Minimum Net Worth: (i) the Demand Note issued to
the General Partner shall be valued at par, (ii) assets subject to a lien shall
be valued at zero, (iii) Certificates or any other interests in any entity
taxable as a partnership for federal income tax purposes shall be valued at
zero, (iv) investments shall be valued at their respective purchase prices plus
accrued interest, and (v) demand notes of NationsBank Corporation issued as
contributions to the General Partner in connection with its status as a general
partner of any other partnership formed pursuant to trust agreements
substantially similar to the Trust Agreement shall be valued at an amount equal
to the excess, if any, of (a) the aggregate current amount of all such demand
notes over (b) 10% of the aggregate Certificate Balance (as such terms are
defined in the related trust agreement) of all certificates issued by such
partnerships, as of such date of determination.
"Monthly Period" means with respect to each Distribution Date and the Class
A-1 Final Scheduled Distribution Date, the calendar month preceding the month in
which such Distribution Date or Class A-1 Final Scheduled Distribution Date
occurs.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Liquidation Proceeds" means, with respect to Liquidated Receivables,
(i) proceeds from the disposition of the vehicles securing the Liquidated
Receivables, less reasonable Servicer out-of-pocket costs, including repair,
repossession and resale expenses not already deducted from such proceeds, and
any amounts required by law to be remitted to the Obligor, (ii) any insurance
proceeds, or (iii) other monies received from the Obligor or otherwise.
"Net Loss Rate" means for any Monthly Period, the product, expressed as a
percentage, of twelve multiplied by a fraction, the numerator of which is equal
to (i) the aggregate Principal Balance of all Receivables that became Liquidated
Receivables during such Monthly Period less (ii) the Net Liquidation Proceeds
received by the Trust with respect to Receivables which became Liquidated
Receivables in such Monthly Period and any prior Monthly Periods, and the
denominator of which is equal to the Aggregate Principal Balance of the
Receivables as of the first day of such Monthly Period.
"Note" means a Class A-1 Note, a Class A-2 Note and a Class A-3 Note.
"Note Depository Agreement" shall mean the agreement among the Trust, the
Servicer and The Depository Trust Company, as the initial Clearing Agency,
substantially in the form of Exhibit C to the Indenture, relating to the Notes.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1 (a)(ii) of the Sale and
Servicing Agreement.
"Noteholder" means the Person in whose name a Note is registered on the
Note Register.
"Noteholder Secured Obligations" means, with respect to the Securities, all
amounts and obligations which the Servicer or the Seller may at any time owe or
be required to perform to or on behalf of the Trustee or the Noteholders under
the Indenture or any other Basic Document, regardless of whether such amounts
are owed or performance is due now or in the future, whether liquidated or
unliquidated, contingent or non-contingent.
"Noteholders' Distributable Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date and a Class of Notes, the excess of the Noteholders' Interest
Distributable Amount for such Class for the preceding Distribution Date, over
the amount in respect of interest that was actually deposited in the Note
Distribution Account with respect to such Class on such preceding Distribution
Date, plus interest on the amount of interest due but not paid to Noteholders of
such Class on the preceding Distribution Date, to the extent permitted by law,
at the Interest Rate borne by such Class of Notes from such preceding
Distribution Date to but excluding the current Distribution Date.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date. Interest shall be computed on the basis of
(i) the actual number of days elapsed in a 360-day year in the case of the Class
A-1 Notes and the Class A-2 Notes and (ii) a 360-day year of twelve 30-day
months in the case of the Class A-3 Notes.
"Noteholders' Monthly Interest Distributable Amount" means, (A) with
respect to any Distribution Date, the product of (i)(x) in the case of the Class
A-1 Notes and the Class A-2 Notes, the product of the Interest Rate for such
Class and a fraction, the numerator of which is the number of days elapsed from
and including the prior Distribution Date (or, in the case of the first
Distribution Date, from and including the Closing Date) to but excluding such
Distribution Date and the denominator of which is 360 and (y) in the case of the
Class A-3 Notes, one-twelfth of the Interest Rate for such Class (or, in the
case of the first Distribution Date, the Interest Rate for such Class multiplied
by a fraction, the numerator of which is the number of days elapsed from and
including the Closing Date to but excluding such Distribution Date and the
denominator of which is 360) and (ii) the outstanding principal amount of the
Notes of such Class immediately preceding such Distribution Date and (B) with
respect to the Class A-1 Notes and the Class A-1 Final Scheduled Distribution
Date, the product of (i) the Interest Rate for the Class A-1 Notes and a
fraction, the numerator of which is the actual number of days elapsed from and
including the preceding Distribution Date to but excluding the Class A-1 Final
Scheduled Distribution Date and the denominator of which is 360 and (ii) the
outstanding principal amount of the Class A-1 Notes immediately preceding the
Class A-1 Final Scheduled Distribution Date.
"Noteholders' Monthly Principal Distributable Amount" means, with respect
to any Distribution Date, the Noteholders' Percentage of the Principal
Distributable Amount.
"Noteholders' Percentage" means with respect to any Determination Date (i)
relating to a Distribution Date prior to the Distribution Date on which the
principal amount of the Class A-3 Notes is reduced to zero, 100%; (ii) relating
to the Distribution Date on which the principal amount of the Class A-3 Notes is
reduced to zero, the percentage equivalent of a fraction, the numerator of which
is the principal amount of the Class A-3 Notes immediately prior to such
Distribution Date, and the denominator of which is the Principal Distributable
Amount; and (iii) relating to any other Distribution Date, 0%.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Noteholders' Principal Distributable Amount
for the preceding Distribution Date over the amount in respect of principal that
was actually deposited in the Note Distribution Account on such preceding
Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date (other than the Final Scheduled Distribution Date for any
Class of Notes), the sum of the Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall for such Distribution Date. The Noteholders' Principal Distributable
Amount on the Final Scheduled Distribution Date for any Class of Notes will
equal the sum of (i) the Noteholders' Monthly Principal Distributable Amount for
such Distribution Date, (ii) the Noteholders' Principal Carryover Shortfall for
such Distribution Date, and (iii) the excess of the outstanding principal amount
of such Class of Notes, if any, over the amounts described in clauses (i) and
(ii).
"Note Owner" means, with respect to a Book-Entry Note, the person who is
the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Note Policy" means the financial guaranty insurance policy issued by the
Insurer to the Indenture Trustee for the benefit of the Noteholders with respect
to the Notes, including any endorsements thereto, in the form of Exhibit E to
the Indenture.
"Note Policy Claim Amount" has the meaning specified in Section 5.18(a) of
the Indenture.
"Note Pool Factor" for each Class of Notes as of the close of business on a
Distribution Date means a seven-digit decimal figure equal to the outstanding
principal amount of such Class of Notes as of such Distribution Date after
giving effect to principal distributions on such date divided by the original
outstanding principal amount of such Class of Notes.
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.4 of the Indenture.
"Notice of Claim" has the meaning, with respect to the Note Policy,
specified in Section 5.18(b) of the Indenture, and with respect to the
Certificate Policy, specified in Section 5A.1(b) of the Sale and Servicing
Agreement.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officer's Certificate" means (i) with respect to the Indenture, a
certificate signed by any Authorized Officer of the Owner Trustee, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 11.1 of the Indenture and TIA ss. 314, and delivered to
the Indenture Trustee, and (ii) otherwise, a certificate signed by the (a)
chairman of the board, the president, any executive vice president or any vice
president and (b) any treasurer, assistant treasurer, secretary or assistant
secretary of the Seller or the Servicer, as appropriate. Unless otherwise
specified, any reference in the Indenture to an Officer's Certificate shall be
to an Officer's Certificate of any Authorized Officer of the Issuer.
"Opinion of Counsel" means (i) with respect to the Indenture, one or more
written opinions of counsel who may, except as otherwise expressly provided in
the Indenture, be employees of or counsel to the Issuer and who shall be
satisfactory to the Indenture Trustee and, if addressed to the Insurer,
satisfactory to the Insurer, and which shall comply with any applicable
requirements of Section 11.1 of the Indenture, and shall be in form and
substance satisfactory to the Indenture Trustee, and if addressed to the
Insurer, satisfactory to the Insurer, and (ii) otherwise, one or more written
opinions of counsel who may be an employee of or counsel to the Seller or the
Servicer or any Affiliate thereof, which counsel shall be acceptable to the
Indenture Trustee, the Owner Trustee, the Insurer or the Rating Agencies, as
applicable.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Originator" means, with respect to any Receivable, either SunStar
Acceptance Corporation or SunStar Acceptance Corporation (California), as the
original purchaser of such Receivable from the applicable Dealer.
"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under the Indenture except:
(i) Notes theretofore canceled by the Note Registrar
or delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the
Indenture Trustee or any Paying Agent in trust for the Holders of
such Notes (provided, however, that if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor, satisfactory to the Indenture
Trustee); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to this Indenture
unless proof satisfactory to the Indenture Trustee is presented that
any such Notes are held by a bona fide purchaser.
provided, however, that Notes which have been paid with proceeds of the
Note Policy shall continue to remain Outstanding for purposes of the Indenture
until the Insurer has been paid as subrogee hereunder or reimbursed pursuant to
the Insurance Agreement as evidenced by a written notice from the Insurer
delivered to the Indenture Trustee, and the Insurer shall be deemed to be the
Holder thereof to the extent of any payments thereon made by the Insurer;
provided, further, that in determining whether the Holders of the requisite
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any Basic Document,
Notes owned by the Issuer, any other obligor upon the Notes, the Seller or any
Affiliate of any of the foregoing Persons shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Indenture Trustee shall
be protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Responsible Officer of the
Indenture Trustee either actually knows to be so owned or has received written
notice thereof shall be so disregarded. Notes so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes, or
class of Notes, as applicable, Outstanding at the date of determination.
"Owner" shall mean each Person who is the beneficial owner of a Book Entry
Certificate as reflected in the records of the Clearing Agency or if a Clearing
Agency Participant is not the Owner, then as reflected in records of a Person
maintaining an account with such Clearing Agency (directly or indirectly, in
accordance with the rules of such Clearing Agency).
"Owner Trustee" means ________________________, a ________ banking
corporation, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement, and its successors in interest or any successor Owner
Trustee under the Trust Agreement.
"Owner Trust Estate" shall mean all right, title and interest of the Trust
in and to the property and rights assigned to the Trust pursuant to Article II
of the Sale and Servicing Agreement, all funds on deposit from time to time in
the Trust Accounts and the Certificate Distribution Account and all other
property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement and the
Spread Account Agreement.
"Payment Date" means a Distribution Date.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11 of
the Indenture and is authorized by the Issuer to make the payments to and
distributions from the Collection Account and the Note Distribution Account,
including payment of principal of or interest on the Notes on behalf of the
Issuer.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Policies" means the Certificate Policy and the Note Policy.
"Pool Balance" means, as of any date of determination, the aggregate
Principal Balance of the Receivables (excluding Purchased Receivables and
Liquidated Receivables).
"Post Cutoff Date Insurance Add-Ons" means Collateral Protection Insurance
Premiums added to the Contracts on or after the Cutoff Date with regard to each
Contract.
"Precomputed Receivable" means any Receivable under which the portion of a
payment allocable to interest and the portion allocable to principal is
determined in accordance with the Rule of 78s Method or the Actuarial Method.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 of the Indenture in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"Preference Claim" has the meaning, with respect to the Note Policy,
specified in Section 5.19(b) of the Indenture, and with respect to the
Certificate Policy, specified in Section 5A.2(b) of the Sale and Servicing
Agreement.
"Principal Balance" means, with respect to any Receivable, as of any date
(a) with respect to any Precomputed Receivable, the present value of all
Scheduled Payments for such Receivable remaining due and unpaid on such date
(calculated based on the assumption that each such Scheduled Payment is paid on
its due date), discounted monthly over the remaining term of the Receivable at
one-twelfth of the related APR and (b) with respect to any Simple Interest
Receivable, the Amount Financed minus that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the Simple
Interest Method.
"Principal Carryover Shortfall" means, as of the close of business on any
Distribution Date, the excess of the Principal Distributable Amount plus any
outstanding Principal Carryover Shortfall from the preceding Distribution Date
over the amount of principal deposited in the Note Distribution Account and/or
the Certificate Distribution Account with respect to such current Distribution
Date.
"Principal Distributable Amount" means, with respect to any Distribution
Date, without duplication, the sum of (i) the principal portion (calculated in
the case of Precomputed Receivables on the basis of the Actuarial Method and in
the case of Simple Interest Receivables on the basis of the Simple Interest
Method) of all Collected Funds received during the immediately preceding Monthly
Period (other than Liquidated Receivables and Purchased Receivables), (ii) the
Principal Balance of all Receivables that became Liquidated Receivables during
the related Monthly Period (other than Purchased Receivables), (iii) the
principal portion of the Purchase Amounts received with respect to all
Receivables that became Purchased Receivables during the related Monthly Period,
and (iv) following the acceleration of the Notes pursuant to Section 5.2 of the
Indenture, the amount of money or property collected pursuant to Section 5.4 of
the Indenture since the preceding Determination Date by the Indenture Trustee or
Controlling Party for distribution pursuant to Section 5.6 of the Indenture.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase Agreement" means the Purchase Agreement between the Seller and
SunStar Acceptance Corporation, dated as of November 30, 1996, pursuant to which
the Seller acquired the Receivables.
"Purchase Amount" means, with respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Principal Balance of such
Receivable (including one month's interest thereon, in the month of payment, at
the APR less, so long as SunStar Acceptance Corporation is the Servicer, the
Servicing Fee), after giving effect to the receipt of any moneys collected (from
whatever source) on such Receivable, if any.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Monthly Period by the Servicer pursuant to Section
4.7 of the Sale and Servicing Agreement or repurchased by the Seller or SunStar
Acceptance Corporation pursuant to Section 3.2(a) of the Sale and Servicing
Agreement.
"Rating Agency" means Moody's and Standard & Poor's. If no such
organization or successor maintains a rating on the Securities, "Rating Agency"
shall be a nationally recognized statistical rating organization or other
comparable Person designated by the Seller and acceptable to the Insurer (so
long as an Insurer Default shall not have occurred and be continuing), notice of
which designation shall be given to the Indenture Trustee, the Owner Trustee and
the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given at least 10 days' (or such shorter period as
shall be acceptable to each Rating Agency) prior notice thereof and that each of
the Rating Agencies shall have notified the Seller, the Servicer, the Insurer,
the Owner Trustee and the Indenture Trustee in writing that such action will not
result in a reduction or withdrawal of the then current rating of any Class of
Notes or the Certificates, as applicable.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A to the Sale and
Servicing Agreement (which Schedule may be in the form of microfiche) conveyed
to the Trust on the Closing Date, as such Contract may be amended or modified;
provided, however, that no Receivable shall include any CPI Funds, all of which
shall remain the property of SunStar Acceptance Corporation or SunStar
Acceptance Corporation (California), as applicable, which rights to such funds
are not being transferred pursuant to the Basic Documents (regardless of whether
the related CPI was placed before, on or after the Closing Date) .
"Receivable Files" means the documents specified in Section 3.3 of the Sale
and Servicing Agreement.
"Record Date" means, with respect to a Distribution Date or Redemption
Date, the close of business on the last Business Day immediately preceding such
Distribution Date or Redemption Date, unless otherwise specified.
"Redemption Date" means (a) in the case of a redemption of the Notes
pursuant to Section 10.1(a) of the Indenture or a payment to Noteholders
pursuant to Section 10.1(b) of the Indenture, the Distribution Date specified by
the Servicer or the Issuer pursuant to Section 10.1(a) or (b) of the Indenture,
as applicable.
"Redemption Price" means (a) in the case of a redemption of the Notes
pursuant to Section 10.1(a) of the Indenture, an amount equal to the unpaid
principal amount of the then outstanding principal amount of each class of Notes
being redeemed plus accrued and unpaid interest thereon to but excluding the
Redemption Date, or (b) in the case of a payment made to Noteholders pursuant to
Section 10.1(b) of the Indenture, the amount on deposit in the Note Distribution
Account, but not in excess of the amount specified in clause (a) above.
"Reference Banks" means four major banks in the London interbank market
selected by the Indenture Trustee.
"Registrar of Titles" means, with respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary, or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Rule of 78s 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 month's digits or any equivalent method
commonly referred to as the "Rule of 78s."
"Rule of 78s Receivable" means a Receivable which by its terms calculates
interest and principal with respect to each scheduled payment in accordance with
the Rule of 78s method.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
among NationsFinancial Auto Owner Trust 1996- 1, NationsFinancial Funding
Corporation, and SunStar Acceptance Corporation, dated as of November 30, 1996.
"Scheduled Payment" means (i) with respect to any Receivable, the fixed
level payment (net of any portion of such payment attributable to any Collateral
Protection Insurance Premium) required to be made by the Obligor during the
respective Monthly Period sufficient to amortize the Principal Balance thereof
over the term of the Receivable and to provide interest at the APR with respect
to Precomputed Receivables, under the Actuarial Method and with respect to
Simple Interest Receivables, under the Simple Interest Method.
"Schedule of Receivables" means the listing of the Receivables set forth in
Schedule A to the Sale and Servicing Agreement.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Secured Obligations" means Insurer Secured Obligations, Noteholder Secured
Obligations and Trust Secured Obligations.
"Securities" means the Notes and the Certificates.
"Seller" means NationsFinancial Funding Corporation, a Delaware corporation
and its successors in interest.
"Service Contract" means, with respect to a Financed Vehicle, the
agreement, if any, financed under the related Receivable that provides for the
repair of such Financed Vehicle.
"Servicer Default" means an event specified in Section 8.1 of the Sale and
Servicing Agreement.
"Servicer" means SunStar Acceptance Corporation, as the servicer of the
Receivables, and each successor Servicer pursuant to Section 7.3 or 8.2 of the
Sale and Servicing Agreement.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.9 of the Sale and Servicing Agreement,
substantially in the form of Exhibit D to the Sale and Servicing Agreement.
"Servicing Fee" has the meaning specified in Section 4.8 of the Sale and
Servicing Agreement.
"Servicing Fee Rate" means [2.5]% per annum.
"Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made (in some states
assuming 30 day months), divided by the actual number of days in a year (360
days in states which assume 30 day months) and the remainder of such payment is
allocable to principal.
"Simple Interest Receivable" means any Receivable under which the portion
of a payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
"Specified Spread Account Requirement" has the meaning specified in Section
3(b) of the Spread Account Agreement.
"Spread Account" means the account designated as such, established and
maintained pursuant to the Spread Account Agreement.
"Spread Account Agreement" means the Spread Account Agreement dated as of
November 30, 1996 among the Seller, the Servicer and the Collateral Agent.
"Spread Account Initial Deposit" means, with respect to the Closing Date,
an amount equal to ___% of the aggregate principal balance of the Receivables as
of the Cutoff Date (which is equal to $____________).
"Spread Account Property" has the meaning set forth in Section 3(a) of the
Spread Account Agreement.
"Standard & Poor's" means Standard & Poor's Ratings Services, or its
successor.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Subservicer" means SunStar Acceptance Corporation (California).
"Successor Servicer" has the meaning specified in Section 3.7(e) of the
Indenture.
"SunStar Acceptance Corporation" means SunStar Acceptance Corporation, a
Delaware corporation.
"Supplemental Servicing Fee" means charges collected (from whatever source)
on the Receivables during the related Monthly Period including, in the case of a
Precomputed Receivable that is prepaid in full, the difference between the
Principal Balance of such Receivable (plus accrued interest to the date of
prepayment) and the principal balance of such Receivable computed according to
the Rule of 78s, and other late fees, prepayment fees, administrative fees and
expenses or similar charges allowed by applicable law with respect to
Receivables, plus reinvestment proceeds on any payments received in respect of
Receivables during the related Monthly Period.
"Termination Date" means the latest of (i) the expiration of the Note
Policy and the return of the Note Policy to the Insurer for cancellation, (ii)
the date on which the Insurer shall have received payment and performance of all
Insurer Issuer Secured obligations and (iii) the date on which the Indenture
Trustee shall have received payment and performance of all Trustee Issuer
Secured Obligations.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trigger Event" means that any of the following tests shall not be
satisfied:
(i) For any Distribution Date, the Average
Delinquency Ratio is less than __%; and
(ii) For any Distribution Date, the Average Net Loss Rate is
less than __%.
"Trust" shall mean the trust established by the Trust Agreement.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1(b) of the
Sale and Servicing Agreement.
"Trust Agreement" means the Trust Agreement dated as of November 30, 1996,
between the Seller and the entity acting as Owner Trustee.
"Trust Certificate" shall mean a Certificate.
"Trustee Issuer Secured Obligations" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Indenture Trustee
for the benefit of the Noteholders under the Indenture or the Notes.
"Trust Estate" means all money, instruments, rights and other property that
are subject or intended to be subject to the lien and security interest of the
Indenture for the benefit of the Noteholders (including all property and
interests Granted to the Indenture Collateral Agent), including all proceeds
thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.
"Trust Property" has the meaning specified in Section 2.1 of the Sale and
Servicing Agreement.
"Trust Officer" means, (i) in the case of the Indenture Trustee, the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller and any assistant
controller or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject, and (ii) in the case of the Owner
Trustee, any officer in the corporate trust office of the entity acting as Owner
Trustee with direct responsibility for the administration of this Agreement or
any of the Basic Documents on behalf of the Owner Trustee.
"Trust Secured Obligations" means with respect to the Securities, all
amounts and obligations which the Servicer or the Seller may at any time owe or
be required to perform to or on behalf of the Owner Trustee or the
Certificateholders under the Trust Agreement or any other Basic Document,
regardless of whether such amounts are owed or performance is due now or in the
future, whether liquidated or unliquidated, contingent or non-contingent.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code as in effect in the State of New York on the date of the Agreement.
EXHIBIT B
FORM OF MONTHLY CERTIFICATEHOLDER STATEMENT
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
_____% Asset Backed Certificates
Distribution Date:
Monthly Period:
Under the Sale and Servicing Agreement dated as of November 30, 1996
among Sunstar Acceptance Corporation, as Servicer, NationsFinancial Funding
Corporation, as Seller, NationsFinancial Auto Owner Trust 1996-1, as Issuer, the
Servicer is required to prepare certain information each month regarding current
distributions to Certificateholders and the performance of the Trust during the
previous month. The information that is required to be prepared with respect to
the Distribution Date and Monthly Period listed above is set forth below.
Certain of the information is presented on the basis of an original principal
amount of $1,000 per Certificate, and certain other information is presented
based upon the aggregate amounts for the Trust as a whole.
A. Information Regarding the Current Monthly Distribution.
1. Certificates.
(a) The aggregate amount of the
distribution to the Certificates
holders...........................................$________
(b) The amount of the distribution set
forth in paragraph A.1.(a) above in
respect of interest on the Certificates...........$________
(c) The amount of the distribution set
forth in paragraph A.1.(a) above in
respect of principal of the Certificates..........$________
(d) The amount of the distributions set
forth in paragraph A.1.(a) payable
out of amounts withdrawn from the Spread
Account with respect to the Certificates..........$________
(e) The amount of the distribution in
A.1.(a) payable pursuant to a claim
on the Certificate Policy.........................$________
(f) The amount of the distribution set
forth in paragraph A.1.(a) above
per $1,000 interest in the Certificates...........$________
(g) The amount of the distribution set
forth in paragraph A.1.(b) above
per $1,000 interest in the Certificates...........$________
(h) The amount of the distribution set
forth in paragraph A.1.(c) above
per $1,000 interest in the Certificates...........$________
(i) The amount of the distribution set
forth in paragraph A.1.(d) above
per $1,000 interest in the Certificates...........$________
(j) The amount of the distribution set
forth in paragraph A.1.(e) above per
$1,000 interest in the Certificate................$________
B. Information Regarding the Performance of the Trust.
1. Pool Balance and Certificate Principal Balance.
(a) The Pool Balance at the close of business on
the last day of the Monthly Period...............$________
(b) The Certificate Principal Balance after
giving effect to payments allocated to
principal as set forth in Paragraph A.1.(c
)................................................$________
(c) The Certificate Pool Factor after
giving affect to the payments set
forth in paragraph A.1.(c).......................$________
(d) the amount of aggregate Realized Losses for
the second preceding Monthly Period..............$________
(e) The aggregate Purchase Amount for
all Receivables that were repurchased
in the Monthly Period............................$________
2. Servicing Fee.
The aggregate amount of the Servicing
Fee paid to the Servicer with respect
to the preceding Monthly Period.................$________
3. Payment Shortfalls.
(a) The amount of the Certificates'
Interest Carryover Shortfall after
giving effect to the payments set forth
in paragraph A.1.(b) above......................$________
(b) The amount of the Certificateholders'
Interest Carryover Shortfalls set
forth in paragraph B.3.(a) above per
$1,000 interest with respect to
the Certificate:................................$________
<PAGE>
EXHIBIT C
FORM OF MONTHLY NOTEHOLDER STATEMENT
NATIONSFINANCIAL AUTO OWNER TRUST 1996-1
Class A-1 _____% Asset Backed Notes
Class A-2 Floating Rate Asset Backed Notes
Class A-3 ____% Asset Backed Notes
Distribution Date:
Monthly Period:
Under the Sale and Servicing Agreement dated as of November 30, 1996
among Sunstar Acceptance Corporation, as Servicer, NationsFinancial Funding
Corporation, as Seller, NationsFinancial Auto Owner Trust 1996-1, as Issuer, the
Servicer is required to prepare certain information each month regarding current
distributions to Noteholders and the performance of the Trust during the
previous month. The information that is required to be prepared with respect to
the Distribution Date and Monthly Period listed above is set forth below.
Certain of the information is presented on the basis of an original principal
amount of $1,000 per Note, and certain other information is presented based upon
the aggregate amounts for the Trust as a whole.
A. Information Regarding the Current Monthly Distribution.
1. Notes.
(a) The aggregate amount of the
distribution with respect to:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(b) The amount of the distribution set
forth in paragraph A.1.(a) above in
respect of interest on:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(c) The amount of the distribution set
forth in paragraph A.1.(a) above in
respect of principal of:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(d) The amount of the distributions set
forth in paragraph A.1.(a) payable out
of amounts withdrawn from the Spread
Account with respect to:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(e) The amount of the distribution in
A.1.(a) payable pursuant to a claim
on the Note Policy with respect to:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(f) The amount of the distribution set
forth in paragraph A.1.(a) above
per $1,000 interest in:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
The Class A-3 Notes....................$________
(g) The amount of the distribution set
forth in paragraph A.1.(b) above
per $1,000 interest in:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(h) The amount of the distribution set
forth in paragraph A.1.(c) above
per $1,000 interest in:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(i) The amount of the distribution set
forth in paragraph A.1.(d) above
per $1,000 interest in:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(j) The amount of the distribution set
forth in paragraph A.1.(e) above
per $1,000 interest in:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
B. Information Regarding the Performance of the Trust.
1. Pool Balance and Note Principal Balance.
(a) The Pool Balance at the close of business on
the last day of the Monthly Period..............$_____
(b) The Note Principal Balance after giving effect to payments
allocated to principal as set forth in Paragraph A.1.(c) above
with respect to:
the Class A-1 Notes....................$________
the Class A-2 Notes....................$________
the Class A-3 Notes....................$________
(c) The Note Pool Factor for each Class of Notes after giving affect
to the payments set forth in paragraph A.1.(c) with respect to:
the Class A-1 Notes.....................________
the Class A-2 Notes.....................________
the Class A-3 Notes.....................________
(d) The amount of aggregate Realized Losses for
the second preceding Monthly Period.... ........$________
(e) The aggregate Purchase Amount for
all Receivables that were repurchased
in the Monthly Period...........................$_____
2. Servicing Fee.
The aggregate amount of the Servicing
Fee paid to the Servicer with respect
to the preceding Monthly Period.................$_____
3. Payment Shortfalls.
(a) The amount of the Noteholders'
Interest Carryover Shortfall after
giving effect to the payments set forth
in paragraph A.1.(b) above with respect to:
the Class A-1 Notes.....................$________
the Class A-2 Notes.....................$________
The Class A-2 Notes.....................$________
(b) The amount of the Noteholders Interest Carryover Shortfalls set
forth in paragraph B.3.(a) above per $1,000 interest with
respect to:
the Class A-1 Notes.....................$________
the Class A-2 Notes.....................$________
The Class A-2 Notes.....................$________
OHIO MOTOR VEHICLE SALES CONTRACT AND DISCLOSURE STATEMENT
DATE:__________
SELLER:_______________________________ BUYER:_____________________
ADDRESS:______________________________ ADDRESS:_______________________________
(Street) (City) (State) (zip) (Street) (City) (State) (Zip)
AGREEMENT: Buyers agree that it was their decision to purchase the property
described below at the Total Sale Price rather than paying cash for the property
at the Cash Price, which is less. In return for Seller financing for Buyers the
purchase of the property described below, Buyers each individually and together
promise and agree as follows:
Primary Use for Which Purchased: / /personal / /business / /agricultural
/ / ______________________________
NOTICE TO BUYERS OF USED VEHICLES (AS DEFINED IN THE FTC USED MOTOR VEHICLE
TRADE REGULATION RULE): The information you see on the window form for this
vehicle is part of this contract. Information on the window form overrides any
contrary provisions in the contract of sale.
<TABLE>
<CAPTION>
New or Used Year Class Make and Model Body Type Vehicle Identification No.
<S> <C> <C> <C> <C> <C> <C>
MOTOR
VEHICLE / /Air Conditioning / /AM-FM radio / /4-5 Speed Trans. / /Power Steering Odometer Miles
DESCRIPTION / /Sun Roof / /Stereo / /Automatic Trans. / /Custom Wheels
Other - Describe
</TABLE>
TRUTH-IN-LENDING DISCLOSURES
ANNUAL FINANCE Amount Total of Total Sale Price
PERCENTAGE CHARGE Financed Payments The total cost of Buyers'
RATE The dollar The amount The amount purchase on credit,
The cost of amount the of credit Buyers will including Buyers' down
Buyers' credit will provided to have paid payment of
credit as cost Buyers. Buyers or after Buyers
a yearly rate on Buyers' have made all $_________________
_______% $________ behalf. payments as $_________________
$_____ scheduled.
$___________
Buyers' payment schedule will be:
Number of Payments Amount of payments When Payments Are Due
$
$ Monthly Starting
Security: Buyers are giving a security interest in the property being purchased.
Late Charge: If any part of a payment is more than 10 days late, Buyers will be
charged five cents for each dollar for the payment which is late or $3.00,
whichever is less.
Prepayment: If Buyers pay off early, Buyers may be entitled to a refund of part
of the finance charge.
See the contract documents for any additional information about nonpayment,
default, any required repayment in full before the scheduled date, and prepay-
ment refunds and penalties.
ITEMIZATION OF THE AMOUNT FINANCED
1 Cash Price (including any accessories, services, Optional Mechanical
Protection Plan and taxes) $____________________________(1)
2 Total Down Payment = Net Trade in $_________ + Cash Down Payments $
Buyers' Trade-in is a (Year) (Make) (Model)$________(2)
3 Unpaid Balance of Cash Price (1 minus 2) $________(3)
4 Insurance: * (Some substantial part
A Cost of Physical Damage Insurance Purchased of the cost shown in 4A
through Seller and Paid to the Insurance and 4B may be paid to
Company Named Below *$_________________ or retained by Seller)
B Cost of Optional Credit Insurance Paid to the Insurance Company or
Companies Named Below
Life $_____________ Disability, Accident and Health $________ *$_________
Total Amounts Paid to Others on Buyers' Behalf $_________________(4)
5 Amount Financed - Unpaid Balance (3+4) $_________________(5)
Insurance: If any insurance is checked below, the policies or certificates
issued by the Companies named will describe the terms and conditions.
Required Physical Damage Insurance: Physical damage insurance is required, but
Buyers may buy it from anyone Buyers want who is acceptable to the Seller.
/ /Buyers have elected to buy the Optional Mechanical Protection Plan:
insurance checked below through the / / Buyers have elected to buy a
Seller and Buyers agree to pay the Mechanical Protection Plan. Buyers
additional cost which is shown in 4A agree to pay the additional cost of
of the Itemization above. This cost $_______. This cost is included in
is included in the Amount Financed. the Cash Price. Some substantial
Buyers understand that they must part of this cost may be paid to
read the insurance policy for or retained by Seller.
exact coverages and exclusions.
CHECK ONE
Insurance Company:______________ Term:______ months Premium
/ /Physical damage insurance / /
(including personal effects coverage) $___________
/ / $______Deductible Collision $___________
/ / $______Deductible Comprehensive including Fire,
Theft and Combined Additional Coverage $___________
Total Required Physical Damage Insurance $___________
Optional, if desired / / Towing and Labor Costs / /Rental Reimbusement
/ / CB Radio Equipment $____________
/ / Buyers have bought, or will buy, required coverage through:
Insurance Company or Agent______________________
THE INSURANCE, IF ANY, REFERRED TO IN THIS CONTRACT DOES NOT INCLUDE COVERAGE
FOR BODILY INJURY LIABILITY, PUBLIC LIABILITY AND PROPERTY DAMAGE LIABILITY
OR COMPLY WITH ANY MINIMUM STATE LIABILITY LAWS.
Optional Credit Insurance: Credit life insurance and credit disability
insurance are not required to obtain credit, and will not be provided unless
a Buyer signs and agrees to pay the additional cost, which will be included in
the Amount Financed.
<TABLE>
<CAPTION>
Type Premium Term (months) Signature
<S> <C> <C> <C>
Credit Life / /Single Coverage $____ I want credit life __________
/ /Joint Coverage $____ insurance. Signature
Credit Disability $ I want credit disability _________
insurance. Signature
</TABLE>
CREDIT LIFE AND DISABILITY INSURANCE: If Buyers elect credit insurance coverage
and are accepted by the insurance company, the terms and conditions will be as
described in the policies or certificates issued by the insurance company. The
original amount of the decreasing term credit life insurance will not exceed
$____ Credit disability insurance payments will equal the monthly payment amount
but will not be more than $____. Insurance Company:__________________.
LIFE AND DISABILITY INSURANCE MAY NOT COVER THE ENTIRE AMOUNT DUE UNDER THIS
CONTRACT. BUYERS MUST SEE THEIR POLICY OR CERTIFICATE FOR EXACT COVERAGE.
BUYERS UNDERSTAND THAT SELLER OR HOLDER OF THIS CONTRACT EXPECTS TO PROFIT
FROM THE SALE OF INSURANCE AND ANY MECHANICAL PROTECTION PLAN. BUYERS CONSENT
TO THIS.
RECEIPT OF PROPERTY AND PROMISE TO PAY: Buyers agree that they have received the
property described above, and have accepted delivery of the property in good
condition. Buyers promise to pay to the Seller at its address shown above the
Total of Payments shown on this contract in accordance with the terms of this
contract. Those terms are printed on both sides of this document.
Seller intends to sell this Contract to SunStar Acceptance Corporation.
That sale may be at a discount, so that Seller will receive less than the Amount
Financed. Seller may also share in a part of the interest you will pay. The
Finance Charge and other terms of this Contract may not be the best financing
terms you could obtain elsewhere. If you can obtain cheaper financing elsewhere,
you should consider doing so and paying the Seller all cash.
NOTICE TO THE BUYER: 1. Do not sign this contract before you read it or if
it contains any blank space. 2. You are entitled to a completely filled-in copy
of this contract. 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
finance charge.
Buyers agree that at the time they signed they received a copy of this RETAIL
INSTALLMENT CONTRACT.
Accepted _________________ ___________________________________(SEAL)
Seller Signature of Buyer
By_______________________(SEAL) ___________________________________(SEAL)
Signature and Title Signature of Co-Buyer
Co-Buyers and Other Owners: A co-buyer is a person who is responsible for
paying the entire debt. An other owner is a person whose name is on the title to
the property but does not have to pay the debt. The co-buyer or other owner
knows that the Seller has a security interest in the property and consents to
the security interest.
Other owner signs here ________________ Address___________________________
Notice: The terms of this contract
are contained on both sides of this
page.
OTHER IMPORTANT AGREEMENTS
Ownership and Risk of Loss: Buyers agree to pay the Seller all that they
owe under this contract even if the property is damaged, destroyed or missing.
Buyers agree not to sell, transfer, or remove the property from Buyer's
possession at the address on this contract without the Seller's permission.
Buyers also agree that Buyers will not sell or otherwise transfer ownership of
the property securing this contract without immediately paying the Seller all
amounts still owing on this contract. If Buyers wish to sell or transfer the
property securing this contract to someone who agrees to assume the balance of
this contract. Buyers must obtain the written approval of the Seller to the
assumption, or the Seller may ignore the assumption, and Buyers will remain
primarily liable for the balance owing. Buyers agree not to expose the property
to misuse or confiscation. Buyers agree to keep the property repaired and in
good condition. Buyers agree that the property will not be used in any manner
contrary to any law. Buyers will make sure the Seller's security interest (lien)
on the property is shown on the title. If the Seller pays any repair bills,
storage bills, taxes, fines, or other charges on the property. Buyers agree to
repay the amount when the Seller asks for it. Buyers agree to comply with all
registration, licensing, tax and title laws applicable to the property.
Security Interest: Buyers are giving the Seller a security interest in the
property being purchased and all proceeds and products of insurance and
mechanical protection plans financed hereunder. This secures payment of all
amounts Buyers owe in this contract and in any transfer, renewal, extension or
assignment of this contract. The security interest also secures all promises
made by Buyers in this contract.
Prepayment Refund: Buyers can prepay all of their debt and get a refund of
part of the Finance Charge. The refund will be figured by the actuarial method
based on the assumption that payments were made as originally scheduled or, if
deferred, as deferred. Buyers agree that Seller may first deduct a $10.00
acquisition charge. No refund will be paid to Buyers if it is less than $1.00.
However, in no event will the credit be less than the minimum refund required by
law.
Required Physical Damage Insurance: Buyers agree to have physical damage
insurance with deductables acceptable to the Seller covering loss or damage to
the property for the term of this contract. At any time during the term of this
contract, if Buyers do not have physical damage insurance which covers both
their interest and the Seller's interest in the property, then the Seller may
buy it for the Buyers. If the Seller does not buy physical damage insurance
which covers both interests in the property, it may, if it decides, buy
insurance which covers only the Seller's interest.
The Seller is under no obligation to buy any insurance, but may do so if it
desires from an insurer of its choice. If the Seller buys either of these
coverages, it will let Buyers know what type it is and the charge (based on the
insurer's filed rates) Buyers must pay. The charge will consist of the charge
for such insurance and a finance charge at the Annual Percentage Rate shown on
the contract and will be added to the contract. The charge for such insurance
and finance charge will be payable over the remaining term of the insurance or
the contract, whichever is less. If permitted by law, Seller may collect such
charges over the remaining term of the contract even if it is longer. Buyers
agree to pay the charge in equal installments along with the payments shown on
the payment schedule.
If the property is lost or damaged, Buyers agree that the Seller can use
any insurance settlement either to repair the property or to apply to the
Buyers' debt.
WARNING
UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS REQUIRED
BY THIS CONTRACT, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR
INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT YOUR INTEREST. IF THE
COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU
MAKE OR ANY CLAIM MADE AGAINST YOU. YOU MAY LATER CANCEL THIS COVERAGE BY
PROVIDING WRITTEN EVIDENCE TO SELLER THAT YOU HAVE OBTAINED PROPER COVERAGE
ELSEWHERE.
YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US. THE COST
OF THIS INSURANCE MAY BE ADDED TO YOUR CONTRACT BALANCE. IF THE COST IS ADDED TO
THE CONTRACT BALANCE, THE INTEREST RATE ON THE UNDERLYING CONTRACT WILL APPLY TO
THIS ADDED AMOUNT. THE EFFECTIVE DATE OF COVERAGE MAY BE THE DATE YOUR PRIOR
COVERAGE LAPSED OR THE DATE YOU FAILED TO PROVIDE PROOF OF COVERAGE.
THE COVERAGE WE PURCHASE MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE
YOU CAN OBTAIN ON YOUR OWN AND MAY NOT SATISFY OHIO'S MANDATORY LIABILITY
INSURANCE LAWS.
YOU ACKNOWLEDGE AND AGREE THAT SELLER MAY BENEFIT FROM THE PURCHASE OF
SUCH INSURANCE BECAUSE IT OR A RELATED ENTITY MAY RECEIVE OR RETAIN A
SUBSTANTIAL COMMISSION OR OTHER COMPENSATION.
Late Charge: If any part of a payment is more than 10 days late, Buyers will
have to pay a late charge of five cents for each dollar of the payment which is
late or $3.00, whichever is less. Acceptance of a late payment or late charge
does not excuse the Buyers' late payment or mean that Buyers can keep making
payments after they are due. The Seller may also take the steps set forth below
if there is any late payment.
Insurance or Optional Protection Plans: This contract may contain charges
for insurance or optional protection plans. If the property is repossessed,
Buyers agree that the Seller may claim benefits under these coverages and
terminate them to obtain refunds for unearned charges.
Insurance or Protection Plan Charges Returned to Seller: If any change for
required insurance is returned to the Seller, it may be credited to the Buyers'
account or used to buy similar insurance or insurance which covers only the
Seller's interest in the property. Any refund on optional insurance or
protection plans obtained by the Seller will be credited to the Buyer's account.
Credits to the Buyers' account will be applied to as many of the Buyer's
installments as they will cover, beginning with the final installment. Buyers
will be notified of what is done.
Required Repayment in Full Before the Scheduled Date: If Buyers fail to pay any
payment within 30 days after its due date or if Buyers break any of the
agreements in this contract (default), the Seller can demand that Buyer pay all
that they owe on this contract at once. In figuring what Buyers owe, the Seller
will give Buyers a refund of part of the Finance Charge figured the same as if
they had prepaid in full.
Repossession of the Property for Failure to Pay: If Buyers fail to pay any
payment within 30 days after its due date or if Buyers break any of the
agreements in this contract (default), the Seller shall have the right in
accordance with state law to enter onto land or in a building without breach of
the peace and take the property in which it has a security interest
(repossession). The Seller may exercise this right without notice to Buyers. If
there are any personal belongings in the property, such as clothing and tools,
the Seller may store the items. However, the Seller does not have to store them
and will not be responsible for the items beyond what the law may require. Any
accessories, equipment or replacement parts will remain with the property.
Getting the Property Back After Repossession: If the Seller repossession the
property, Buyers have the right to get it back (redeem) by curing their default
as allowed by the Ohio Retail Installment Sales Act or by redeeming the
property as permitted by the Ohio Uniform Commercial Code Buyer's right to
redeem will end when the property is sold in accordance with applicable Ohio
law.
Sale of the Repossessed Property: The Seller will send Buyers a written notice
of sale at least 10 days before selling the property. If Buyers do not redeem
the property by the date on the notice, the Seller can sell the property at
public sale. The Seller will use the net proceeds of the sale to pay all or
part of the Buyer's debt.
If Buyers owe the Seller less than the net proceeds of sale, the Seller
will pay Buyers the difference, unless required to pay it to someone else. For
example, the Seller may be required to pay a lender who has given the Buyers a
loan and also taken a security interest in the property.
If Buyers owe more than the net proceeds of sale, Buyers may be required to pay
the Seller the difference between the net proceeds of sale and what they owe.
If Buyers do not pay this amount, Buyers may also be charged interest at the
highest lawful rate until they do pay all that they owe to the Seller.
Default: Seller may file suit against Buyer if Buyer fails to do anything
Buyer has agreed to do in this contract, including a demand to pay a
deficiency balance in the event of repossession.
Delay in Enforcing Rights and Charges of this Contract: The Seller can delay or
refrain from enforcing any of its rights under this contract without losing
them. For example, the Seller can extend the time for making some payments
without extending others. Any change in terms of this contract must be in
writing and signed by the Seller. No oral changes are binding. If any part of
this contract is not valid, all other parts will remain enforceable.
Interest after Maturity: Buyers further agree to pay interest at the Annual
Percentage Rate shown on this contract on any amounts which remain unpaid after
the maturity of this contract.
Warranties Seller Disclaims: If this is a used vehicle to which the FTC
Used Motor Vehicle Trade Regulation Rule applies, Buyers should see window form
for any applicable warranties. In the case of all other vehicles, Buyers
understand that the Seller is not offering any warranties and that there are no
implied warranties of merchantability, of fitness for a particular purpose, or
any other warranties, express or implied by the Seller, covering the property
unless it is of a type obtained primarily for personal, family, or household
use, or the Seller extends a written warranty or protection plan within 90 days
from the date of this contract.
An implied warranty of merchantability generally means that the property is fit
for the ordinary purpose for which such property is generally used. A warranty
of fitness for a particular purpose is a warranty that may arise when the Seller
has reason to know the particular purpose for which Buyers require the property
and Buyers rely on the Seller's skill or judgment to furnish suitable property.
This provision does not affect any warranties covering the property which may be
provided by the manufacturer of the property.
Meaning of Buyers and Seller: The word "Buyers" means one or more persons who
are purchasing property from the Seller and financing the purchase by this
contract. The word "Seller" includes any person or corporation to whom this
contract may be sold or assigned.
Notices to Buyer: Any notice to Buyer shall be deemed to be delivered on the day
it is posted in the U.S. mail and addressed to the Buyer at the address shown on
this contract, or the address then currently on file with the Seller.
Governing Law: The terms of this contract shall be governed by the laws of
Ohio.
NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES
OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE
DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
The preceding NOTICE applies only to goods or services obtained primarily for
personal, family, or household use. In all other cases, Buyer will not assert
against any subsequent holder or assignee of this contract any claims or
defenses the Buyer (debtor) may have against the Seller, or against the
manufacturer of the property obtained under this contract.
TERMS OF SELLERS' ASSIGNMENT
Effective upon receipt of payment therefor, we hereby sell and assign this
contract (but not our obligations hereunder) and all interest in the property
described on the front hereof (the "vehicle") and our rights under any related
guaranty and any related insurance or mechanical protection plan to SunStar
Acceptance Corporation ("assignee") without recourse as to Buyer's obligation of
payment, except as may be otherwise provided in any Dealer Agreement between us,
with full power to assignee in assignee's or our name to collect and discharge
the same and to take all such legal or other proceedings as we might take, save
for this assignment. We warrant that the contract and any guaranty are genuine,
legally valid and enforceable; we have complied with all applicable Federal and
State laws and regulations (including those imposing disclosure requirements)
relating to the contract and the establishment of the contract; we hereby convey
good title thereto; all statements of facts therein are true, the Buyer was
quoted the cash price and the total sale price as stated therein and we did not
increase the price of the vehicle above that which would have been sought and
charged in an all-cash transaction; no part of the down payment shown as paid in
cash is owing by loan or note and any trade-in shown was received by us for the
allowance stated therein; all statements made by Buyer on any forms related
thereto are true to our knowledge and belief; we have conveyed clear title to
the vehicle to Buyer, free of all liens and encumbrances, except for this
contract; Buyer is not a minor and has capacity to contract; a Certificate of
Title showing the first lien or encumbrance in assignee's favor has been or will
be forthwith obtained, with the lien thereon perfected as of the date of the
contract, if permitted by law. We further warrant and agree to abide by all
agreements, warranties or guaranties, either express, implied or required by
law, afforded Buyer relative to the vehicle, and warrant that the vehicle has
been delivered to and accepted by the Buyer and was then in good working order
and condition. All warranties herein contained are made to induce assignee to
purchase this contract and if there is a breach of any, or if Buyer withholds
payment because Buyer alleges any claim, defense or set-off against us, without
regard to assignee's or our knowledge or lack of knowledge with respect thereto
or assignee's reliance thereon, we will on demand purchase this contract from
assignee for the balance then remaining unpaid, plus any and all damages, costs
and expenses paid or incurred in respect thereto; in addition, if Buyer recovers
any amounts from assignee as a result of such claim, we will reimburse assignee
for its reasonable legal fees and such amounts paid to Buyer. We waive all
demands and notice of default and consent that, without notice to us, assignee
may extend time to or fail to pursue or release by operation of law or
otherwise, any rights against Buyer or any other obligor. If the vehicle is
repossessed we will apply for and pay to assignee on demand any applicable
refunds on any mechanical service contract, credit life or disability insurance
or any similar arrangement. If we and assignee are parties to any Dealer
Agreement or other similar agreement the terms of that agreement shall govern
this assignment in the event of any conflict. Assignee's acceptance of the
foregoing assignment shall be evidenced by its payment to us of the purchase
price therefor. Our signature to the contract shall be our signature to this
assignment as well.
(SEE OTHER SIDE FOR SELLER'S SIGNATURE TO ASSIGNMENT)
