<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 2000
REGISTRATION NO. 333-32802
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DEALER AUTO RECEIVABLES TRUSTS
(Issuer with respect to the securities)
DEALER AUTO RECEIVABLES CORP.
(Depositor of the trusts described herein)
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-4347972
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
DEALER AUTO RECEIVABLES CORP.
230 WEST MONROE STREET
CHICAGO, ILLINOIS 60606
(312) 456-1250
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
CHARLES BRADFORD WOLFE
DEALER AUTO RECEIVABLES CORP., C/O PREMIER AUTO FINANCE, INC.
230 WEST MONROE STREET
CHICAGO, ILLINOIS 60606
(312) 456-1250
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
<TABLE>
<S> <C>
COPIES TO: COPIES TO:
M. DAVID GALAINENA, ESQ. LAURA PALMA, ESQ.
DANIEL C. BIRD, JR., ESQ. SIMPSON THACHER & BARTLETT
WINSTON & STRAWN 425 LEXINGTON AVENUE
35 WEST WACKER DRIVE NEW YORK, NEW YORK 10017
CHICAGO, ILLINOIS 60601 (212) 455-2000
(312) 558-5600
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
PROPOSED TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Asset Backed Securities..................... $10,000,000 100% $10,000,000 $2,640.00(3)
</TABLE>
(1) The amount of securities being registered represents the maximum aggregate
principal amount of securities currently expected to be offered for sale.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a).
(3) Previously paid.
------------------------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INTRODUCTORY NOTE
This registration statement contains (i) a prospectus relating to the
offering of one or more series of asset-backed notes and/or asset-backed
certificates by various trusts created from time to time by Dealer Auto
Receivables Corp. and (ii) two forms of prospectus supplements relating to the
offering by each separate trust of a particular series of asset-backed
certificates or of asset-backed notes and asset-backed certificates described in
the prospectus supplements. Each form of prospectus supplement relates only to
the securities described therein and is a form which may be used by Dealer Auto
Receivables Corp. to offer asset-backed notes and/or asset-backed certificates
under this registration statement.
<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY
BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ]
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1
ISSUER
$ ASSET-BACKED NOTES
$ ASSET-BACKED CERTIFICATES
DEALER AUTO RECEIVABLES CORP.
DEPOSITOR
PREMIER AUTO FINANCE, INC.
SERVICER
THE TRUST WILL ISSUE THE FOLLOWING CLASSES OF SECURITIES--
CONSIDER CAREFULLY
THE RISK FACTORS
BEGINNING ON
PAGE S-11 IN THIS
PROSPECTUS SUPPLEMENT
AND ON PAGE 7 IN THE
ACCOMPANYING
PROSPECTUS.
The notes represent
obligations of and
the certificates
represent interests
in the owner trust
only.
This prospectus
supplement must be
accompanied by the
prospectus.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST FINAL UNDERWRITING
RATE/PASS- FIRST SCHEDULED DISCOUNT
PRINCIPAL THROUGH PAYMENT PAYMENT PRICE TO PER PROCEEDS TO
CLASS AMOUNT RATE DATE DATE PUBLIC SECURITY DEPOSITOR
A-1 Notes............. $ %
A-2 Notes............. $ %
A-3 Notes............. $ %
B Notes............... $ %
C Certificates........ $ %
</TABLE>
The total price to the public is $
The total underwriting discount is $
The total proceeds to the depositor are $
Credit Enhancement:
- Reserve fund with an initial deposit of $
- Subordination of the Class B Notes and the certificates provides credit
enhancement to the Class A Notes as described in this prospectus
supplement.
- Subordination of the certificates provides credit enhancement to the
Class B Notes as described in this prospectus supplement.
The securities are asset-backed securities issued by the trust. The assets
underlying the securities are retail installment contracts for the purchase of
new or used automobiles and light-duty trucks.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CHASE SECURITIES INC.
Prospectus Supplement dated [ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Important Notice About Information Presented in this
Prospectus Supplement and the Accompanying Prospectus..... i
Prospectus Supplement Summary............................... S-1
Risk Factors................................................ S-11
Some classes of securities will be entitled to interest or
principal payments before other classes................. S-11
Adverse events in four high concentration states may cause
increased defaults and delinquencies.................... S-11
If there is a servicer default, the servicer may be
removed only by the indenture trustee and certain
noteholders............................................. S-12
Subordinated noteholders may not be able to direct the
indenture trustee upon an event of default under the
indenture and may have limited rights upon nonpayment of
interest................................................ S-12
The securities may not be suitable investments for all
investors............................................... S-12
Prepayments, potential losses and change in order of
priority of payments following acceleration of the
notes................................................... S-12
Because the securities are in book-entry form, your rights
can only be exercised indirectly........................ S-13
The absence of an existing market for the securities may
limit your ability to resell the securities............. S-13
The Trust................................................... S-14
General................................................... S-14
Capitalization of the Trust............................... S-15
The Indenture and the Administration Agreement............ S-15
The Trustee and the Indenture Trustee..................... S-15
The Seller and the Servicer................................. S-15
The Performance Guarantor................................... S-15
The Contracts............................................... S-16
Description of the Contracts.............................. S-16
Statistics Relating to the Contracts...................... S-16
Maturity and Prepayment Considerations.................... S-20
Statistics Relating to Delinquencies and Losses........... S-20
Losses and Recoveries..................................... S-22
Weighted Average Lives of the Securities.................... S-24
Note Factors and Certificate Factors........................ S-28
Use of Proceeds............................................. S-28
Description of the Notes.................................... S-28
General................................................... S-28
Interest.................................................. S-29
Principal................................................. S-29
Mandatory Prepayment...................................... S-29
Voting Rights............................................. S-30
Notices................................................... S-30
Description of the Certificates............................. S-30
General................................................... S-30
Interest.................................................. S-31
Principal................................................. S-31
Mandatory Prepayment...................................... S-31
Notices................................................... S-32
Payments and Distributions.................................. S-32
Available Amounts......................................... S-32
Servicing Compensation and Reimbursement of Servicer
Advances................................................ S-33
Distributions............................................. S-33
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Reserve Fund.............................................. S-35
Ratings of the Securities................................... S-35
Material Federal Income Tax Consequences.................... S-36
Treatment of Trust........................................ S-36
Treatment of Investors in Notes........................... S-36
Treatment of Investors in Certificates.................... S-36
ERISA Considerations........................................ S-37
The Notes................................................. S-37
The Certificates.......................................... S-37
Legal Proceedings........................................... S-37
Underwriting................................................ S-37
Legal Matters............................................... S-38
Experts..................................................... S-39
Glossary.................................................... S-39
Dealer Auto Receivables Owner Trust 2000-1 Balance Sheet.... S-41
Notes to the Balance Sheet.................................. S-41
</TABLE>
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the securities in two separate documents
that offer varying levels of detail:
- the accompanying prospectus--which provides general information, some of
which may not apply to a particular series of securities including your
series, and
- this prospectus supplement--which provides a summary of the specific terms
of your series of securities.
Certain terms used in this prospectus supplement are defined under the
caption "GLOSSARY" beginning on page in this prospectus supplement.
You should rely on the information contained in this document, including the
information described under the heading "WHERE YOU CAN FIND MORE INFORMATION" in
the accompanying prospectus. We have not authorized anyone to provide you with
any different information or make any representation not contained in this
prospectus supplement. If anyone makes such a representation to you, you should
not rely on it.
If you have received a copy of this prospectus supplement and the
accompanying prospectus in an electronic format, and if the legal prospectus
delivery period has not expired, you may obtain a paper copy of this prospectus
supplement and the accompanying prospectus from Dealer Auto Receivables Corp. at
230 West Monroe Street, Chicago, Illinois 60606, telephone number
(312) 456-1250, or an underwriter by asking any of them for it.
i
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following is only a summary of selected information from the prospectus
supplement and provides a general overview of relevant terms of the securities.
It does not contain all the information that may be important to you. You should
read carefully this entire prospectus supplement and the prospectus to
understand all of the terms of the offering. In addition, you may wish to read
the documents governing the transfers and servicing of the contracts, the
formation of the trusts and the issuance of the securities. Those documents have
been filed as exhibits to the registration statement.
There are material risks associated with an investment in the securities.
See "RISK FACTORS" in this prospectus supplement and in the accompanying
prospectus for a discussion of factors you should consider before investing in
the securities.
<TABLE>
<S> <C>
Trust........................................ Dealer Auto Receivables Owner Trust 2000-1. The
depositor established the trust pursuant to a trust
agreement.
Owner Trustee................................ [ ]. The owner trustee's address and phone
number is [ ].
Indenture Trustee............................ The Bank of New York will serve as indenture trustee.
See "THE TRUST--THE TRUSTEE AND THE INDENTURE
TRUSTEE," in this prospectus supplement.
Cut-off Date................................. [ ].
Closing Date................................. On or about [ ].
SECURITIES OFFERED
TERMS OF THE NOTES:
A. Payment Dates............................. The trust will pay interest and principal on the
notes on the [ ] day of each month or if that day
is not a business day, the next business day. The
first payment date is [ ].
B. Record Dates.............................. The last business day of the preceding calendar
month.
C. Interest.................................. PER ANNUM INTEREST RATES:
The notes will have fixed rates of interest as
follows:
</TABLE>
<TABLE>
<CAPTION>
CLASS INTEREST RATE
----- -------------
<S> <C> <C>
A-1....................................... %
A-2....................................... %
A-3....................................... %
B......................................... %
</TABLE>
<TABLE>
<S> <C>
INTEREST PERIODS:
Interest on the notes will accrue in the following
manner:
</TABLE>
<TABLE>
<CAPTION>
INTEREST PERIODS
DAY COUNT
CLASS FROM (INCLUDING) TO (EXCLUDING) CONVENTION
----- ------------------ ------------------ ----------
<S> <C> <C> <C> <C>
A-1......... Prior Distribution Current
Date Distribution Date actual/360
A-2......... 15th of prior 15th of current
month month 30/360
A-3......... 15th of prior 15th of current
month month 30/360
B........... 15th of prior 15th of current
month month 30/360
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C>
PAYMENT OF INTEREST:
On each payment date after payment of the base
servicing fee and the fees payable to the owner
trustee and the indenture trustee and reimbursement
of servicer advances, the trust will make interest
payments on the notes from the funds available to it
on each payment date.
Interest payments to each class of the Class A Notes
will have the same priority.
The trust will make interest payments on the Class B
Notes after paying interest on the Class A Notes,
provided, that after the acceleration of the notes
following an event of default resulting from a
payment default, the trust will not make interest
payments on the Class B Notes until the Class A Notes
have been paid in full.
See "PAYMENTS AND DISTRIBUTIONS" in this prospectus
supplement.
D. Principal................................. On each payment date, the trust will pay principal on
the notes.
The amount of principal payable will be based on the
amount by which:
- the sum of the aggregate principal balances of the
notes and the certificate balance of the certificates
as of the close of business on the prior payment
date, exceeds
- the aggregate principal balance of the contracts as
of the end of the prior calendar month, excluding
certain non-collectible or defaulted contracts and
contracts to be repurchased by the depositor or
purchased by the servicer due to certain breaches.
On each payment date prior to the acceleration of the
notes following an event of default resulting from a
payment default, the trust will make principal
payments on the notes from the funds available to it
on that payment date after payment of the base
servicing fee and the fees payable to the owner
trustee and the indenture trustee, reimbursement of
servicer advances and payment of interest on the
securities.
The trust will pay principal on the notes in the
following order:
PRIOR TO ACCELERATION OF THE NOTES:
The trust will pay principal of each class of notes
sequentially starting with the earliest maturing
class of notes then outstanding until such class is
paid in full.
</TABLE>
S-2
<PAGE>
<TABLE>
<S> <C>
AFTER ACCELERATION OF THE NOTES:
After acceleration of the notes following an event of
default, the trust will pay the principal of the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes pro
rata until paid in full and then the Class B Notes
until paid in full.
See "PAYMENTS AND DISTRIBUTIONS" in this prospectus
supplement.
E. Final Scheduled Payment Dates............. The principal of the notes of each class is due and
payable on the dates shown on the cover of this
prospectus supplement.
F. Mandatory Prepayment...................... The seller, at its option, may repurchase the
contracts on any payment date on which the aggregate
outstanding principal balance of the securities is
less than 10% of the initial aggregate principal
balance of the contracts. If the seller purchases the
contracts, the trust will prepay the notes in full on
that payment date.
See "DESCRIPTION OF THE NOTES AND
INDENTURE--MANDATORY PREPAYMENT" in this prospectus
supplement.
TERMS OF THE CERTIFICATES:
A. Payment Dates............................. The trust will make distributions of interest and
principal on the [ ] day of each month or if
that is not a business day, the next business day.
The first payment date is [ ].
B. Record Dates.............................. The last business day of the preceding calendar
month.
C. Interest.................................. PASS-THROUGH RATE:
The trust will distribute interest in respect of the
certificates at the pass-through rate shown on the
cover of this prospectus supplement.
INTEREST PERIODS:
Interest on the certificates will accrue in the
following manner:
</TABLE>
<TABLE>
<CAPTION>
INTEREST PERIOD
-------------------------------------------- DAY COUNT
FROM (INCLUDING) TO (EXCLUDING) CONVENTION
---------------- -------------- ----------
<S> <C> <C> <C>
15th of prior month 15th of current month 30/360
</TABLE>
<TABLE>
<S> <C>
PAYMENT OF INTEREST:
On each payment date after payment of the base
servicing fee and the fees payable to the owner
trustee and the indenture trustee and reimbursement
of servicer advances and payment of interest on the
notes, the trust will make distributions of interest
in respect of on the certificates from the funds
available to it on each payment date.
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
After the acceleration of the notes following an
event of default resulting from a payment default,
the trust will not make interest distributions in
respect of the certificates until the notes have been
paid in full.
See "PAYMENTS AND DISTRIBUTIONS" in this prospectus
supplement.
D. Principal................................. On each payment date, after the trust has paid the
notes in full, the trust will distribute principal in
respect of the certificates.
The amount of principal payable will be based on the
amount by which:
- the certificate balance of the certificates as of
the close of business on the prior payment date,
exceeds
- the aggregate principal balance of the contracts as
of the end of the prior calendar month, excluding
certain non-collectible or defaulted contracts and
contracts to be repurchased by the depositor or
purchased by the servicer due to certain breaches.
The trust will make distributions of principal in
respect of the certificates from the funds available
to it on each payment date after payment of the base
servicing fee and the fees payable to the owner
trustee and the indenture trustee, reimbursement of
servicer advances and distributions of interest on
the certificates.
See "DESCRIPTION OF THE CERTIFICATES--PRINCIPAL" and
"PAYMENTS AND DISTRIBUTIONS" in this prospectus
supplement.
E. Final Scheduled Payment................... The trust will reduce the outstanding certificate
balance of the certificates to zero no later than the
date shown on the cover of this prospectus
supplement.
F. Mandatory Prepayment...................... The seller, at its option, may repurchase the
contracts on any payment date on which the aggregate
outstanding principal balance of the securities is
less than 10% of the initial aggregate principal
balance of the contracts. If the seller purchases the
contracts the trust will prepay the certificates in
full on that payment date. See "DESCRIPTION OF THE
CERTIFICATES--MANDATORY PREPAYMENT" in this
prospectus supplement.
THE TRUST'S ASSETS
A. The Contracts............................. Our main source of funds for making payments on the
securities will be collections on the contracts.
As of the cut-off date, the contracts had the
following characteristics:
</TABLE>
<TABLE>
<S> <C> <C>
Aggregate principal balance.......... $789,214,882.32
Number of contracts.................. 61,534
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C> <C>
Average principal balance............ $12,825.67
Weighted average annual percentage
rate............................... 11.746%
Weighted average remaining term to
maturity........................... 49 months
Approximate weighted average original
term to maturity................... 62 months
</TABLE>
<TABLE>
Geographic concentration:
PRINCIPAL
BALANCE
STATE CONCENTRATION
-------------------------- -----
<S> <C> <C>
Texas..................... 15.7%
California................ 11.4%
Florida................... 7.3%
Georgia................... 5.8%
</TABLE>
<TABLE>
<S> <C>
No other state represented more than 5% of the
aggregate principal balance of the contracts as of
the cut-off date.
[0.00% of the aggregate principal balance of the
contracts as of the cut-off date are precomputed
contracts. A precomputed contract provides for
amortization of the loan over a series of fixed level
monthly installments. Each scheduled payment consists
of an amount of interest calculated on the basis of
the "Rule of 78s" or equal to 1/12 of the stated
annual percentage rate of the contract multiplied by
the scheduled principal balance of the contract and
an amount of principal equal to the remaining
amount.]
All of the contracts are simple interest contracts. A
simple interest contract provides for amortization of
the loan over a series of equal monthly installments
where payments received are applied first to pay
accrued interest to the date preceding the date the
payment is received and second to pay principal.
[The portion of the scheduled monthly payments and
prepayments that will be allocable to principal is
different for each of the two types of contracts. See
"THE CONTRACTS" in the accompanying prospectus.]
You should refer to "THE CONTRACTS" in this
prospectus supplement and the accompanying prospectus
for more information on the contracts.
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
B. Reserve Fund.............................. On the closing date, the indenture trustee will
establish a trust account in the name of the
indenture trustee which we refer to as the "RESERVE
FUND." The reserve fund provides you with limited
protection in the event collections from obligors on
the contracts are insufficient to make payment on the
securities. We cannot assure you, however, that this
protection will be adequate to prevent shortfalls in
amounts available to make payments on the notes and
the certificates.
The initial balance of the reserve fund will be
$ . The amount required to be on deposit in the
reserve fund on each payment date is .
If the amount on deposit in the reserve fund on any
payment date is less than the required amount, the
trust will use the funds available to it after
payment of the base servicing fee and the fees
payable to the owner trustee and the indenture
trustee, reimbursement of servicer advances and
payment of interest and principal on the securities
to make a deposit into the reserve fund. Amounts on
deposit in the reserve fund on any payment date in
excess of the required amount will be paid to the
depositor.
If on any payment date the funds available to the
trust to pay principal and interest on the securities
are insufficient, the trust will use funds in the
reserve fund to cover any shortfalls.
If on the final scheduled payment date of any class
of securities, the principal or certificate balance
of that class has not been paid in full, the trust
will use funds in the reserve fund to pay those
securities in full.
Servicing; Servicing Fee..................... Premier Auto Finance, Inc., as the servicer, will be
responsible for servicing, managing and administering
the contracts and related interests, and enforcing
and making collections on the contracts.
ADVANCES:
The servicer will make advances [for delinquent
scheduled payments on precomputed contracts] and for
delinquent interest payments on simple interest
contracts, in each case, to the extent it determines
that advances will be recoverable in future periods.
Servicer advances will be reimbursed from the
delinquent payments when made by the obligors and
from collections on other contracts when the servicer
determines that a contract as to which it has made
advances is a defaulted contract.
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
SERVICING FEE:
The servicer's base monthly fee payable on each
payment date will equal the product of:
- one twelfth (1/12th) of one percent (1%) and
- the aggregate principal balance of the contracts as
of the last day of the second calendar month
preceding the month in which that payment date
falls.
The trust will pay the base servicing fee to the
servicer with the funds available to it on each
payment date after the reimbursement of servicer
advances.
The servicer will also be entitled to retain any late
payment fees, prepayment charges, if any, and other
similar fees and charges.
See "DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENT--SERVICING" in the accompanying prospectus.
Priority of Payments......................... PRIOR TO ACCELERATION OF THE NOTES:
On each payment date prior to the acceleration of the
notes, the trust will apply collections on the
contracts received during the prior calendar month,
servicer advances and funds transferred from the
reserve fund to make the following payments in the
following order of priority:
- reimbursement of servicer advances;
- base servicing fee to the servicer;
- fees payable to the owner trustee and the indenture
trustee;
- interest on the Class A Notes;
- interest on the Class B Notes;
- interest on the certificates;
- principal on the securities:
- principal on the Class A-1 Notes until paid in
full;
- principal on the Class A-2 Notes until paid in
full;
- principal on the Class A-3 Notes until paid in
full;
- principal on the Class B Notes until paid in full;
and
- principal on the certificates until paid in full;
and
- to the reserve fund, the amount, if any, needed to
fund the reserve fund to the required amount.
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
AFTER ACCELERATION OF THE NOTES:
On each payment date following the acceleration of
the notes following an event of default resulting
from a payment default, the trust will apply the
funds available to it in the same order except that
the trust will not pay interest on the Class B Notes
until the Class A Notes are paid in full and will not
distribute interest in respect of the certificates
until the notes have been paid in full.
On each payment date following the acceleration of
the notes, the trust will pay principal on the Class
A Notes pro rata.
Credit Enhancement........................... Losses and other shortfalls of cash flow will be
covered by payments on other contracts, withdrawals
from the reserve fund and allocations of available
funds to the more senior classes of the securities.
</TABLE>
<TABLE>
<S> <C> <C>
The credit enhancement for the securities is as
follows:
Class A Notes - subordination of the Class B Notes
and the certificates
- reserve fund
Class B Notes - subordination of the certificates
- reserve fund
Certificates - reserve fund
Ratings...................................... On the closing date, each class of securities will
have the following ratings by Standard & Poor's
Ratings Services and Moody's Investors Service, Inc.:
</TABLE>
<TABLE>
<CAPTION>
CLASS S&P MOODY'S
----- ----------- -----------
<S> <C> <C> <C>
A-1 Notes
A-2 Notes
A-3 Notes
B Notes
Certificates
See "RATINGS OF THE SECURITIES" in this
prospectus supplement and the
accompanying prospectus.
Winston & Strawn, as federal tax counsel
to the trust, has delivered its opinion
that the notes will be characterized as
debt for federal income tax purposes,
and the trust will not be characterized
Material Federal Income Tax as an association (or publicly traded
Consequences.................................
partnership) taxable as a corporation.
The purpose of obtaining the opinion of
tax counsel is to provide investors with
greater assurance regarding the
treatment of the notes for federal
income tax purposes and that the issuer
of the
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C> <C> <C>
notes and certificates will not be
subject to federal income tax at the
entity level. However, an opinion of tax
counsel is not binding on the Internal
Revenue Service and there is no
assurance that the Internal Revenue
Service will not disagree with the
opinion of tax counsel.
By purchasing a note, you will agree to
treat your note as debt for federal,
state and local income tax purposes. As
a result, payments received by you will
generally be treated as either interest
or principal and you will not be
considered an owner of an equity
interest in the trust.
By purchasing a certificate, you will
agree to treat the trust as a
partnership in which you are a partner
for federal, state and local income tax
purposes. As an investor in a
certificate you will be treated as a
partner in that partnership and will be
subject to tax on your allocable share
of partnership income, gains, losses and
expenses. By purchasing a certificate,
you will agree not to take inconsistent
action with treatment of the trust as a
partnership.
This summary of material federal income
tax matters is very general. These
general statements are subject to the
qualifications, clarifications,
assumptions and expanded discussion set
forth in the accompanying prospectus and
this prospectus supplement under the
heading "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES".
ERISA Considerations......................... The notes are generally eligible for
purchase by employee benefit plans and
individual retirement accounts, subject
to those considerations and exceptions
discussed under "ERISA CONSIDERATIONS"
in the accompanying prospectus and this
prospectus supplement.
The certificates may not be acquired or
held by an employee benefit plan or
individual retirement account that is
subject to ERISA or Section 4975 of the
Code.
You should refer to "ERISA
CONSIDERATIONS" in the accompanying
prospectus and this prospectus
supplement. If you are a benefit plan
fiduciary considering purchase of the
securities you should, among other
things, consult with your counsel in
determining whether all required
conditions have been satisfied.
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.
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C> <C> <C>
The mailing address of the seller is 230
West Monroe Street, Chicago, Illinois
Mailing Address and Telephone Number of 60606, telephone (312) 456-1300. The
Principal Executive Offices.................. mailing address of the depositor is 230
West Monroe Street, Chicago, Illinois
60606, telephone (312) 456-1250. The
principal office of the trust is
, telephone
.
</TABLE>
S-10
<PAGE>
RISK FACTORS
The following risk factors and the risk factors in the accompanying
prospectus describe the principal risk factors relating to an investment in the
securities. You should carefully consider the following risk factors before you
invest in the securities. You should also carefully consider the risk factors
beginning on page of the accompanying prospectus.
SOME CLASSES OF SECURITIES WILL BE ENTITLED TO INTEREST OR PRINCIPAL PAYMENTS
BEFORE OTHER CLASSES
The trust will pay interest, principal or both on some classes of securities
prior to paying interest, principal or both on other classes of securities. The
subordination of some classes to others means that the subordinated classes are
more likely to suffer the consequences of delinquent payments and defaults on
the contracts than the classes having prior payment rights. See "PAYMENTS AND
DISTRIBUTIONS" in this prospectus supplement.
Moreover, the more senior classes of securities could lose the credit
enhancement provided by the more subordinate classes and the reserve fund if
delinquencies and defaults on contracts increase and the collections on
contracts and amounts in the reserve fund are insufficient to pay even the more
senior classes of securities.
ADVERSE EVENTS IN FOUR HIGH CONCENTRATION STATES MAY CAUSE INCREASED DEFAULTS
AND DELINQUENCIES
If adverse events or economic conditions were particularly severe in a
geographic region where there is a substantial concentration of obligors, the
amount of delinquent payments and defaults on the contracts may increase. As a
result, the overall timing and amount of collections on the contracts may differ
from what you expect, and you may experience delays or reductions in payments.
The following are the approximate percentages of the initial contract pool
principal balance whose obligors are located in the following states:
- 15.7% in Texas,
- 11.4% in California,
- 7.3% in Florida, and
- 5.8% in Georgia.
The remaining states accounted for 59.8% of the initial aggregate principal
balance of the contracts, and none of these remaining states accounted for more
than 5% of the aggregate principal balance of the contracts. For a discussion of
the breakdown of the contracts by state, see "THE CONTRACTS" in this prospectus
supplement.
Although we do not know of any matters likely to increase the rate of
delinquencies or defaults in these states, an example of an adverse event
specific to a geographic region is the possibility of a catastrophic earthquake
in California. An earthquake in California could have negative regional economic
repercussions and potentially cause obligors in that region to delay or reduce
their payments on the contracts. Additionally, a substantial downturn in the
financial services industry, which is highly concentrated in the states of New
York and New Jersey, or in the oil and gas industry, which is concentrated in
the state of Texas could reduce the income of obligors in those states and
ultimately reduce the associated obligor's ability to make timely payments on
their related contracts. In addition, the following economic conditions may
affect payments:
- unemployment,
- interest rates,
- inflation rates, and
- consumer perceptions of the economy.
S-11
<PAGE>
IF THERE IS A SERVICER DEFAULT, THE SERVICER MAY BE REMOVED ONLY BY THE
INDENTURE TRUSTEE AND CERTAIN NOTEHOLDERS
The indenture trustee acting at the direction of the holders of a majority
of the most senior class of notes outstanding has the right under limited
circumstances to terminate the servicer. The holders of the Class B Notes will
have no ability to remove the servicer while the Class A Notes are outstanding
and the holders of the certificates will have no ability to remove the servicer
while the notes are outstanding. In addition, the holders of a majority of the
most senior class of notes outstanding may waive certain servicer defaults
without consideration of the effect of that waiver on the holders of the other
securities. See "DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS--SERVICING--RIGHTS UPON SERVICER DEFAULT" and "--SERVICING--WAIVER OF
PAST DEFAULTS" in the accompanying prospectus.
SUBORDINATED NOTEHOLDERS MAY NOT BE ABLE TO DIRECT THE INDENTURE TRUSTEE UPON AN
EVENT OF DEFAULT UNDER THE INDENTURE AND MAY HAVE LIMITED RIGHTS UPON
NONPAYMENT OF INTEREST
If an event of default occurs under the indenture, only the holders of the
most senior class of notes outstanding, for example, the Class A Notes may waive
the event of default, accelerate the maturity dates of the notes or direct or
consent to any action under the indenture. The holders of the outstanding
subordinated class of notes will not have any rights to direct or to consent to
any action until the more senior class of notes has been paid in full.
Furthermore, upon failure to pay interest when due on the outstanding
subordinated class of notes, the holders of the subordinated notes will not have
any right to declare an event of default, cause the maturity dates of the notes
to be accelerated or to direct or consent to any action under the indenture.
THE SECURITIES MAY NOT BE SUITABLE INVESTMENTS FOR ALL INVESTORS
The securities may not be a suitable investment for any investor that
requires a regular or predictable schedule of principal payments. We suggest
that only investors who, either alone or with their financial, tax and legal
advisors, have the expertise to analyze the prepayment, reinvestment and default
risks, the tax consequences of an investment and the interaction of these
factors consider purchasing the securities.
PREPAYMENTS, POTENTIAL LOSSES AND CHANGE IN ORDER OF PRIORITY OF PAYMENTS
FOLLOWING ACCELERATION OF THE NOTES
Following the occurrence of an event of default, the holders of a majority
of the most senior class of notes outstanding may accelerate the maturity dates
of the notes. If the Class A Notes are outstanding when the maturity dates of
the notes are accelerated, the trust will pay the principal of the Class A Notes
PRO RATA until paid in full.
If the maturity dates of the notes are accelerated following an event of
default resulting from a payment default or the insolvency of the trust, the
trust will make no further distributions of interest in respect of the
certificates until the notes are paid in full and will make no further payments
of interest on the Class B Notes until the Class A Notes are paid in full.
If the maturity dates of the notes are accelerated following an event of
default, the indenture trustee with the consent of the holders of all
outstanding notes may sell the trust assets. In such event, the trust may not
have sufficient funds to pay all of the securities in full.
If the maturity dates of the notes are accelerated following an event of
default, the indenture trustee without the consent of the noteholders or the
certificateholders may sell the trust assets for an amount at least equal to the
aggregate outstanding principal amount of the notes. In such event, the trust
may not have sufficient funds to pay the certificates in full.
S-12
<PAGE>
In addition, if the maturity dates of the notes are accelerated following an
event of default resulting from a payments default and the indenture trustee
determines that the trust assets will not be sufficient on an ongoing basis to
make all payments on the notes as the payments would have become due if the
maturity dates of the notes had not been accelerated, the indenture trustee with
the consent of the holders of at least 66 2/3% of the most senior class of notes
outstanding may sell the trust assets for an amount less than the aggregate
outstanding principal amount of the notes. In such event, the trust may not have
sufficient funds to pay all of the securities in full.
The certificateholders will not have any right to direct the indenture
trustee or to consent to any action until the notes are paid in full. See
"DESCRIPTION OF THE NOTES AND INDENTURE--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF
DEFAULT" in the accompanying prospectus.
If you receive your principal earlier than expected, you may not be able to
reinvest the prepaid amount at a rate of return that is equal to or greater than
the rate of return on your securities. If the trust is required to sell its
assets in the circumstances described above, the amount received from the sale
may not be sufficient to pay all amounts owed to you.
BECAUSE THE SECURITIES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY BE EXERCISED
INDIRECTLY
Because the securities will be issued in book-entry form, you will be
required to hold your interest in the securities through The Depository Trust
Company in the United States, or Clearstream (formerly Cedelbank) or the
Euroclear System in Europe. Transfers of interests in the securities within DTC,
Clearstream or Euroclear must be made in accordance with the usual rules and
operating procedures of those systems. So long as the securities are in
book-entry form, you will not be entitled to receive a physical note or
certificate representing your interest. The securities will remain in book-entry
form except in the limited circumstances described under the caption
"INFORMATION REGARDING THE SECURITIES--BOOK-ENTRY REGISTRATION" in the
accompanying prospectus. Unless and until the securities in this prospectus
supplement cease to be held in book-entry form, the indenture trustee will not
recognize you as a "noteholder," as such term is used in the indenture and the
trustee will not recognize you as a "certificateholder", as such term is used in
the trust agreement. As a result, you will only be able to exercise the rights
of securityholders indirectly through DTC, if in the United States, and its
participating organizations, or Clearstream and Euroclear, in Europe, and their
participating organizations. Holding the securities in book-entry form could
also limit your ability to pledge your securities to persons or entities that do
not participate in DTC, Clearstream or Euroclear and to take other actions that
require a physical note or certificate representing the securities.
Interest and principal on the securities will be paid by the trust to DTC as
the record holder of the securities while they are held in book-entry form. DTC
will credit payments received from the trust to the accounts of its participants
which, in turn, will credit those amounts to securityholders either directly or
indirectly through indirect participants. This process may delay your receipt of
principal and interest payments from the trust.
THE ABSENCE OF AN EXISTING MARKET FOR THE SECURITIES MAY LIMIT YOUR ABILITY TO
RESELL THE SECURITIES
There is currently no public market for the securities and we cannot assure
you that one will develop. Thus, you may not be able to resell your securities
at all, or may be able to do so only at a substantial discount. The underwriters
may assist in resales of the securities but they are not obligated to do so.
[Other than the Luxembourg Exchange], we do not intend to apply for listing of
the securities on any securities exchange or for the inclusion of the securities
on any automated quotation system. We cannot predict whether there will be a
secondary market for these types of securities or if one develops, how liquid it
would be.
S-13
<PAGE>
THE TRUST
GENERAL
The depositor created the trust on [ ] under a trust agreement,
which the parties will amend and restate on the closing date, between the
depositor and the owner trustee. The trust's principal offices are in
[ ], in care of [ ] as owner trustee, at the address set
forth below under "--THE TRUSTEE AND INDENTURE TRUSTEE".
Under a purchase agreement, dated as of , between Premier Auto
Finance, L.P., as seller, and Dealer Auto Receivables Corp., the seller will
sell all of the contracts and the related property to the depositor.
Under a sale and servicing agreement, dated as of [ ], among the
trust, Dealer Auto Receivables Corp., as depositor of the contracts to the
trust, Premier Auto Finance, Inc., as servicer, and the indenture trustee, the
depositor will transfer all of the contracts and related property to the trust.
The property of the trust will consist of:
- the contracts and the right to receive all scheduled payments and
prepayments received on the contracts on or after the cut-off date, but
excluding any scheduled payments due on or after, but received prior to,
the cut-off date;
- security interests in the financed vehicles securing the contracts and any
related property;
- rights with respect to any repossessed financed vehicles;
- the rights to proceeds from claims on theft, physical damage, credit life
and disability insurance policies covering the financed vehicles or the
obligors;
- the seller's rights against the originating dealers under the dealer
agreements and against other third parties under the agreements pursuant
to which the seller purchased the contracts;
- certain rebates of premiums and other amounts relating to insurance
policies, extended service contracts or other repair agreements and other
items financed under the contracts;
- the depositor's rights against the seller under the purchase agreement
pursuant to which the seller sold the pool of contracts to the depositor
and against the performance guarantor under the performance guarantee
pursuant to which the performance guarantor guaranteed the seller's
obligations under the purchase agreement;
- the right to receive payments from the depositor obligated to repurchase
contracts which do not meet specified representations made by depositor in
the sale and servicing agreement;
- the trust's rights against the servicer under the sale and servicing
agreement;
- amounts held in the collection account, the note distribution account and
the reserve fund to be established and maintained under the sale and
servicing agreement;
- amounts held in the certificate distribution account to be established and
maintained under the trust agreement; and
- all proceeds of the foregoing.
S-14
<PAGE>
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as if the
issuance of the securities had occurred on the cut-off date:
<TABLE>
<S> <C>
Class A-1 Notes............................................. $
Class A-2 Notes.............................................
Class A-3 Notes.............................................
Class B Notes...............................................
Certificates................................................
-------
Total................................................... $
</TABLE>
THE INDENTURE AND THE ADMINISTRATION AGREEMENT
Under an indenture dated as of [ ] between the trust and
[ ], as indenture trustee, the indenture trustee will pledge the
trust assets to secure the payment of the notes and authenticate and deliver the
notes.
Under an administration agreement dated as of among the trust,
the indenture trustee and Premier Auto Finance, Inc., as administrator, the
administrator will agree to perform certain of the trust's administrative
functions under the indenture.
THE TRUSTEE AND THE INDENTURE TRUSTEE
[ ] will be the trustee under the trust agreement. The trustee is a
[ ] banking association and its principal offices are located at
[ ].
The Bank of New York will be the indenture trustee under the indenture
agreement. The indenture trustee is a New York banking association and its
principal offices are located at 101 Barclay Street, New York, New York.
The fees of the owner trustee and the indenture trustee in connection with
their duties under the trust agreement and the indenture will be paid out of
Available Amounts. See "PAYMENTS AND DISTRIBUTIONS--DISTRIBUTIONS". The owner
trustee's fee will equal $[ ] per month and the indenture trustee's
fees will equal [ ]. Each of the trustee and the indenture trustee
will also be entitled to indemnification by the servicer for, and will be held
harmless against, any loss, liability, fee, disbursement or expense incurred by
it not resulting from its own willful misfeasance, bad faith or negligence. The
servicer will also indemnify the trustee and the indenture trustee for specified
taxes that may be asserted in connection with the transaction.
THE SELLER AND THE SERVICER
Information regarding the seller and the servicer is set forth under the
captions "THE SELLER AND THE ORIGINATING DEALERS" and "THE SERVICER" in the
accompanying prospectus.
THE PERFORMANCE GUARANTOR
Virginia Surety Company, Inc. was incorporated in Illinois in January 1982.
Virginia Surety Company, Inc. is an Illinois licensed insurance company that
underwrites and administers comprehensive extended warranty and consumer service
programs. It is a wholly owned subsidiary of Aon Corporation. Its principal
executive offices are located at 123 North Wacker Drive, Chicago, Illinois 60606
(telephone number (312) 701-4670). As of December 31, 1999, Virginia Surety
Company Inc. had total assets of $1,442,316,483 and stockholders' equity of
$318,749,189. As of December 31, 1998, Virginia Surety Company Inc. had total
assets of $1,386,694,811 and stockholders' equity of $330,048,524. The claims
paying ability of Virginia Surety Company is rated A+ by A.M. Best.
S-15
<PAGE>
THE CONTRACTS
DESCRIPTION OF THE CONTRACTS
All of the contracts are retail installment contracts originated by the
originating dealers on or after May 8, 1995. The contracts were selected on a
random basis from the seller's portfolio of contracts based on several criteria,
including that each contract:
- has a contractual annual percentage rate that equals or exceeds 1.900%;
- has a remaining term to maturity as of the cut-off date of not less than 7
months and not more than 72 months;
- is not past due as of the cut-off date;
- was originated prior to March 31, 2000;
- has been entered into by an obligor that was not in bankruptcy proceedings
or is bankrupt or insolvent;
- is secured by a financed vehicle that has not been repossessed; and
- has an original term to maturity of not less than 12 months and not more
than 72 months.
See "THE CONTRACTS" in the accompanying prospectus for a further description
of the contracts.
STATISTICS RELATING TO THE CONTRACTS
The aggregate principal balance of the contracts as of the cut-off date was
$789,214,882.32. [By aggregate principal balance approximately 0.00% of the
contracts constituted precomputed contracts and approximately 100.00% of the
contracts constituted simple interest contracts. See "THE CONTRACTS" in the
accompanying prospectus for a further description of the characteristics of
precomputed contracts and simple interest contracts.]
The following tables set forth the characteristics of the contracts as of
the cut-off date. The percentages shown in these tables may not total due to
rounding.
COMPOSITION OF THE CONTRACTS
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED AVERAGE
INITIAL AVERAGE AVERAGE WEIGHTED AVERAGE INITIAL
AGGREGATE ORIGINAL ANNUAL AVERAGE REMAINING PRINCIPAL
NUMBER OF PRINCIPAL PRINCIPAL PERCENTAGE ORIGINAL TERM TERM BALANCE
CONTRACTS BALANCE BALANCE (RANGE) (RANGE) (RANGE) (RANGE)
--------------------- --------------- ---------- --------------- --------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
61,534 $789,214,882.32 $16,207.45 1.90% to 29.95% 12 to 72 months 7 to 72 months $529.29 to $63,417.44
</TABLE>
S-16
<PAGE>
DISTRIBUTION OF THE CONTRACTS BY ANNUAL PERCENTAGE RATE
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
NUMBER OF INITIAL PRINCIPAL AGGREGATE PRINCIPAL
RANGE OF APRS(%) CONTRACTS BALANCE BALANCE
- ---------------- --------- ----------------- ---------------------
<S> <C> <C> <C>
1.500 - 1.999.................................... 2 $ 31,956.43 0.00%
2.500 - 2.999.................................... 19 140,953.94 0.02
3.500 - 3.999.................................... 6 55,675.39 0.01
4.500 - 4.999.................................... 5 26,278.18 0.00
5.500 - 5.999.................................... 7 85,634.05 0.01
6.000 - 6.499.................................... 10 158,638.86 0.02
6.500 - 6.999.................................... 1,320 18,710,576.06 2.37
7.000 - 7.499.................................... 2,489 35,263,595.25 4.47
7.500 - 7.999.................................... 4,315 56,310,972.88 7.14
8.000 - 8.499.................................... 3,032 37,658,408.90 4.77
8.500 - 8.999.................................... 5,186 64,507,390.40 8.17
9.000 - 9.499.................................... 2,481 32,498,526.47 4.12
9.500 - 9.999.................................... 5,547 74,228,366.41 9.41
10.000 - 10.499.................................. 2,533 36,097,559.77 4.57
10.500 - 10.999.................................. 3,800 50,025,913.45 6.34
11.000 - 11.499.................................. 2,013 28,023,726.08 3.55
11.500 - 11.999.................................. 3,110 41,910,715.42 5.31
12.000 - 12.499.................................. 1,970 26,606,215.45 3.37
12.500 - 12.999.................................. 2,725 35,431,834.89 4.49
13.000 - 13.499.................................. 1,496 19,111,960.46 2.42
13.500 - 13.999.................................. 2,321 29,461,154.81 3.73
14.000 - 14.499.................................. 1,294 16,676,798.49 2.11
14.500 - 14.999.................................. 2,070 24,951,766.36 3.16
15.000 - 15.499.................................. 1,246 15,673,260.07 1.99
15.500 - 15.999.................................. 1,886 22,739,069.61 2.88
16.000 - 16.499.................................. 1,195 14,876,376.33 1.88
16.500 - 16.999.................................. 1,838 22,234,954.85 2.82
17.000 - 17.499.................................. 1,039 12,236,736.95 1.55
17.500 - 17.999.................................. 1,659 19,357,220.73 2.45
18.000 - 18.499.................................. 1,670 18,821,775.79 2.38
18.500 - 18.999.................................. 834 9,448,107.00 1.20
19.000 - 19.499.................................. 474 5,354,270.57 0.68
19.500 - 19.999.................................. 641 7,032,446.50 0.89
20.000 - 20.499.................................. 406 4,311,111.59 0.55
20.500 - 20.999.................................. 261 2,897,223.71 0.37
21.000 and greater............................... 634 6,257,710.22 0.79
TOTAL:........................................... 61,534 $789,214,882.32 100.00%
</TABLE>
S-17
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF THE CONTRACTS
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
NUMBER OF INITIAL PRINCIPAL AGGREGATE PRINCIPAL
STATE CONTRACTS BALANCE BALANCE
- ----- --------- ----------------- ---------------------
<S> <C> <C> <C>
Alabama.......................................... 37 $ 450,254.72 0.06%
Alaska........................................... 19 191,635.35 0.02
Arizona.......................................... 1,904 26,726,354.98 3.39
Arkansas......................................... 1,348 23,698,346.03 3.00
California....................................... 6,891 90,164,387.32 11.42
Colorado......................................... 1,637 19,260,369.22 2.44
Connecticut...................................... 367 4,454,517.00 0.56
Delaware......................................... 8 96,133.13 0.01
District of Columbia............................. 150 1,836,589.62 0.23
Florida.......................................... 4,822 57,368,484.45 7.27
Georgia.......................................... 3,213 45,774,902.12 5.80
Hawaii........................................... 322 4,190,810.37 0.53
Idaho............................................ 23 316,496.32 0.04
Illinois......................................... 2,724 34,236,058.14 4.34
Indiana.......................................... 2,548 33,301,291.15 4.22
Iowa............................................. 702 8,329,160.08 1.06
Kansas........................................... 553 6,814,830.87 0.86
Kentucky......................................... 119 1,313,259.74 0.17
Louisiana........................................ 1,391 18,690,596.19 2.37
Maine............................................ 126 1,489,041.55 0.19
Maryland......................................... 1,173 15,209,860.79 1.93
Massachusetts.................................... 1,091 12,720,842.34 1.61
Michigan......................................... 1,493 16,520,582.56 2.09
Minnesota........................................ 480 5,752,288.24 0.73
Mississippi...................................... 159 2,614,127.02 0.33
Missouri......................................... 1,463 16,484,292.07 2.09
Montana.......................................... 9 90,909.85 0.01
Nebraska......................................... 983 13,110,838.93 1.66
Nevada........................................... 1,277 17,408,846.07 2.21
New Hampshire.................................... 6 68,411.63 0.01
New Jersey....................................... 1,288 13,879,175.45 1.76
New Mexico....................................... 628 8,713,758.57 1.10
New York......................................... 1,186 16,223,684.84 2.06
North Carolina................................... 1,276 14,947,294.69 1.89
North Dakota..................................... 70 851,051.43 0.11
Ohio............................................. 419 4,896,737.21 0.62
Oklahoma......................................... 1,248 17,102,693.55 2.17
Oregon........................................... 744 9,207,639.30 1.17
Pennsylvania..................................... 375 4,585,674.92 0.58
Puerto Rico...................................... 5 62,561.12 0.01
Rhode Island..................................... 6 73,517.81 0.01
South Carolina................................... 1,345 15,687,840.26 1.99
South Dakota..................................... 8 75,883.82 0.01
Tennessee........................................ 1,106 16,498,299.50 2.09
Texas............................................ 9,188 124,113,511.78 15.73
Utah............................................. 78 798,782.87 0.10
</TABLE>
S-18
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
NUMBER OF INITIAL PRINCIPAL AGGREGATE PRINCIPAL
STATE CONTRACTS BALANCE BALANCE
- ----- --------- ----------------- ---------------------
<S> <C> <C> <C>
Vermont.......................................... 10 119,878.91 0.02
Virginia......................................... 1,922 24,730,245.83 3.13
Washington....................................... 419 5,571,050.33 0.71
West Virginia.................................... 21 246,193.84 0.03
Wisconsin........................................ 3,137 31,936,331.90 4.05
Wyoming.......................................... 17 208,556.54 0.03
TOTAL:........................................... 61,534 $789,214,882.32 100.00%
</TABLE>
REMAINING TERMS OF CONTRACTS
<TABLE>
<CAPTION>
REMAINING TERMS PERCENTAGE OF INITIAL
OF CONTRACTS AGGREGATE NUMBER PRINCIPAL AGGREGATE PRINCIPAL
(MONTHS) OF CONTRACTS BALANCE BALANCE
- --------------------- ---------------- --------------- ---------------------
<S> <C> <C> <C>
1 - 12 1,129 $ 3,626,499.87 0.46%
13 - 18 2,066 9,899,999.47 1.25
19 - 24 3,255 21,532,712.81 2.73
25 - 30 5,298 44,506,338.32 5.64
31 - 36 6,248 62,569,168.04 7.93
37 - 42 8,324 96,076,626.68 12.17
43 - 48 8,935 115,525,593.66 14.64
49 - 54 9,787 142,326,083.99 18.03
55 - 60 9,000 140,649,840.13 17.82
61 - 66 3,681 72,028,648.84 9.13
67 - 72 3,811 80,473,370.51 10.20
TOTAL: 61,534 $789,214,882.32 100.00%
</TABLE>
S-19
<PAGE>
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding maturity and prepayment considerations with respect to
the securities is set forth under "WEIGHTED AVERAGE LIFE OF THE SECURITIES" in
the accompanying prospectus.
Because the rate of payment of principal of each class of notes and the
certificates depends primarily on the rate of payment of the principal balances
of the contracts, final payment of any class of securities could occur
significantly earlier or later than their respective final scheduled payment
dates. You will bear the risk of being able to reinvest principal payments on
your securities at yields at least equal to the yield on your securities. We
cannot predict the rate of prepayments.
Although the contracts have different annual percentage rates,
disproportionate rates of prepayments between contracts with higher annual
percentage rates will generally not affect the yield to you. However, higher
rates of prepayments of contracts with higher annual percentage rates will
decrease the amount available to cover delinquencies and defaults on the
contracts and may decrease the amounts available to be deposited in the reserve
fund.
STATISTICS RELATING TO DELINQUENCIES AND LOSSES
The following table shows delinquency statistics for the seller's portfolio
of retail installment contracts serviced by the servicer. The contracts were
originated in accordance with the underwriting standards described in the
accompanying prospectus under "THE SERVICER--UNDERWRITING AND ORIGINATION". For
these purposes a "DELINQUENCY" means that the obligor on the contract has failed
to make a required scheduled payment in an amount equal to at least 95% of the
scheduled payment for the indicated number of days past the due date. These
statistics are not necessarily indicative of the future performance of the
contracts.
S-20
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------
1999 1998 1997 1996
-------------------- --------------------- --------------------- ---------------------
NUMBER NUMBER NUMBER NUMBER
DOLLARS OF DOLLARS OF DOLLARS OF DOLLARS OF
(000'S) CONTRACTS (000'S) CONTRACTS (000'S) CONTRACTS (000'S) CONTRACTS
------- ---------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding Principal
Amount...............
==== ========== ==== ========== ===== ========== ===== ==========
Delinquencies ($)(1)...
31-60 Days...........
61-90 Days...........
91 Days or More......
---- ---------- ---- ---------- ----- ---------- ----- ----------
Total Delinquencies....
Repossession
Inventory............
---- ---------- ---- ---------- ----- ---------- ----- ----------
Total Delinquencies &
Repossession
Inventory............
==== ========== ==== ========== ===== ========== ===== ==========
Delinquencies
(%)(1)(2)............
31-60 Days...........
61-90 Days...........
91 Days or More......
---- ---------- ---- ---------- ----- ---------- ----- ----------
Total
Delinquencies(2).....
Repossession
Inventory(2).........
---- ---------- ---- ---------- ----- ---------- ----- ----------
Total Delinquencies &
Repossession
Inventory(2).........
==== ========== ==== ========== ===== ========== ===== ==========
<CAPTION>
AS OF DECEMBER 31
1995
---------------------
NUMBER
DOLLARS OF
(000'S) CONTRACTS
-------- ----------
<S> <C> <C>
Outstanding Principal
Amount...............
===== ==========
Delinquencies ($)(1)...
31-60 Days...........
61-90 Days...........
91 Days or More......
----- ----------
Total Delinquencies....
Repossession
Inventory............
----- ----------
Total Delinquencies &
Repossession
Inventory............
===== ==========
Delinquencies
(%)(1)(2)............
31-60 Days...........
61-90 Days...........
91 Days or More......
----- ----------
Total
Delinquencies(2).....
Repossession
Inventory(2).........
----- ----------
Total Delinquencies &
Repossession
Inventory(2).........
===== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31
--------------
2000 1999
-------------------- ---------------------
NUMBER NUMBER
DOLLARS OF DOLLARS OF
(000'S) CONTRACTS (000'S) CONTRACTS
------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Outstanding Principal Amount............................
==== ========== ==== ==========
Delinquencies($)(1)
31-60 Days............................................
61-90 Days............................................
91 Days or More.......................................
---- ---------- ---- ----------
Total Delinquencies.....................................
Repossession Inventory................................
==== ========== ==== ==========
Total Delinquencies &
Repossession Inventory................................
==== ========== ==== ==========
Delinquencies (%)(1)(2)
31-60 Days............................................
61-90 Days............................................
91 Days or More.........................................
---- ---------- ---- ----------
Total Delinquencies(2)..................................
Repossession Inventory(2)...............................
---- ---------- ---- ----------
Total Delinquencies & Repossession Inventory(2).........
==== ========== ==== ==========
</TABLE>
- ------------------------
(1) Delinquencies include principal amounts only.
(2) As a percent of outstanding principal in dollars.
S-21
<PAGE>
LOSSES AND RECOVERIES
The following table shows loss statistics for the seller's portfolio of
retail installment contracts serviced by the servicer. The servicer generally
charges-off a contract (i) when the servicer deems the contract uncollectible;
(ii) during the month when 5% or more of an installment due under the contract
becomes more than 120 days past due; (iii) if the financed vehicle is
repossessed, when all sale proceeds, insurance claims or refunds of financed
insurance policies and extended warranties have been received with respect to
the related repossessed financed vehicle; or (iv) when an obligor files for
bankruptcy and the servicer determines that its loss is known. Recoveries
generally include amounts received with respect to contracts previously
charged-off, except for proceeds realized in connection with the sale of the
repossessed vehicles. Gross charge-offs are the remaining principal balances
less proceeds from the sale of repossessed vehicles. Net charge-offs mean gross
charge-offs minus recoveries of contracts previously charged off. These
statistics are not necessarily indicative of the future performance of the
contracts.
<TABLE>
<CAPTION>
12 MONTHS ENDED
------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of Contracts(1)..........
Period End Outstanding Principal
Amount........................ $ $ $
Average Outstanding Principal
Amount (2).................... $ $ $
Number of Repossessions in
Inventory.....................
Number of Gross Charge-Offs.....
Gross Charge-Offs............... $ $ $
Gross Charge-Offs as a % of
Period End Outstanding
Principal Amount..............
Gross Charge-Offs as a % of
Average Outstanding Principal
Amount........................
Recoveries...................... $ $ $
Net Charge-Offs................. $ $ $
Net Charge-Offs as a % of Period
End Outstanding Principal
Amount(5).....................
Net Charge-Offs as a % of
Average Outstanding Principal
Amount(5).....................
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
3 MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
Number of Contracts(1)......................................
Period End Outstanding Principal Amount..................... $ $
Average Outstanding Principal Amount (2).................... $ $
Number of Repossessions in Inventory........................
Number of Gross Charge-Offs.................................
Gross Charge-Offs........................................... $ $
Gross Charge-Offs as a % of Period End Outstanding Principal
Amount....................................................
Gross Charge-Offs as a % of Average Outstanding Principal
Amount....................................................
Recoveries.................................................. $ $
Net Charge-Offs............................................. $ $
Net Charge-Offs as a % of Period End Outstanding Principal
Amount....................................................
Net Charge-Offs as a % of Average Outstanding Principal
Amount....................................................
</TABLE>
- ------------------------
(1) Number of contracts as of period end.
(2) The average for each period presented was computed by taking a simple
average of monthly average outstanding principal amounts for such period.
TWELVE MONTHS ENDED DECEMBER 31, 1999 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1998.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to .
Gross charge-offs as a percentage of the period end outstanding principal amount
of the contracts [increased/decreased] from [ ]% to [ ]%. The
[increase/decrease] is attributable to . The number of contracts
[increased/decreased] from [ ] to [ ] due to .
We know of no trends that are likely to increase the rate of delinquencies or
losses on the contracts.
TWELVE MONTHS ENDED DECEMBER 31, 1998 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1997.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to .
Gross charge-offs as a percentage of the period end outstanding principal amount
of the contracts [increased/decreased] from [ ]% to [ ]%. The
[increase/decrease] is attributable to . The number of contracts
[increased/decreased] from [ ] to [ ] due to .
TWELVE MONTHS ENDED DECEMBER 31, 1997 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1996.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to
. Gross charge-offs as a percentage of the period end outstanding
principal amount of the contracts [increased/ decreased] from [ ]% to
[ ]%. The [increase/decrease] is attributable to . The number of
contracts [increased/decreased] from [ ] to [ ] due to
.
S-23
<PAGE>
TWELVE MONTHS ENDED DECEMBER 31, 1996 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1995.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to
. Gross charge-offs as a percentage of the period end outstanding
principal amount of the contracts [increased/ decreased] from [ ]% to
[ ]%. The [increase/decrease] is attributable to . The number of
contracts [increased/decreased] from [ ] to [ ] due to
.
THREE MONTHS ENDED MARCH 31, 2000 VERSUS THREE MONTHS ENDED MARCH 31, 1999.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to .
Gross charge-offs as a percentage of the period end outstanding principal amount
of the contracts [increased/decreased] from [ ]% to [ ]%. The
[increase/decrease] is attributable to . The number of contracts
[increased/decreased] from [ ] to [ ] due to .
We know of no trends that are likely to increase the rate of delinquencies or
losses on the contracts.
WEIGHTED AVERAGE LIVES OF THE SECURITIES
The rate of payments on contracts will directly affect
- the rate at which you receive principal payments on your securities;
and
- if you purchase your securities at a premium or discount, your yield to
maturity.
The payments on the contracts may be in the form of payments scheduled to be
made under the terms of the contracts, prepayments or liquidations due to
default, casualty and other events which we cannot predict. The depositor will
be obligated to repurchase contracts from the trust as a result of a breach of a
representation or warranty with respect to that contract that materially and
adversely affects the trust's or the securityholders' interest in the contract
or the collectibility of the contract. In such event the seller, or the
performance guarantor, will be obligated to repurchase the contract from the
depositor. In addition, the servicer will be obligated to repurchase contracts
from the trust as a result of a breach of certain covenants with respect to the
contract. Any payments for these reasons, other than scheduled payments may
result in distributions to you of amounts which would otherwise have been
distributed over the remaining term of the contracts. Each prepayment,
liquidation or repurchase of a contract will shorten the weighted average
remaining term of the contracts and the weighted average lives of the
securities. See "RISK FACTORS--YOU MAY EXPERIENCE REDUCED RETURNS ON YOUR
INVESTMENT RESULTING FROM PREPAYMENTS ON THE CONTRACTS, REPURCHASES OF THE
CONTRACTS, LIQUIDATION OF DEFAULTED CONTRACTS AND EARLY TERMINATION OF THE
TRUST" in the accompanying prospectus.
S-24
<PAGE>
Prepayments on automotive receivables can be measured relative to a payment
standard or model. In this prospectus supplement we use the Absolute Prepayment
Model ("ABS"), which represents an assumed rate of prepayment each month
relative to the original number of contracts in a pool of contracts. ABS further
assumes that all the contracts in question are the same size and amortize at the
same rate and that each contract in each month of its life will either be paid
as scheduled or be paid in full. For example, in a pool of contracts originally
containing 10,000 contracts, a 1% ABS rate means that 100 contracts 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 contracts.
The information in the ABS Table was prepared on the assumption that:
- the contracts prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases,
- each scheduled monthly payment on each contract is scheduled to be made
and is made on the last day of each month and each month has 30 days,
- payments are made on the securities on each payment date,
- the balance in the reserve fund on each payment date is the required
amount described under "PAYMENTS AND DISTRIBUTIONS--RESERVE FUND" in this
prospectus supplement and
- the seller does not purchase the contracts.
The ABS Table also assumes that the contracts have been aggregated into
hypothetical pools with all of the contracts within each pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools will be such that each pool will be fully amortized by the end of
its remaining term to maturity.
<TABLE>
<CAPTION>
AGGREGATE REMAINING TERM ORIGINAL TERM
PRINCIPAL TO MATURITY TO MATURITY
POOL BALANCE APR (IN MONTHS) (IN MONTHS)
- ---- --------------- -------- -------------- -------------
<S> <C> <C> <C> <C>
1........................................ $ 3,626,499.87 11.971% 10 47
2........................................ 31,432,712.28 12.124 20 51
3........................................ 107,075,506.36 11.985 31 56
4........................................ 211,602,220.34 11.371 43 59
5........................................ 282,975,924.12 12.006 55 62
6........................................ 152,502,019.35 11.533 67 72
TOTAL:................................... $789,214,882.32 11.746% 49 62
</TABLE>
The hypothetical pools each have an assumed cut-off date of [ ]. The
ABS Table indicates the projected weighted average life of each class of
securities and sets forth the percent of the initial principal amount of each
class of securities that is projected to be outstanding after each of the
payment dates shown at various constant ABS percentages.
The actual characteristics and performance of the contracts will differ from
the assumptions used to prepare the ABS Table. The assumptions used are
hypothetical and have been provided to give a general sense of how the principal
cash flows might behave under varying prepayment rates. Any difference between
the assumptions and the actual characteristics and performance of the contracts
or
S-25
<PAGE>
actual prepayment experience will affect the percentages of initial amounts
outstanding over time and the weighted average lives of each class of
securities.
<TABLE>
<CAPTION>
CLASS A-1 NOTES
-----------------------------------------
ASSUMED ABS PERCENTAGE(2)
-----------------------------------------
PAYMENT DATES 0.50% 1.00% 1.50% 2.00%
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted Average Life (years)(1)............................
Weighted Average Life to Call (years)(1)(3).................
Optional Call Date..........................................
</TABLE>
- ------------------------
(1) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment on a note by the number of years from the
date of the issuance of the note to the payment date on which it is made,
(ii) adding the results and (iii) dividing the sum by the initial principal
amount of the note.
(2) An asterisk "*" means a percent of initial principal balance of more than
zero and less than 0.5%.
(3) This calculation assumes the seller repurchases the contracts at the first
opportunity.
<TABLE>
<CAPTION>
CLASS A-2 NOTES
-----------------------------------------
ASSUMED ABS PERCENTAGE(2)
-----------------------------------------
PAYMENT DATES 0.50% 1.00% 1.50% 2.00%
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted Average Life (years)(1)............................
Weighted Average Life to Call (years)(1)(3).................
Optional Call Date..........................................
</TABLE>
- ------------------------
(1) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment on a note by the number of years from the
date of the issuance of the note to the payment date on which it is made,
(ii) adding the results and (iii) dividing the sum by the initial principal
amount of the note.
(2) An asterisk "*" means a percent of initial principal balance of more than
zero and less than 0.5%.
(3) This calculation assumes the seller repurchases the contracts at the first
opportunity.
<TABLE>
<CAPTION>
CLASS A-3 NOTES
-----------------------------------------
ASSUMED ABS PERCENTAGE(2)
-----------------------------------------
PAYMENT DATES 0.50% 1.00% 1.50% 2.00%
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted Average Life (years)(1)............................
Weighted Average Life to Call (years)(1)(3).................
Optional Call Date..........................................
</TABLE>
- ------------------------
(1) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment on a note by the number of years from the
date of the issuance of the note to the payment date on which it is made,
(ii) adding the results and (iii) dividing the sum by the initial principal
amount of the note.
(2) An asterisk "*" means a percent of initial principal balance of more than
zero and less than 0.5%.
(3) This calculation assumes the seller repurchases the contracts at the first
opportunity.
S-26
<PAGE>
<TABLE>
<CAPTION>
CLASS B NOTES
-----------------------------------------
ASSUMED ABS PERCENTAGE(2)
-----------------------------------------
PAYMENT DATES 0.50% 1.00% 1.50% 2.00%
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted Average Life (years)(1)............................
Weighted Average Life to Call (years)(1)(3).................
Optional Call Date..........................................
</TABLE>
- ------------------------
(1) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment on a note by the number of years from the
date of the issuance of the note to the payment date on which it is made,
(ii) adding the results and (iii) dividing the sum by the initial principal
amount of the note.
(2) An asterisk "*" means a percent of initial principal balance of more than
zero and less than 0.5%.
(3) This calculation assumes the seller repurchases the contracts at the first
opportunity.
<TABLE>
<CAPTION>
CERTIFICATES
-----------------------------------------
ASSUMED ABS PERCENTAGE(2)
-----------------------------------------
PAYMENT DATES 0.50% 1.00% 1.50% 2.00%
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted Average Life (years)(1)............................
Weighted Average Life to Call (years)(1)(3).................
Optional Call Date..........................................
</TABLE>
- ------------------------
(1) The weighted average life of a certificate is determined by (i) multiplying
the amount of each principal payment on a certificate by the number of years
from the date of the issuance of the certificate to the payment date on
which it is made, (ii) adding the results and (iii) dividing the sum by the
initial certificate balance of the certificate.
(2) An asterisk "*" means a percent of initial principal certificate balance of
more than zero and less than 0.5%.
(3) This calculation assumes the seller repurchases the contracts at the first
opportunity.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-27
<PAGE>
NOTE FACTORS AND CERTIFICATE FACTORS
The "NOTE FACTOR" or "CERTIFICATE FACTOR" for any class of notes or
certificates, respectively, will be a seven-digit decimal indicating the
principal amount of that class of securities on the payment date as a fraction
of the respective principal amount thereof as of the closing date. The servicer
will compute the note factor and certificate factor each month. Initially, each
factor will be 1.0000000 and thereafter will decline to reflect reductions in
the principal amount of each class of notes and reductions in the certificate
balance. The portion of the principal amount of any class of notes and of the
certificate balance for the certificates for a given month allocable to a
securityholder can be determined by multiplying the original denomination of the
holder's security by the related note factor or certificate factor, as the case
may be, for that month.
You will receive monthly reports concerning the payments received on the
contracts, the aggregate principal balance of the contracts, the related note
factors, certificate factors and various other items of information pertaining
to the trust. Furthermore, the trustee or indenture trustee will furnish you
with information for tax reporting purposes not later than the latest date
permitted by law. See "DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS--SERVICING--STATEMENTS TO SECURITYHOLDERS" in the accompanying
prospectus.
USE OF PROCEEDS
The depositor will use all of the proceeds from the sales of securities,
after depositing funds into the reserve fund and paying expenses, to pay the
purchase price for the contracts to the seller. The purchase price for the
contracts is $ . The seller will use the proceeds it receives to pay down a
warehouse receivables securitization facility.
DESCRIPTION OF THE NOTES
This section supplements the information in the accompanying prospectus
under the caption "DESCRIPTION OF THE NOTES AND INDENTURE". However, as these
statements are only summaries, you should read the sale and servicing agreement
and indenture, forms of which have been filed as exhibits to the registration
statement of which the accompanying prospectus forms a part. A copy of the
indenture and the sale and servicing agreement are available to you upon request
to the depositor and will be filed with the Securities and Exchange Commission
following the issuance of the securities.
GENERAL
The notes will be issued pursuant to the terms of the indenture between the
trust and the indenture trustee.
The trust will issue four classes of notes, consisting of three classes of
senior notes, designated as the
- Class A-1 Notes,
- Class A-2 Notes, and
- Class A-3 Notes.
We refer to these notes as the "CLASS A NOTES." The trust will also issue
one class of subordinate notes, designated as the Class B Notes.
The notes will be delivered in book-entry form only and be issued in minimum
denominations of $1,000.
S-28
<PAGE>
INTEREST
Each class of notes will bear interest at the fixed rate per annum for that
class shown on the cover page of this prospectus supplement.
The trust will pay interest on the notes on each payment date with Available
Amounts and amounts withdrawn from the reserve fund as set forth under "PAYMENTS
AND DISTRIBUTIONS--DISTRIBUTIONS" below.
Interest will be payable to you monthly on the [ ] of each month or, if
that date is not a business day, on the next succeeding business day and will be
calculated
- on the Class A-1 Notes on the basis of the actual number of days during
the interest period from and including the prior payment date (or from and
including the closing date, in the case of the initial payment date) to
but excluding that payment date divided by 360, and
- on all other classes of notes on the basis of a 360-day year consisting of
twelve 30-day months for the interest period from and including the th
day of the prior month (or from and including the closing date, in the
case of the initial payment date) to but excluding the th day of the
next month.
After the acceleration of the notes following an event of default resulting
from a payment default, the trust will not make interest payments on the
Class B Notes until the Class A Notes have been paid in full.
Interest payments on the Class A Notes will have the same priority. If on
any payment date the trust has insufficient funds to make a full payment of
interest on the Class A Notes, the holders of the Class A Notes will receive
their pro rata share of the amount available for interest on the Class A Notes.
If on any payment date, the trust does not have sufficient funds, to make a
full payment of interest on any class of notes, the amount of the shortfall will
be carried forward, and together with interest on the shortfall amount at the
applicable interest rate for that class, added to the amount of interest the
affected class of noteholders will be entitled to receive on the next payment
date.
PRINCIPAL
On each payment date, principal on the notes will be payable in an amount
equal to the amount by which (1) the sum of the aggregate principal balances of
the notes and the certificate balance of the certificates as of the close of
business on the prior payment date exceeds (2) the aggregate principal balance
of the contracts as of the end of the prior calendar month, excluding certain
non-collectible or defaulted contracts and contracts to be repurchased by the
depositor or purchased by the servicer due to certain breaches. The trust will
pay principal on the notes on each payment date with Available Amounts and
amounts withdrawn from the reserve fund as set forth under "PAYMENTS AND
DISTRIBUTIONS--DISTRIBUTIONS" below.
The principal of each class of notes is due and payable on the scheduled
final payment date for that class shown on the cover page of this prospectus
supplement.
MANDATORY PREPAYMENT
The seller, at its option, may repurchase all of the contracts owned by a
trust on any payment date following the date on which the aggregate outstanding
principal balance of the securities is less than
S-29
<PAGE>
10% of the aggregate principal balance of the contracts as of the cut-off date.
The purchase price required to be paid in connection with the purchase will be
at least equal to the sum of:
- the unpaid principal balance of the notes as of that payment date,
together with accrued interest but unpaid interest on the notes to that
payment date;
- the certificate balance of the certificates as of that payment date,
together with all interest distributable in respect of the certificates
as of that payment date;
- unreimbursed servicer advances;
- accrued but unpaid servicer fees;
- accrued but unpaid fees to the owner trustee and the indenture trustee;
- any other amounts payable at the time from Available Amounts; minus
- amounts on deposit in the reserve fund.
If the seller does purchase the contracts, the notes will be prepaid in full on
the payment date on which the purchase occurs.
VOTING RIGHTS
The accompanying prospectus specifies certain circumstances under which the
consent, approval, direction or request of the holders of a specified percentage
of the outstanding principal amount of the notes must be obtained, given or
made, or under which such holders are permitted to take an action or give a
notice. The holders of that specified percentage of the Class A Notes will have
those rights, not the holders of all of the notes or the Class B Notes, while
the Class A Notes are outstanding.
NOTICES
You will be notified in writing by the indenture trustee of any event of
default, servicer default or termination of, or appointment of a successor to,
the servicer promptly upon a responsible officer obtaining actual knowledge of
these events. If notes are issued other than in book-entry form, those notices
will be mailed to the addresses of noteholders as they appear in the register
maintained by the indenture trustee prior to mailing. Those notices will be
deemed to have been given on the date of that publication or mailing.
DESCRIPTION OF THE CERTIFICATES
This section supplements the information in the accompanying prospectus
under the caption "DESCRIPTION OF THE CERTIFICATES". However, as these
statements are only summaries, you should read the trust agreement and the sale
and servicing agreement, forms of which have been filed as exhibits to the
registration statement of which the accompanying prospectus forms a part. A copy
of the trust agreement and the sale and servicing agreement are available to you
upon request to the depositor and will be filed with the Securities Exchange
Commission following the issuance of the certificates.
GENERAL
The certificates will be issued pursuant to the terms of the trust agreement
between the trust and the trustee.
The trust will issue the certificates which evidence undivided ownership
interests in the trust.
The certificates will be delivered in book-entry form only and be issued in
minimum denominations of $1,000.
S-30
<PAGE>
INTEREST
Interest will be distributable in respect of the certificates at the fixed
pass-through rate per annum set forth on the cover page of this prospectus
supplement.
The trust will distribute interest in respect of the certificates on each
payment date with Available Amounts and amounts withdrawn from the reserve fund
as set forth under "PAYMENTS AND DISTRIBUTIONS--DISTRIBUTIONS" below.
Interest will be payable to you monthly on the [ ] of each month or, if
that date is not a business day, on the next succeeding business day and will be
calculated for the interest period from and including the th day of the prior
month (or from and including the closing date, in the case of the initial
payment date) to but excluding the th day of the next month on the basis of a
360-day year consisting of twelve 30-day months.
If on any payment date, the trust does not have sufficient funds to make a
full distribution of interest in respect of the certificates, the amount of the
shortfall will be carried forward, and together with interest on the shortfall
amount at the applicable pass-through rate, added to the amount of interest
distributable in respect of the certificates on the next payment date.
After acceleration of the notes following an event of default resulting from
a payment default, the trust will not make interest distributions in respect of
the certificates until the notes have been paid in full.
PRINCIPAL
On each payment date after the notes have been paid in full, principal in
respect of the certificates will be distributable in an amount equal to the
amount by which (1) the certificate balance of the certificates as of the close
of business on the prior payment date exceeds (2) the aggregate principal
balance of the contracts as of the end of the prior calendar month, excluding
certain non-collectible or defaulted contracts and contracts to be repurchased
by the depositor or purchased by the servicer due to certain breaches. The trust
will distribute principal in respect of the certificates on each payment date
with Available Amounts and amounts withdrawn from the reserve fund as set forth
under "PAYMENTS AND DISTRIBUTIONS--DISTRIBUTIONS" below.
MANDATORY PREPAYMENT
The seller, at its option, may repurchase all of the contracts owned by a
trust on any payment date following the date on which the aggregate outstanding
principal balance of the securities is less than 10% of the aggregate principal
balance of the contracts as of the cut-off date. The purchase price to be paid
in connection with the purchase will be at least equal to the sum of:
- the unpaid principal balance of the notes as of that payment date,
together with accrued interest but unpaid interest on the notes to that
payment date;
- the certificate balance of the certificates as of that payment date,
together with all interest distributable in respect of the certificates
as of that payment date;
- unreimbursed servicer advances;
- accrued but unpaid servicer fees;
- accrued but unpaid owner trustee and indenture trustee fees;
- any other amounts payable at the time from Available Amounts; minus
- amounts on deposit in the reserve fund.
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<PAGE>
If the seller does purchase the contracts, the certificates will be paid in
full on the payment date on which the purchase occurs.
NOTICES
Certificateholders will be notified in writing by the trustee of any
servicer default or termination of, or appointment of a successor to, the
servicer promptly upon a responsible officer obtaining actual knowledge of these
events. Except for the monthly and annual reports to certificateholders
described this prospectus supplement, the trustee is not obligated under the
trust agreement to forward any other notices to the certificateholders. There
are no provisions in the trust agreement for the regular or special meetings of
certificateholders.
PAYMENTS AND DISTRIBUTIONS
AVAILABLE AMOUNTS
The trust will pay principal and interest in respect of the securities on
each payment date from Available Amounts for the payment date, as well as
amounts permitted to be withdrawn from the reserve fund. See "--RESERVE FUND"
below. "AVAILABLE AMOUNTS" for any payment date are the sum of:
- the following amounts on deposit in the collection account which the trust
received during the prior calendar month;
(1) all amounts allocable to scheduled principal or interest payments on
the contracts;
(2) prepayments of contracts; and
(3) proceeds of repossessed financed vehicles and other proceeds of
Defaulted Contracts;
- the purchase price paid by the depositor in repurchasing contracts from
the trust on that payment date as a result of a breach of the
representations and warranties with respect to those contracts in the sale
and servicing agreement;
- the purchase price paid by the servicer in purchasing contracts from the
trust on that payment date as a result of a breach of certain covenants
with respect to those contracts in the sale and servicing agreement;
- servicer advances made by the servicer on that payment date in respect of
delinquent scheduled payments or delinquent interest payments for the
prior calendar month; and
- the amount paid by the seller to purchase the contracts when the aggregate
principal balance of the securities is reduced to less than 10% of the
aggregate principal balance of the contracts as of the cut-off date.
The precise calculation of the funds available to the trust on each payment
date to make payments on the securities is set forth in the definition of
"AVAILABLE AMOUNTS" and the definitions of the defined terms contained in that
definition set forth in the Glossary. We refer you to those definitions.
S-32
<PAGE>
SERVICING COMPENSATION AND REIMBURSEMENT OF SERVICER ADVANCES
On each payment date, the servicer will be entitled to receive:
- the base servicing fee in an amount equal to the product of one twelfth of
one percent (1%) and the aggregate principal balance of the contracts as
of the last day of the second calendar month preceding the month in which
that payment date falls; and
- any investment income earned on amounts on deposit in the collection
account during the prior calendar month.
The servicer will also be entitled to retain any late payment fees,
prepayment charges, if any, and other similar fees and charges received during
the prior calendar month.
The servicer will reimburse itself for servicer advances out of:
- amounts received by the servicer from the obligors on account of the
related delinquent contract payments;
- the proceeds, net of expenses incurred by the servicer, of the sale of the
repossessed financed vehicles securing the related delinquent contracts;
and
- payments on other contracts when the servicer has determined that a
contract as to which it has made advances is a Defaulted Contract.
DISTRIBUTIONS
On each payment date prior to the acceleration of the notes, the servicer
will direct the indenture trustee to apply the Available Amounts, together with
amounts withdrawn from the reserve fund, to the following payments and
distributions in the following order of priority:
(1) reimbursement of servicer advances;
(2) payment of the base servicing fee;
(3) payment of the fees due and owing to the owner trustee and indenture
trustee;
(4) all accrued and unpaid interest on the Class A Notes, including any
accrued and unpaid interest on the Class A Notes payable on prior payment
dates plus interest on that accrued and unpaid interest;
(5) all accrued and unpaid interest on the Class B Notes, including any
accrued and unpaid interest on the Class B Notes payable on prior payment
dates plus interest on that accrued and unpaid interest;
(6) all accrued and unpaid interest distributable in respect of the
certificates, including any accrued and unpaid interest distributable in
respect of the certificates on prior payment dates plus interest on that
accrued and unpaid interest;
(7) principal on the notes and the certificates in the amounts and priority
described below under "PRINCIPAL";
(8) to the reserve fund, any amount necessary to increase the amount on
deposit in the reserve fund to the required amount; and
(9) any remaining amounts to the depositor.
On each payment date after the acceleration of the notes following an event
of default resulting from a payment default, the trust will apply Available
Amounts, together with amounts withdrawn from the reserve fund, in the same
order as described above except that the trust will not pay interest on the
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<PAGE>
Class B Notes until the Class A Notes are paid in full and will not distribute
interest in respect of the certificates until the notes have been paid in full.
The trust is to make payments first from the Available Amounts, and second,
but only as to amounts described in clauses (4), (5), (6) and (7) above, from
amounts permitted to be withdrawn from the reserve fund as described under
"RESERVE FUND" below.
PRINCIPAL
PRINCIPAL DISTRIBUTIONS BEFORE ACCELERATION OF NOTES
This chart summarizes how the trust will pay principal on the notes and
certificates before the acceleration of the maturity dates of the notes. The
precise calculation of the amount of principal payable on the securities on each
payment date is set forth in the definition of "TOTAL PRINCIPAL PAYMENT AMOUNT"
and the definitions of the defined terms used in that definition set forth in
the Glossary.
<TABLE>
<CAPTION>
<S> <C>
CLASS PRINCIPAL PAYMENTS
Class A-1 Notes - Begins receiving principal on first payment date
- Receives 100% of Total Principal Payment Amount until paid
in full
Class A-2 Notes - Begins receiving principal on payment date on which Class
A-1 Notes are paid in full
- Receives 100% of Total Principal Payment Amount until paid
in full
Class A-3 Notes - Begins receiving principal on the payment date on which
Class A-2 Notes are paid in full
- Receives 100% of Total Principal Payment Amount until paid
in full
Class B Notes - Begins receiving principal on the payment date on which
Class A-3 Notes are paid in full
- Receives 100% of Total Principal Payment Amount until paid
in full
Certificates - Begins receiving principal on the payment date on which
Class B Notes are paid in full
- Receives 100% of Total Principal Payment Amount until paid
in full
</TABLE>
PRINCIPAL DISTRIBUTIONS AFTER ACCELERATION OF NOTES
After acceleration of the maturity dates of the notes, the trust will pay
principal on the notes and certificates as follows:
<TABLE>
<CAPTION>
<S> <C>
CLASS PRINCIPAL PAYMENTS
Class A-1 Notes, - Begins receiving principal on first payment date
Class A-2 Notes, - Receives 100% of the Total Principal Payment Amount
Class A-3 Notes applied on a pro rata basis to each class until paid in full
Class B Notes - Begins receiving principal on the payment date on which
Class A Notes are paid in full
- Receives 100% of the Total Principal Payment Amount until
paid in full
Certificates - Begins receiving principal on the payment date on which
the notes are paid in full
- Receives 100% of the Total Principal Payment Amount until
paid in full
</TABLE>
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<PAGE>
RESERVE FUND
The indenture trustee will establish pursuant to the sale and servicing
agreement the reserve fund which will be a segregated account in the name of the
indenture trustee. The reserve fund will be created with an initial deposit by
the trust on the closing date of an amount equal to $ , which is less than
the amount that is required to be on deposit in the reserve fund. The reserve
fund will thereafter be funded as described above under "--DISTRIBUTIONS".
Amounts held from time to time in the reserve fund will be held for the
benefit of securityholders and may be invested in investments acceptable to the
rating agencies rating the securities as being consistent with the ratings of
the securities at the direction of the servicer. Investment income on those
investments will be paid to the depositor, upon the direction of the servicer,
to the extent that funds on deposit in the reserve fund on any payment date
exceed the amount that is required to be on deposit in the reserve fund. If the
amount on deposit in the reserve fund on any payment date exceeds the amount
that is required to be on deposit in the reserve fund on that payment date, the
indenture trustee will withdraw that excess and pay it to the depositor. Upon
any distribution to the depositor of those excess amounts, the securityholders
will not have any rights in, or claims to, those amounts.
The amount that is required to be on deposit in the reserve fund on each
payment date will initially be $[ ].
The servicer may, from time to time after the date of this prospectus
supplement, request each rating agency rating the securities to approve a
formula for determining the amount that is required to be on deposit in the
reserve fund on each payment date that is different from that described above.
If each rating agency delivers a letter to the indenture trustee and the trustee
to the effect that the use of any new formula will not result in a
qualification, reduction or withdrawal of its then-current rating of any class
of the notes or the certificates, then the amount that is required to be on
deposit in the reserve fund will be determined in accordance with the new
formula. The sale and servicing agreement will accordingly be amended, without
the consent of any noteholder or certificateholder, to reflect the new
calculation.
If Available Amounts for any payment date, after paying the base servicing
fee and the fees payable to the owner trustee and the indenture trustee and
reimbursing the servicer for servicer advances, are insufficient to pay
principal and interest on the securities, the indenture trustee will withdraw
funds from the reserve fund for distribution to the securityholders to cover any
shortfalls. If on the final scheduled payment date of any class of securities,
the principal amount or certificate balance of that class has not been paid in
full, the indenture trustee will withdraw funds from the reserve fund to pay
those securities in full.
None of the securityholders, the indenture trustee, the owner trustee or the
seller will be required to refund any amounts properly distributed or paid to
them, whether or not there are sufficient funds on any subsequent payment date
to make full distributions to the securityholders.
RATINGS OF THE SECURITIES
It is a condition of issuance that each of Standard & Poor's Ratings
Services and Moody's Investors Service, Inc.
- rate the Class A-1 Notes in its highest short-term rating category,
- rate the Class A-2 and Class A-3 in its highest long-term rating category,
- rate the Class B Notes at least [ ], respectively,
- rate the certificates at least BBB-/Baa3, respectively.
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<PAGE>
The ratings address the likelihood of the timely receipt of interest and
payment of principal on each class of securities on or before the scheduled
final payment date for the class. The ratings will be based primarily upon the
contracts and the related property, the reserve fund and the subordination
provided by
- the certificates and the Class B Notes, in the case of the Class A Notes,
and
- the certificates, in the case of the Class B Notes.
We cannot assure you that any rating will not be lowered or withdrawn by the
assigning rating agency. In the event that ratings with respect to the
securities are qualified, reduced or withdrawn, no person or entity will be
obligated to provide any additional credit enhancement with respect to the
securities.
The ratings should be evaluated independently from similar ratings on other
types of securities. A rating is not a recommendation to buy, sell or hold
securities, inasmuch as these ratings do not comment as to market price or
suitability for a particular investor. The ratings do not address the likelihood
of payment of principal on any class of securities prior to the scheduled final
payment date or the possibility of the imposition of United States withholding
tax with respect to non-United States Persons.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
TREATMENT OF TRUST
Winston & Strawn, as federal tax counsel to the trust, will deliver its
opinion that the trust will not be an association (or a publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumptions and qualifications described in the
accompanying prospectus under the caption "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--OWNER TRUST". Because the trust will issue certificates to
multiple owners, the trust will be characterized as a partnership for federal
income tax purposes.
TREATMENT OF INVESTORS IN NOTES
Each purchaser of the notes agrees to treat the notes as debt for federal
income tax purposes. An investor will be taxed on the amount of payments of
interest on a note as ordinary interest income at the time it accrues or is
received in accordance with the investor's regular method of accounting. An
investor who disposes of a note will recognize taxable gain or loss equal to the
difference between the amount realized and the investor's adjusted tax basis in
the note. Any gain or loss will be a capital gain or loss assuming the notes
constitute capital assets in the hands of the owner. Special rules apply to
investors who purchase notes at a discount or a premium. The foregoing general
description of the treatment of investors in notes is subject to the further
explanation, assumptions and qualifications set forth in the accompanying
prospectus.
TREATMENT OF INVESTORS IN CERTIFICATES
As mentioned above, in any case where the trust issues certificates to
multiple owners, the trust will be treated as a partnership for federal income
tax purposes. Each certificateholder will agree by its purchase of certificates
to treat the trust as a partnership for purposes of federal and state income
tax, franchise tax, and any other tax measured in whole or in part by income and
to treat itself as a partner in that partnership. As a partnership, the trust
will not be subject to federal income tax. Rather, each certificateholder will
be required to separately take into account the holder's allocated share of
income, gains, losses, deductions and credits of the trust. The trust's income
will consist primarily of interest and finance charges earned on the contracts
owned by the trust (including appropriate adjustments for any market discount,
original issue discount and bond premium), any yield supplement deposits, and
any gain upon collection or disposition of the contracts. The trust 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
contracts. The requirement that each certificateholder include its share of each
item of trust income and gain in income and the ability of a certificateholder
to deduct losses or deductions attributable to the trust are subject to the
fuller explanation, assumptions and qualifications set forth in the accompanying
prospectus.
S-36
<PAGE>
ERISA CONSIDERATIONS
THE NOTES
The notes may be purchased by an employee benefit plan or an individual
retirement account (a "Plan") subject to ERISA or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Plan must
determine that the purchase of a note is consistent with its fiduciary duties
under ERISA and does not result in a nonexempt prohibited transaction as defined
in Section 406 of ERISA or Section 4975 of the Code. For additional information
regarding treatment of the notes under ERISA, see "ERISA CONSIDERATIONS" in the
accompanying prospectus.
The notes may not be purchased with the assets of a Plan if the depositor,
the servicer, the indenture trustee, the trustee or any of their affiliates:
1. is a "fiduciary" as defined in Section 3(21) of ERISA or Section 4975(e)(3)
of the Code with respect to those Plan assets: or
2. is an employer maintaining or contributing to the Plan; or if a
certificateholder is a fiduciary with respect to those Plan assets and
participates in the decision to acquire the notes.
THE CERTIFICATES
The certificates may not be acquired by a Plan or any entity whose
underlying assets include Plan assets by reason of a Plan's investment in the
entity or which uses Plan assets to acquire certificates (a "Plan Investor"). By
its acceptance of a certificate, each certificateholder will be deemed to have
represented and warranted that is not subject to the foregoing limitation. In
addition, a purchaser of certificates other than a Plan Investor should be aware
that a prohibited transaction could occur if a certificateholder (or any of its
affiliates) is or becomes a party in interest or a disqualified person with
respect to a Plan Investor that purchases and holds any notes unless covered by
one or more applicable exemptions.
LEGAL PROCEEDINGS
None of the depositor, the servicer, the seller, or the trust are parties to
any legal proceeding which could have a material adverse impact on your interest
in the securities or in the trust's assets.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated [ ], the depositor has agreed to sell to each of the
underwriters named below and each of those underwriters has severally agreed to
purchase the following respective initial principal amounts of securities at the
respective public offering prices less the respective underwriting discounts
shown on the cover page of this prospectus supplement:
<TABLE>
<CAPTION>
INITIAL INITIAL INITIAL INITIAL
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL INITIAL CERTIFICATE
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF BALANCE OF
UNDERWRITER CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS B NOTES CERTIFICATES
- ----------- --------------- --------------- --------------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the securities being
offered, if any of the securities are purchased. The underwriters have advised
the depositor that they propose initially to offer the securities to the public
at the respective public offering prices shown on the cover page of this
prospectus supplement,
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<PAGE>
and to certain dealers at that price, less a concession not in excess of the
amount noted in the table below. The underwriters may allow and the dealers may
reallow to other dealers a discount not in excess of the amount noted in the
table below.
<TABLE>
<CAPTION>
SELLING CONCESSION REALLOWANCE
CLASS NOT TO EXCEED NOT TO EXCEED
- ----- ------------------ -------------
<S> <C> <C>
A-1.........................................................
A-2.........................................................
A-3.........................................................
B...........................................................
C...........................................................
</TABLE>
After the initial public offering of the securities, the offering prices and
other selling terms may be varied by the underwriters.
The following table shows the underwriting fees to be paid to the
underwriters by the depositor in connection with this offering. This
underwriting fee is the difference between the price to public and the amount
the underwriters pay to the depositor to purchase the securities from the
depositor.
<TABLE>
<CAPTION>
PER SECURITY TOTAL
------------ --------
<S> <C> <C>
A-1 Notes................................................... % $
A-2 Notes................................................... % $
A-3 Notes................................................... % $
A-4 Notes................................................... % $
C Certificates.............................................. % $
</TABLE>
The expenses of this offering, exclusive of underwriting commissions, are
estimated at $ and are payable by the depositor.
In connection with the offering of the securities, [ ], on behalf
of the underwriters, may engage in overallotment, stabilizing transactions or
syndicate covering transactions in accordance with Regulation M under the
Securities Exchange Act of 1934. Overallotment transactions involve syndicate
sales in excess of the offering size creating a short position. Stabilizing
transactions permit bids to purchase the securities so long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering transactions involve
purchases of securities in the open market after the distribution has been
completed in order to cover short positions. Such over-allotment transactions,
stabilizing and syndicate covering transactions may cause the price of the
securities to be higher than they would otherwise be in the absence of those
transactions. The underwriters do not represent that the underwriters will
engage in those transactions nor that such transactions, once commenced, will
not be discontinued without notice.
The depositor and some of its affiliates have agreed to indemnify the
underwriters against some liabilities in connection with the sale of securities,
including liabilities under the Securities Act of 1933, as amended.
The securities have no established trading market. The underwriters have
advised us that the underwriters intend to make a market in the securities but
are not obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the securities.
LEGAL MATTERS
Winston & Strawn, Chicago, Illinois, has provided a legal opinion relating
to the securities in its capacity as special counsel to the trust, the
depositor, the servicer and the administrator. Certain legal
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<PAGE>
matters for the underwriters will be passed upon by Simpson Thacher & Bartlett.
The indenture, the sale and servicing agreement and the notes will be governed
by the laws of the State of Illinois. The trust agreement and the certificates
will be governed by the laws of the State of Delaware.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the balance sheet of
Dealer Auto Receivables [ ] Trust at [ ] as set forth in
their report. The depositor included this balance sheet in this prospectus
supplement in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.
GLOSSARY
AVAILABLE AMOUNTS means, with respect to any payment date, the sum of the
Available Interest and the Available Principal for such payment date.
AVAILABLE INTEREST means, with respect to any payment date, the total,
without duplication, of the following amounts received by the servicer on or in
respect of the contracts during the prior calendar month:
- all amounts allocable to scheduled interest payments on the contracts;
- the interest component of all prepayments of contracts;
- the interest component of all proceeds of repossessed financed vehicles
and other proceeds of Defaulted Contracts;
- the interest component of the purchase price paid by the depositor in
repurchasing contracts from the trust on that payment date as a result of
a breach of the representations and warranties with respect to those
contracts in the sale and servicing agreement;
- the interest component of the purchase price paid by the servicer in
purchasing contracts from the trust on that payment date as a result of a
breach of certain covenants with respect to those contracts in the sale
and servicing agreement;
- servicer advances made by the servicer on that payment date in respect of
delinquent interest payments for the prior calendar month;
- the interest component of the amount paid by the seller to purchase the
contracts when the aggregate principal balance of the securities is
reduced to less than 10% of the aggregate principal balance of the
contracts as of the cut-off date; and
- all amounts received in respect of interest, dividends, gains, income and
earnings on investment of funds in the trust accounts.
AVAILABLE PRINCIPAL means, with respect to any payment date, the total,
without duplication, of the following amounts received by the servicer on or in
respect of the contracts during the prior calendar month:
- all amounts allocable to scheduled principal payments on the contracts;
- the principal component of all prepayments of contracts;
- the principal component of all proceeds of repossessed vehicles and other
proceeds of Defaulted Contracts;
- the principal component of the purchase price paid by the depositor in
repurchasing contracts from the trust on that payment date as a result of
a breach of the representations and warranties with respect to those
contracts in the sale and servicing agreement;
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<PAGE>
- the principal component of the purchase price paid by the servicer in
purchasing contracts from the trust on that payment date as a result of a
breach of certain covenants with respect to those contracts in the sale
and servicing agreement;
- servicer advances made by the servicer on that payment date in respect of
delinquent scheduled principal payments for the prior calendar month; and
- the principal component of the amount paid by the seller to purchase the
contracts when the aggregate principal balance of the securities is
reduced to less than 10% of the aggregate principal balance of the
contracts as of the cut-off date.
A DEFAULTED CONTRACT will be a contract as to which (a) all or part of a
scheduled payment is 120 days or more than 120 days past due and the servicer
has not repossessed the related financed vehicle or (b) the servicer has, in
accordance with its customary servicing procedures, determined that eventual
payment in full is unlikely and has either repossessed and liquidated the
related financed vehicle or repossessed and held the related financed vehicle in
its repossessed inventory for 90 days, which ever occurs first, or (c) as to
which the obligor has suffered an insolvency event.
PRINCIPAL BALANCE means, (a) with respect to any simple interest contract as
of any date, an amount equal to the unpaid principal balance of such contract as
of the opening of business on the cut-off date, reduced by all payments and
other amounts received by the servicer as of such date allocable to principal;
(b) with respect to any precomputed contract as of any date, an amount equal to
the unpaid principal balance of such contract as of the opening of business on
the cut-off date, reduced by the sum of (1) that portion of all scheduled
payments due on or after the cut-off date and on or prior to the last day of the
prior calendar month on that contract allocated to principal and (2) all
prepayments and other amounts applied by the servicer as of such date to the
payment of principal on that contract; provided, however, that (i) if (x) a
contract is repurchased by the depositor, the seller or the performance
guarantor because of a breach of a representation or warranty, or if (y) the
seller gives notice of its intent to purchase the contracts in connection with
an optional termination of the trust, in each case the Principal Balance of such
contract or contracts shall be deemed to be zero for the prior calendar month in
which such event occurs and for each calendar month thereafter and (ii) from and
after the prior calendar month in which a contract becomes a Defaulted Contract,
the Principal Balance of such contract shall be deemed to be zero; and
(c) where the context requires, the aggregate Principal Balances described in
clauses (a) and (b) for all such contracts.
The TOTAL PRINCIPAL PAYMENT AMOUNT for any payment date is the excess of
(x) the sum of the aggregate principal balance of the notes and the certificate
balance of the certificates as of the close of business on the prior payment
date over (y) the Principal Balance of the contracts as of the last day of the
calendar month immediately preceding the payment date.
UNITED STATES PERSONS means:
- A citizen or resident of the United States;
- A corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof;
- An estate the income of which is includible in gross income for United
States federal income tax purposes, regardless of its source; or
- A trust, (a) with respect to which a court within the United States is
able to exercise primary supervision over its administration, and one or
more United States fiduciaries have the authority to control all of its
substantial decisions, or (b) otherwise, the income of which is subject to
U.S. federal income tax regardless of its source.
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<PAGE>
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1
BALANCE SHEET AS OF [ ], 2000
<TABLE>
<S> <C>
Assets--Cash................................................ $ 0
===
Beneficial Equity........................................... $ 0
===
Liabilities................................................. $ 0
===
</TABLE>
NOTES TO THE BALANCE SHEET
Dealer Auto Receivables Owner Trust 2000-1 (the "Trust") is a limited
purpose business trust established under the laws of the State of Delaware. It
was formed on [ ] by Dealer Auto Receivables Corp. (the "Depositor")
and [ ] (the "Trustee") under a trust agreement dated as of
[ ] between the Depositor and the Trustee. The activities of the
Trust are limited by the terms of the trust agreement to acquiring, owning and
managing loan contracts and related assets, issuing and making payments on notes
and subordinate certificates and other related activities. Prior to and
including [ ], the Trust did not conduct any activities.
The Depositor will pay all fees and expenses related to the organization and
operations of the Trust, other than withholding taxes, imposed by the United
States or any other domestic taxing authority. The Depositor has also agreed to
indemnify the indenture trustee and Trustee and certain other persons involved
in the sale of notes.
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<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY
BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED[ ]
DEALER AUTO RECEIVABLES GRANTOR TRUST
ISSUER
$ ASSET-BACKED CERTIFICATES
DEALER AUTO RECEIVABLES CORP.
DEPOSITOR
PREMIER AUTO FINANCE, INC.
SERVICER
THE GRANTOR TRUST WILL ISSUE THE FOLLOWING CLASSES OF CERTIFICATES--
CONSIDER CAREFULLY
THE RISK FACTORS
BEGINNING ON
PAGE S-8 IN THIS
PROSPECTUS SUPPLEMENT
AND ON PAGE 7 IN THE
ACCOMPANYING
PROSPECTUS.
The certificates
represent interests
in the trust only.
This prospectus
supplement must be
accompanied by the
prospectus.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
UNDERWRITING
PASS- FIRST FINAL DISCOUNT PROCEEDS
PRINCIPAL THROUGH DISTRIBUTION SCHEDULED PRICE TO PER TO
CLASS AMOUNT RATE DATE DISTRIBUTION PUBLIC CERTIFICATE DEPOSITOR
A $ %
B $ %
</TABLE>
The total price to the public is $
The total underwriting discount is $
The total proceeds to the depositor are $
Credit Enhancement:
- - Reserve fund with an initial deposit of $ .
- - Subordination of the Class B Certificates to the Class A Certificates as
described in this prospectus supplement.
The certificates are asset-backed securities issued by the trust. The assets
underlying the certificates are retail installment contracts for the purchase
of new or used automobiles and light-duty trucks.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CHASE SECURITIES INC.
Prospectus Supplement dated [ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Important Notice About Information Presented in this
Prospectus Supplement and the Accompanying Prospectus..... i
Prospectus Supplement Summary............................... S-1
Risk Factors................................................ S-8
The Class A Certificates will be entitled to interest or
principal distributions before the Class B
Certificates............................................ S-8
Adverse events in [five] high concentration states may
cause increased defaults and delinquencies.............. S-8
The certificates may not be suitable investments for all
investors............................................... S-9
Because the certificates are in book-entry form, your
rights can only be exercised indirectly................. S-9
Holders of Class B Certificates may have to pay taxes on
amounts not actually received........................... S-9
The absence of an existing market for the certificates may
limit your ability to resell the certificates........... S-9
The Trust................................................... S-10
General................................................... S-10
The Trustee............................................... S-11
The Seller and the Servicer................................. S-11
The Performance Guarantor................................... S-11
The Contracts............................................... S-11
Description of the Contracts.............................. S-11
Statistics Relating to the Contracts...................... S-12
Maturity and Prepayment Considerations.................... S-13
Statistics Relating to Delinquencies and Losses........... S-14
Losses and Recoveries..................................... S-15
Weighted Average Lives of the Securities.................... S-17
Certificate Factors and Pool Factors........................ S-19
Use of Proceeds............................................. S-19
Description of the Certificates............................. S-20
General................................................... S-20
Interest.................................................. S-20
Principal................................................. S-20
Mandatory Prepayment...................................... S-21
Voting Rights............................................. S-21
Notices................................................... S-21
Distributions on the Certificates........................... S-21
General................................................... S-21
Servicing Compensation and Reimbursement of Servicer
Advances................................................ S-21
Distributions............................................. S-22
Reserve Fund.............................................. S-22
Yield Supplement Account.................................. S-23
Ratings of the Certificates................................. S-24
Material Federal Income Tax Consequences.................... S-24
Treatment of Trust as Grantor Trust....................... S-24
Tax Treatment of Investors................................ S-24
Erisa Considerations........................................ S-25
Class A Certificates...................................... S-25
Class B Certificates...................................... S-26
All Certificates.......................................... S-27
Legal Proceedings........................................... S-27
Underwriting................................................ S-27
Legal Matters............................................... S-28
Glossary.................................................... S-29
</TABLE>
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates in two separate
documents that offer varying levels of detail:
- the accompanying prospectus--which provides general information, some of
which may not apply to a particular class of certificates including your
class, and
- this prospectus supplement--which provides a summary of the specific terms
of your class of certificates.
Certain terms used in this prospectus supplement are defined under the
caption "GLOSSARY" beginning on page in this prospectus supplement.
You should rely on the information contained in this document, including the
information described under the heading "WHERE YOU CAN FIND MORE INFORMATION" in
the accompanying prospectus. We have not authorized anyone to provide you with
any different information or make any representation not contained in this
prospectus supplement. If anyone makes such a representation to you, you should
not rely on it.
If you have received a copy of this prospectus supplement and the
accompanying prospectus in an electronic format, and if the legal prospectus
delivery period has not expired, you may obtain a paper copy of this prospectus
supplement and the accompanying prospectus from Dealer Auto Receivables Corp. at
230 West Monroe Street, Chicago, Illinois 60606, telephone number (312)
456-1250, or an underwriter by asking any of them for it.
i
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following is only a summary of selected information from this prospectus
supplement and provides a general overview of relevant terms of the
certificates. It does not contain all the information that may be important to
you. You should read carefully this entire prospectus supplement and the
accompanying prospectus to understand all of the terms of the offering. In
addition, you may wish to read the documents governing the transfers and
servicing of the contracts, the formation of the trust and the issuance of the
certificates. Those documents have been filed as exhibits to the registration
statement.
There are material risks associated with an investment in the securities.
See "RISK FACTORS" in this prospectus supplement and in the accompanying
prospectus for a discussion of factors you should consider before investing in
the certificates.
<TABLE>
<S> <C>
Trust........................................... Dealer Auto Receivables Grantor Trust [--]. The
depositor will establish the trust pursuant to a
pooling and servicing agreement.
Trustee......................................... The trustee will be [ ], acting not in its
individual capacity but solely as trustee under the
pooling and servicing agreement. The trustee's
address and phone number is [ ]. See "THE
TRUST" in this prospectus supplement.
Cut-off Date.................................... [ ].
Closing Date.................................... On or about [ ].
TERMS OF THE CERTIFICATES:
A. Distribution Dates........................... The trust will distribute interest and principal in
respect of the certificates on the [ ] day of
each month or if that day is not a business day,
the next business day. The first distribution date
is [ ].
B. Record Dates................................. The last business day of the preceding calendar
month.
C. Interest..................................... PASS-THROUGH RATE:
The trust will distribute interest in respect of
the certificates at the pass-through rates shown on
the cover of this prospectus supplement.
INTEREST PERIODS:
Interest on the certificates will accrue in the
following manner:
</TABLE>
<TABLE>
<CAPTION>
INTEREST PERIOD
---------------------------------------- DAY COUNT
FROM (INCLUDING) TO (EXCLUDING) CONVENTION
---------------- ------------------- ----------
<S> <C> <C>
15th of prior 15th of current 30/360
month.............. month
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C>
DISTRIBUTION OF INTEREST:
On each distribution date after payment of the base
servicing fee and the trustee's fee and
reimbursement of servicer advances, the trust will
distribute interest in respect of the certificates
from the funds available to it to pay interest and
expenses on each distribution date.
The funds available to the trustee to distribute
interest in respect of the certificates on each
distribution date will generally consist of
interest collections on the contracts received by
the servicer during the prior calendar month, less
the base servicing fee payable to the servicer, the
trustee fee payable to the trustee and amounts
applied to reimburse servicer advances relating to
delinquent interest payments, and amounts withdrawn
from the reserve fund.
If the funds available to the trustee to distribute
interest in respect of the Class A Certificates are
insufficient on any distribution date, funds
available to the trustee on that distribution date
to distribute principal in respect of the Class B
Certificates will be applied to distribute interest
in respect of the Class A Certificates.
No distributions of interest in respect of the
Class B Certificates will be made on any
distribution date until interest in respect of the
Class A Certificates has been distributed.
See "DISTRIBUTIONS ON THE CERTIFICATES" in this
prospectus supplement.
D. Principal.................................... On each distribution date, the trust will
distribute principal of the certificates.
The funds available to the trustee to distribute
principal in respect of the certificates on each
distribution date will generally consist of
collections on the contracts received by the
servicer during the prior calendar month, less the
base servicing fee payable to the servicer, the
trustee fee payable to the trustee, amounts applied
to reimburse servicer advances and amounts
distributed in respect of interest on the
certificates, and amounts withdrawn from the
reserve fund.
The amount of principal distributable will be based
on the amount by which:
</TABLE>
<TABLE>
<S> <C>
- the aggregate principal balance of the contracts
as of the first day of the calendar month prior to
the month in which that distribution date occurs,
exceeds
</TABLE>
S-2
<PAGE>
<TABLE>
<S> <C>
- the aggregate principal balance of the
contracts as of the end of the prior calendar month,
excluding certain non-collectible or defaulted
contracts and contracts to be repurchased by
depositor or purchased by the servicer due to
certain breaches.
</TABLE>
<TABLE>
<S> <C>
See the definitions of "MONTHLY PRINCIPAL" and
"PRINCIPAL BALANCE" in the Glossary for a precise
calculation of the amount of principal
distributable on the certificates on each
distribution date.
The holders of the Class A Certificates and the
Class B Certificates will be entitled to receive a
pro rata share of the amounts to be distributed in
respect of principal. However, no distributions of
principal in respect of the Class B Certificates
will be made on any distribution date until
interest and principal in respect of the Class A
Certificates has been distributed.
See "DESCRIPTION OF THE CERTIFICATES--PRINCIPAL"
and "DISTRIBUTIONS ON THE
CERTIFICATES--DISTRIBUTIONS" in this prospectus
supplement.
E. Final Scheduled Distribution Date............ The trust will reduce the outstanding principal
balance of the certificates to zero no later than
the date shown on the cover of this prospectus
supplement.
F. Mandatory Prepayment......................... The seller, at its option, may repurchase the
contracts on any distribution date on which the
aggregate outstanding principal balance of the
certificates is less than 10% of the initial
aggregate principal balance of the contracts. If
the seller purchases the contracts the trust will
prepay the certificates in full on the distribution
date.
See "DESCRIPTION OF THE CERTIFICATES--MANDATORY
PREPAYMENT" in this prospectus supplement.
THE TRUST'S ASSETS
A. The Contracts................................ Our main source of funds for making distributions
on the certificates will be collections on the
contracts.
As of the cut-off date, the contracts had the
following characteristics:
</TABLE>
<TABLE>
<S> <C>
Aggregate principal balance......... $
Number of contracts................. [ ]
Average principal balance........... $
Weighted average annual percentage
rate.............................. %
Weighted average remaining term to
maturity.......................... months
Approximate weighted average
original term to maturity......... months
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
Geographic concentration:
PRINCIPAL
BALANCE
STATE CONCENTRATION
------------------------------------ --------
<S> <C>
[ ].......................... %
[ ].......................... %
[ ].......................... %
[ ].......................... %
[ ].......................... %
</TABLE>
<TABLE>
<S> <C>
No other state represented more than 5% of the
aggregate principal balance of the contracts as of
the cut-off date.
All of the contracts as of the cut-off date are
simple interest contracts. A simple interest
contract provides for amortization of the loan over
a series of equal monthly installments where
payments received are applied first to pay accrued
interest to the date preceding the date the payment
is received and second to pay principal.
The portion of the scheduled monthly payments and
prepayments that will be allocable to principal is
different for each of the two types of contracts.
See "THE CONTRACTS" in the accompanying prospectus.
You should refer to "THE CONTRACTS" in this
prospectus supplement and the accompanying
prospectus for more information on the contracts.
B. Reserve Fund................................. On the closing date, the depositor will establish a
reserve fund in the name of , as collateral
agent. The reserve fund provides you with limited
protection in the event collections from obligors
on the contracts are insufficient to make payment
on the certificates. We cannot assure you, however,
that this protection will be adequate to prevent
shortfalls in amounts available to make
distributions on the certificates.
The initial balance of the reserve fund will be
$ . The amount required to be on deposit in
the reserve fund on each distribution date is
$ .
If the amount on deposit in the reserve fund on any
distribution date is less than the required amount,
the trustee will use the funds available on that
distribution date after payment of the base
servicing fee and the trustee's fee, reimbursement
of servicer advances and distributions of interest
and principal in respect of the certificates to
make a deposit into the reserve fund. Amounts on
deposit in the reserve fund on any distribution
date in excess of the required amount will be paid
to the depositor.
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
If on any distribution date the funds available to
the trustee to distribute principal and interest in
respect of the certificates are insufficient, the
trust will use funds in the reserve fund to make
distributions to the certificateholders to cover
any shortfalls.
If on the final scheduled distribution date of the
certificates, the certificate balances of the
certificates has not been reduced to zero, the
trustee will use funds in the reserve fund to
reduce the certificates balances to zero.
C. Yield Supplement Account..................... On the closing date, the depositor will establish a
yield supplement account in the name of , as
collateral agent. The initial deposit into the
yield supplement account will be $ . No
additional deposits to the yield supplement account
will be made after the closing date.
On each distribution date, the trustee will
withdraw from the yield supplement account and
deposit in the collection account the aggregate
amount by which:
</TABLE>
<TABLE>
<S> <C>
- one month's interest on the principal balance of
each contract at a rate equal to the weighted
average pass- through rate on the certificates
plus 1.00% exceeds
- one month's interest on that principal balance at
the annual percentage rate of that contract.
</TABLE>
<TABLE>
<S> <C>
For detailed information about the yield supplement
account, please see "DISTRIBUTIONS ON THE
CERTIFICATES-- YIELD SUPPLEMENT ACCOUNT" in this
prospectus supplement and "INFORMATION REGARDING
THE SECURITIES--YIELD SUPPLEMENT ACCOUNT AND YIELD
SUPPLEMENT AGREEMENT" in the accompanying
prospectus.
Servicing; Servicing Fee........................ Premier Auto Finance, Inc., as the servicer, will
be responsible for servicing, managing and
administering the contracts and related interests,
and enforcing and making collections on the
contracts.
ADVANCES:
The servicer will make advances for delinquent
interest payments, to the extent it determines that
advances will be recoverable in future periods.
Servicer advances will be reimbursed from the
delinquent payments when made by the obligors and
from collections on other contracts when the
servicer determines that a contract as to which it
has made advances is a defaulted contract.
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
SERVICING FEE:
The servicer's base monthly fee payable on each
distribution date will equal the product of:
</TABLE>
<TABLE>
<S> <C>
- one twelfth ( 1/12th) of one percent (1%) and
- the aggregate principal balance of the contracts
as of the last day of the second calendar month
preceding the month in which that distribution
date falls.
</TABLE>
<TABLE>
<S> <C>
The trust will pay the base servicing fee to the
servicer with the funds available to it to pay
interest and expenses on each distribution date
after the reimbursement of servicer advances.
The servicer will also be entitled to retain any
late payment fees, prepayment charges, if any, and
other similar fees and charges.
See "DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENT--SERVICING" in the accompanying
prospectus.
Credit Enhancement.............................. Losses and other shortfalls of cash flow will be
covered by payments on other contracts, withdrawals
from the reserve fund and allocations of available
funds to the Class A Certificates.
The credit enhancement for the certificates is as
follows:
</TABLE>
<TABLE>
<S> <C>
A Certificates - subordination of
the Class B
Certificates
- reserve fund
B Certificates - reserve fund
</TABLE>
<TABLE>
<S> <C>
Ratings......................................... On the closing date, each class of certificates
will have the following ratings by Standard &
Poor's Ratings Services and Moody's Investors
Service, Inc.:
</TABLE>
<TABLE>
<CAPTION>
CLASS S&P MOODY'S
----- ---------------- ----------------
<S> <C> <C>
A
B
</TABLE>
<TABLE>
<S> <C>
See "RATINGS OF THE CERTIFICATES" in this
prospectus supplement and "RATINGS OF THE
SECURITIES" in the accompanying prospectus.
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
Material Federal Income Tax
Consequences.................................. Winston & Strawn, as federal tax counsel to the
trust, has delivered its opinion that:
- the trust will be treated as a grantor trust
for federal income tax purposes and not as an
association (or publicly traded partnership)
taxable as a corporation; and
- each certificateholder will be treated as the
owner of a pro rata undivided interest in the
income and assets of the trust.
ERISA Considerations............................ Subject to the considerations and conditions
discussed under "ERISA CONSIDERATIONS" in this
prospectus supplement, the Class A Certificates may
be purchased by an employee benefit plan that is
subject to ERISA or Section 4975 of the Code.
Employee benefit plans and other retirement
arrangements that are subject to ERISA or Section
4975 of the Code are not permitted to acquire or
hold Class B Certificates except through an
"insurance company general account" in the manner
discussed under "ERISA CONSIDERATIONS" in this
prospectus supplement and the accompanying
prospectus.
You should refer to "ERISA CONSIDERATIONS" in the
accompanying prospectus for more detailed
information regarding the ERISA eligibility of any
class of certificates.
Mailing Address and Telephone Number of
Principal Executive Offices................... The mailing address of the seller is 230 West
Monroe Street, Chicago, Illinois 60606, telephone
(312) 456-1300. The mailing address of the
depositor is 230 West Monroe Street, Chicago,
Illinois 60606, telephone (312) 456-1250.
</TABLE>
S-7
<PAGE>
RISK FACTORS
The following risk factors and the risk factors in the accompanying
prospectus describe the principal risk factors relating to an investment in the
certificates. You should carefully consider the following risk factors before
you invest in the certificates. You should also carefully consider the risk
factors beginning on page of the accompanying prospectus.
THE CLASS A CERTIFICATES WILL BE ENTITLED TO INTEREST OR PRINCIPAL DISTRIBUTIONS
BEFORE THE CLASS B CERTIFICATES
The holders of the Class B Certificates will not receive any distribution of
interest until the full amount of interest is distributed to the holders of the
Class A Certificates on each distribution date. The holders of the Class B
Certificates will not receive any distribution of principal until the full
amount of principal and interest is distributed to the holders of the Class A
Certificates on each distribution date. The subordination of the Class B
Certificates to the Class A Certificates means that the Class B Certificates are
more likely to suffer the consequences of delinquent payments and defaults on
the contracts than the Class A Certificates having prior distribution rights.
See "DISTRIBUTIONS ON THE CERTIFICATES--DISTRIBUTIONS" in this prospectus
supplement.
Moreover, the Class A Certificates could lose the credit enhancement
provided by the Class B Certificates and the reserve fund if delinquencies and
defaults on contracts increase and the collections on contracts and amounts in
the reserve fund are insufficient to make distributions in respect of even the
Class A Certificates.
ADVERSE EVENTS IN [FIVE] HIGH CONCENTRATION STATES MAY CAUSE INCREASED DEFAULTS
AND DELINQUENCIES
If adverse events or economic conditions were particularly severe in a
geographic region where there is a substantial concentration of obligors, the
amount of delinquent payments and defaults on the contracts may increase. As a
result, the overall timing and amount of collections on the contracts may differ
from what you expect, and you may experience delays or reductions in
distributions.
The following are the approximate percentages of the initial contract pool
principal balance whose obligors are located in the following states:
- [ %] in [ ],
- [ %] in [ ],
- [ %] in [ ],
- [ %] in [ ], and
- [ %] in [ ].
The remaining states accounted for [ ]% of the aggregate principal
balance of the contracts, and none of these remaining states accounted for more
than 5% of the initial aggregate principal balance of the contracts. For a
discussion of the breakdown of the contracts by state, see "THE CONTRACTS" in
this prospectus supplement.
Although we do not know of any matters likely to increase the rate of
delinquencies or defaults in these states, an example of an adverse event
specific to a geographic region is the possibility of a catastrophic earthquake
in California. An earthquake in California could have negative regional economic
repercussions and potentially cause obligors in that region to delay or reduce
their payments on the contracts. Additionally, a substantial downturn in the
financial services industry, which is highly concentrated in the states of New
York and New Jersey, or in the oil and gas industry, which is concentrated in
the state of Texas could reduce the income of obligors in those states and
ultimately
S-8
<PAGE>
reduce the associated obligor's ability to make timely payments on their related
contracts. In addition, the following economic conditions may affect payments:
- unemployment,
- interest rates,
- inflation rates, and
- consumer perceptions of the economy.
THE CERTIFICATES MAY NOT BE SUITABLE INVESTMENTS FOR ALL INVESTORS
The certificates may not be a suitable investment for any investor that
requires a regular or predictable schedule of principal payments. We suggest
that only investors who, either alone or with their financial, tax and legal
advisors, have the expertise to analyze the prepayment, reinvestment and default
risks, the tax consequences of an investment and the interaction of these
factors consider purchasing the certificates.
BECAUSE THE CERTIFICATES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY BE
EXERCISED INDIRECTLY
Because the certificates will be issued in book-entry form, you will be
required to hold your interest in the certificates through The Depository Trust
Company in the United States, or Clearstream (formerly Cedelbank) or the
Euroclear System in Europe. Transfers of interests in the certificates within
DTC, Clearstream or Euroclear must be made in accordance with the usual rules
and operating procedures of those systems. So long as the certificates are in
book-entry form, you will not be entitled to receive a physical certificate
representing your interest. The certificates will remain in book-entry form
except in the limited circumstances described under the caption "INFORMATION
REGARDING THE SECURITIES--BOOK-ENTRY REGISTRATION" in the accompanying
prospectus. Unless and until the certificates in this prospectus supplement
cease to be held in book-entry form, the trustee will not recognize you as a
"certificateholder", as such term is used in the pooling and servicing
agreement. As a result, you will only be able to exercise the rights of
certificateholders indirectly through DTC, if in the United States, and its
participating organizations, or Clearstream and Euroclear, in Europe, and their
participating organizations. Holding the certificates in book-entry form could
also limit your ability to pledge your certificates to persons or entities that
do not participate in DTC, Clearstream or Euroclear and to take other actions
that require a physical certificate representing the certificates.
Interest and principal on the certificates will be distributed by the trust
to DTC as the record holder of the certificates while they are held in
book-entry form. DTC will credit distributions received from the trustee to the
accounts of its participants which, in turn, will credit those amounts to
certificateholders either directly or indirectly through indirect participants.
This process may delay your receipt of principal and interest distributions from
the trust.
HOLDERS OF CLASS B CERTIFICATES MAY HAVE TO PAY TAXES ON AMOUNTS NOT ACTUALLY
RECEIVED
For federal income tax purposes, amounts otherwise payable to the holders of
the Class A Certificates will be deemed to have been received by the holders of
the Class B Certificates and then paid by them to the holders of the Class A
Certificates pursuant to a guaranty. Accordingly, the holders of the Class A
Certificates could be liable for taxes on amounts not actually received. See
"MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in the accompanying prospectus.
THE ABSENCE OF AN EXISTING MARKET FOR THE CERTIFICATES MAY LIMIT YOUR ABILITY TO
RESELL THE CERTIFICATES
There is currently no public market for the certificates and we cannot
assure you that one will develop. Thus, you may not be able to resell your
certificates at all, or may be able to do so only at a substantial discount. The
underwriters may assist in resales of the certificates but they are not
obligated
S-9
<PAGE>
to do so. [Other than the Luxembourg Exchange], we do not intend to apply for
listing of the certificates on any securities exchange or for the inclusion of
the certificates on any automated quotation system. We cannot predict whether
there will be a secondary market for these types of certificates or if one
develops, how liquid it will be.
THE TRUST
GENERAL
The depositor will create the trust pursuant to a pooling and servicing
agreement dated as of [ ], among Dealer Auto Receivables Corp., as
depositor of the contracts to the trust, Premier Auto Finance, Inc., as servicer
of the contracts and the trustee.
Under a purchase agreement, dated as of , between Premier Auto
Finance, L.P., as seller, and Dealer Auto Receivables Corp., the seller will
sell all of the contracts and the related property to the depositor.
Pursuant to the pooling and servicing agreement, the depositor will transfer
all of the contracts and related property to the trust in exchange for the
certificates.
The property of the trust will consist of:
- the contracts and the right to receive all payments received on the
contracts on or after the cut-off date;
- security interests in the financed vehicles securing the contracts and any
related property;
- rights with respect to any repossessed financed vehicles;
- the rights to proceeds from claims on theft, physical damage, credit life
and disability insurance policies covering the financed vehicles or the
obligors;
- the seller's rights against the originating dealers under the dealer
agreements and against other third parties under the agreements pursuant
to which the seller purchased the contracts;
- certain rebates of premiums and other amounts relating to insurance
policies, extended service contracts or other repair agreements and other
items financed under the contracts;
- the depositor's rights against the seller under the purchase agreement
pursuant to which the seller sold the pool of contracts to the depositor
and against the performance guarantor under the performance guarantee
pursuant to which the performance guarantor guaranteed the seller's
obligations under the purchase agreement;
- the right to receive payments from the depositor obligated to repurchase
contracts which do not meet specified representations made by depositor in
the pooling and servicing agreement;
- the trust's rights against the servicer under the pooling and servicing
agreement;
- amounts held in the collection account and the paid-ahead account to be
established and maintained under the pooling and servicing agreement; and
- all proceeds of the foregoing.
The reserve fund and the yield supplement account will be maintained in the
name of , as collateral agent for the benefit of the
certificateholders, but will not be part of the trust.
The certificates represent fractional undivided interests in the trusts. See
"DESCRIPTION OF THE CERTIFICATES" in this prospectus supplement.
S-10
<PAGE>
THE TRUSTEE
[ ] will be the trustee under the pooling and servicing agreement. The
trustee is a [ ] banking association and its principal offices are
located at [ ].
The fees of the trustee in connection with its duties under the pooling and
servicing agreement will be paid out of Available Amounts. See "DISTRIBUTIONS ON
THE CERTIFICATES--DISTRIBUTIONS". The trustee's fees will equal $ per month.
The trustee will also be entitled to indemnification by the servicer for, and
will be held harmless against, any loss, liability, fee, disbursement or expense
incurred by the trustee not resulting from its own willful misfeasance, bad
faith or negligence. The servicer will also indemnify the trustee for specified
taxes that may be asserted in connection with the transaction.
THE SELLER AND THE SERVICER
Information regarding the seller and the servicer is set forth under the
captions "THE SELLER AND THE ORIGINATING DEALERS" and "THE SERVICER" in the
accompanying prospectus.
THE PERFORMANCE GUARANTOR
Virginia Surety Company, Inc. was incorporated in Illinois in January 1982.
Virginia Surety Company, Inc. is an Illinois licensed insurance company that
underwrites and administers comprehensive extended warranty and consumer service
programs. It is a wholly owned subsidiary of Aon Corporation. Its principal
executive offices are located at 123 North Wacker Drive, Chicago, Illinois 60606
(telephone number (312) 701-4670). As of December 31, 1999, Virginia Surety
Company, Inc. had total assets of $1,442,316,483 and stockholder' equity of
$318,749,189. As of December 31, 1998, Virginia Surety Company, Inc. had total
assets of $1,386,694,811 and stockholders' equity of $330,048,524. The claims
paying ability of Virginia Surety Company is rated A+ by A.M. Best.
THE CONTRACTS
DESCRIPTION OF THE CONTRACTS
All of the contracts are retail installment contracts originated by
originating dealers on or after [ ]. The contacts were selected on a
random basis from the seller's portfolio of contracts based on several criteria,
including that each contract:
- has a contractual annual percentage rate that equals or exceeds [ ]%;
- has a remaining term to maturity as of the cut-off date of not less than
[ ] months and not more than [ ] months;
- is not past due as of the cut-off date;
- was originated prior to [ ];
- has been entered into by an obligor that was not in bankruptcy proceedings
or is bankrupt or insolvent;
- is secured by a financed vehicle that has not been repossessed; and
- has an original term to maturity of not less than and not more than
.
See "THE CONTRACTS" in the accompanying prospectus for a further description
of the contracts.
S-11
<PAGE>
STATISTICS RELATING TO THE CONTRACTS
The aggregate principal balance of the contracts as of the cut-off date was
$[ ]. All of the contracts constituted simple interest contracts. See
"THE CONTRACTS" in the accompanying prospectus for a further description of the
characteristics of simple interest contracts.
The following tables set forth the characteristics of the contracts as of
the cut-off date. The percentages shown in these tables may not total due to
rounding.
COMPOSITION OF THE CONTRACTS
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED AVERAGE
INITIAL AVERAGE AVERAGE WEIGHTED AVERAGE INITIAL
AGGREGATE ORIGINAL ANNUAL AVERAGE REMAINING PRINCIPAL
NUMBER OF PRINCIPAL PRINCIPAL PERCENTAGE ORIGINAL TERM TERM BALANCE
CONTRACTS BALANCE BALANCE RATE (RANGE) (RANGE) (RANGE) (RANGE)
- --------------------- --------- --------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
[ ] $ [ ] $ [ ] [ ]% [ ] [ ] $ [ ]
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY ANNUAL PERCENTAGE RATE
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
NUMBER OF INITIAL PRINCIPAL AGGREGATE PRINCIPAL
RANGE OF APRS (%) CONTRACTS BALANCE BALANCE
- ----------------- --------- ----------------- ---------------------
<S> <C> <C> <C>
Totals.............................................
</TABLE>
GEOGRAPHICAL DISTRIBUTION OF THE CONTRACTS
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
NUMBER OF INITIAL PRINCIPAL AGGREGATE PRINCIPAL
STATE CONTRACTS BALANCE BALANCE
- ----- --------- ----------------- ---------------------
<S> <C> <C> <C>
Alaska.............................................
Arizona............................................
Arkansas...........................................
California.........................................
Colorado...........................................
Connecticut........................................
Delaware...........................................
Florida............................................
Georgia............................................
Hawaii.............................................
Idaho..............................................
Illinois...........................................
Indiana............................................
Iowa...............................................
Kansas.............................................
Kentucky...........................................
Louisiana..........................................
Maine..............................................
Maryland...........................................
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
NUMBER OF INITIAL PRINCIPAL AGGREGATE PRINCIPAL
STATE CONTRACTS BALANCE BALANCE
- ----- --------- ----------------- ---------------------
<S> <C> <C> <C>
Massachusetts......................................
Michigan...........................................
Minnesota..........................................
Mississippi........................................
Missouri...........................................
Montana............................................
Nebraska...........................................
Nevada.............................................
New Hampshire......................................
New Jersey.........................................
New Mexico.........................................
New York...........................................
North Carolina.....................................
North Dakota.......................................
Ohio...............................................
Oklahoma...........................................
Oregon.............................................
Pennsylvania.......................................
Rhode Island.......................................
South Carolina.....................................
South Dakota.......................................
Tennessee..........................................
Texas..............................................
Utah...............................................
Vermont............................................
Virginia...........................................
Washington.........................................
West Virginia......................................
Wisconsin..........................................
Wyoming............................................
-------- ------------ -----------
Total..............................................
======== ============ ===========
</TABLE>
REMAINING TERMS OF CONTRACTS
<TABLE>
<CAPTION>
REMAINING TERMS AGGREGATE INITIAL PERCENTAGE OF
OF CONTRACTS AGGREGATE NUMBER PRINCIPAL AGGREGATE INITIAL
(MONTHS) OF CONTRACTS BALANCE PRINCIPAL BALANCE
- --------------- ---------------- ----------------- -----------------
<S> <C> <C> <C>
</TABLE>
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding maturity and prepayment considerations with respect to
the certificates is set forth under "WEIGHTED AVERAGE LIVES OF THE SECURITIES"
in the accompanying prospectus.
S-13
<PAGE>
Because the rate of distribution of principal of the certificates depends
primarily on the rate of payment of the principal balances of the contracts,
final distribution on the certificates could occur significantly earlier or
later than the final scheduled distribution date. You will bear the risk of
being able to reinvest principal distributions on the certificates at yields at
least equal to the yield on your certificates. We cannot predict the rate of
prepayments.
Although the contracts have different annual percentage rates,
disproportionate rates of prepayments of contracts with higher annual percentage
rates will generally not affect the yield to you. However, higher rates of
prepayments of contracts with higher annual percentage rates will decrease the
amount available to cover delinquencies and defaults on the contracts and may
decrease the amounts available to be deposited in the reserve fund.
STATISTICS RELATING TO DELINQUENCIES AND LOSSES
The following table shows delinquency statistics for the seller's portfolio
of retail installment contracts serviced by the servicer. The contracts were
originated in accordance with the underwriting standards described in the
accompanying prospectus under "THE SERVICER--UNDERWRITING AND ORIGINATION". For
these purposes a "DELINQUENCY" means that the obligor on the contract has failed
to make a required scheduled payment in an amount equal to at least 95% of the
scheduled payment for the indicated number of days past the due date. These
statistics are not necessarily indicative of the future performance of the
contracts.
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------- -------------------- -------------------- --------------------
NUMBER NUMBER NUMBER NUMBER
DOLLARS OF DOLLARS OF DOLLARS OF DOLLARS OF
(000'S) CONTRACTS (000'S) CONTRACTS (000'S) CONTRACTS (000'S) CONTRACTS
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding Principal
Amount.....................
======== ======== ======== ======== ======== ======== ======== ========
Delinquencies($)(1)
31-60 Days.................
61-90 Days.................
91 Days or More............
-------- -------- -------- -------- -------- -------- -------- --------
Total Delinquencies..........
Repossession Inventory.......
-------- -------- -------- -------- -------- -------- -------- --------
Total Delinquencies &
Repossession Inventory.....
======== ======== ======== ======== ======== ======== ======== ========
Delinquencies (%)(1)(2)
31-60 Days.................
61-90 Days.................
91 Days or More............
-------- -------- --------
Total Delinquencies(2).......
Repossession Inventory(2)....
-------- -------- --------
Total Delinquencies &
Repossession
Inventory(2)...............
======== ======== ========
<CAPTION>
AS OF DECEMBER 31
--------------------
1995
--------------------
NUMBER
DOLLARS OF
(000'S) CONTRACTS
-------- ---------
<S> <C> <C>
Outstanding Principal
Amount.....................
======== ========
Delinquencies($)(1)
31-60 Days.................
61-90 Days.................
91 Days or More............
-------- --------
Total Delinquencies..........
Repossession Inventory.......
-------- --------
Total Delinquencies &
Repossession Inventory.....
======== ========
Delinquencies (%)(1)(2)
31-60 Days.................
61-90 Days.................
91 Days or More............
Total Delinquencies(2).......
Repossession Inventory(2)....
Total Delinquencies &
Repossession
Inventory(2)...............
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31
-------------------------------------------
2000 1999
-------------------- --------------------
NUMBER NUMBER
DOLLARS OF DOLLARS OF
(000'S) CONTRACTS (000'S) CONTRACTS
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Outstanding Principal Amount..................
======== ======== ======== ========
Delinquencies ($)(1)
31-60 Days..................................
61-90 Days..................................
91 Days or More.............................
-------- -------- -------- --------
Total Delinquencies...........................
Repossession Inventory........................
-------- -------- -------- --------
Total Delinquencies & Repossession
Inventory...................................
======== ======== ======== ========
Delinquencies (%)(1)(2)
31-60 Days..................................
61-90 Days..................................
91 Days or More.............................
-------- --------
Total Delinquencies(2)........................
Repossession Inventory(2).....................
-------- --------
Total Delinquencies & Repossession
Inventory(2)................................
======== ========
</TABLE>
- ------------------------------
(1) Delinquencies include principal amounts only.
(2) As a percent of outstanding principal in dollars.
LOSSES AND RECOVERIES
The following table shows loss statistics for the seller's portfolio of
retail installment contracts serviced by the servicer. The servicer generally
charges-off a contract (i) when the servicer deems the contract uncollectible;
(ii) during the month when 5% or more of an installment due under the contract
becomes more than 120 days past due; (iii) if the financed vehicle is
repossessed, when all sale proceeds, insurance claims or refunds of financed
insurance policies and extended warranties have been received with respect to
the related repossessed financial vehicle; or (iv) when an obligor files for
bankruptcy and the servicer determines that its loss is known. Recoveries
generally include amounts received with respect to contracts previously
charged-off, except for proceeds realized in connection with the sale of the
repossessed vehicles. Gross charge-offs are the remaining principal balances
less proceeds from the sale of repossessed vehicles. Net charge-offs mean gross
charge-offs minus recoveries of contracts previously charged off. These
statistics are not necessarily indicative of the future performance of the
contracts.
<TABLE>
<CAPTION>
12 MONTHS ENDED
------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of Contracts(1)..................
Period End Outstanding Principal
Amount................................ $ $ $
Average Outstanding Principal Amount
(2)................................... $ $ $
Number of Repossessions in Inventory....
Number of Gross Charge-Offs.............
Gross Charge-Offs....................... $ $ $
Gross Charge-Offs as a % of Period End
Outstanding Principal Amount..........
Gross Charge-Offs as a % of Average
Outstanding Principal Amount..........
Recoveries.............................. $ $ $
Net Charge-Offs......................... $ $ $
Net Charge-Offs as a % of Period End
Outstanding Principal Amount..........
Net Charge-Offs as a % of Average
Outstanding Principal Amount..........
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
3 MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
Number of Contracts(1)......................................
Period End Outstanding Principal Amount..................... $ $
Average Outstanding Principal Amount (2).................... $ $
Number of Repossessions in Inventory........................
Number of Gross Charge-Offs.................................
Gross Charge-Offs........................................... $ $
Gross Charge-Offs as a % of Period End Outstanding Principal
Amount....................................................
Gross Charge-Offs as a % of Average Outstanding Principal
Amount....................................................
Recoveries.................................................. $ $
Net Charge-Offs............................................. $ $
Net Charge-Offs as a % of Period End Outstanding Principal
Amount....................................................
Net Charge-Offs as a % of Average Outstanding Principal
Amount....................................................
</TABLE>
- ------------------------
(1) Number of contracts as of period end.
(2) The average for each period presented was computed by taking a simple
average of monthly average outstanding principal amounts for such period.
TWELVE MONTHS ENDED DECEMBER 31, 1999 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1998.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to .
Gross charge-offs as a percentage of the period end outstanding principal amount
of the contracts [increased/decreased] from [ ]% to [ ]%. The
[increase/decrease] is attributable to . The number of contracts
[increased/decreased] from [ ] to [ ] due to .
We know of no trends that are likely to increase the rate of delinquencies or
losses on the contracts.
TWELVE MONTHS ENDED DECEMBER 31, 1998 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1997.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to .
Gross charge-offs as a percentage of the period end outstanding principal amount
of the contracts [increased/decreased] from [ ]% to [ ]%. The
[increase/decrease] is attributable to . The number of contracts
[increased/decreased] from [ ] to [ ] due to .
TWELVE MONTHS ENDED DECEMBER 31, 1997 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1996.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to .
Gross charge-offs as a percentage of the period end outstanding principal amount
of the contracts [increased/decreased] from [ ]% to [ ]%. The
[increase/decrease] is attributable to . The number of contracts
[increased/decreased] from [ ] to [ ] due to .
S-16
<PAGE>
TWELVE MONTHS ENDED DECEMBER 31, 1996 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1995.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to .
Gross charge-offs as a percentage of the period end outstanding principal amount
of the contracts [increased/decreased] from [ ]% to [ ]%. The
[increase/decrease] is attributable to . The number of contracts
[increased/decreased] from [ ] to [ ] due to .
THREE MONTHS ENDED MARCH 31, 2000 VERSUS THREE MONTHS ENDED MARCH 31, 1999.
The amounts classified as delinquent as a percentage of the seller's
portfolio of retail installment contracts serviced by the servicer
[increased/decreased] from [ ]% to [ ]%. The [increase/ decrease] is
attributable to . Repossession inventory [increased/decreased] from
[ ] to [ ]. The [increase/decrease] is attributable to .
Gross charge-offs as a percentage of the period end outstanding principal amount
of the contracts [increased/decreased] from [ ]% to [ ]%. The
[increase/decrease] is attributable to . The number of contracts
[increased/decreased] from [ ] to [ ] due to .
We know of no trends that are likely to increase the rate of delinquencies or
losses on the contracts.
WEIGHTED AVERAGE LIVES OF THE SECURITIES
The rate of payments on contracts will directly affect
- the rate at which you receive distributions of principal in respect of
your certificates; and
- if you purchase your certificates at a discount or a premium, your yield
to maturity.
The payments on the contracts may be in the form of payments scheduled to be
made under the terms of the contracts, prepayments or liquidations due to
default, casualty and other events which we cannot predict. The depositor will
be obligated to repurchase contracts from the trust as a result of a breach of a
representation or warranty with respect to that contract that materially and
adversely affects the trust's or the securityholders' interest in the contract
or the collectibility of the contract. In such event, the seller, or the
performance guarantor, will be obligated to repurchase the contract from the
depositor. In addition, the servicer will be obligated to purchase contracts
from the trust as a result of a breach of certain covenants with respect to the
contract. Any payments for these reasons, other than scheduled payments may
result in distributions to you of amounts which would otherwise have been
distributed over the remaining term of the contracts. Each prepayment,
liquidation or repurchase of a contract will shorten the weighted average
remaining term of the contracts and the weighted average lives of the
certificates. See "RISK FACTORS--YOU MAY EXPERIENCE REDUCED RETURNS ON YOUR
INVESTMENT RESULTING FROM PREPAYMENTS ON THE CONTRACTS, REPURCHASES OF THE
CONTRACTS, LIQUIDATIONS OF DEFAULTED CONTRACTS AND EARLY TERMINATION OF THE
TRUST" in the accompanying prospectus.
Prepayments on automotive receivables can be measured relative to a payment
standard or model. In this prospectus supplement we use the Absolute Prepayment
Model ("ABS"), which represents an assumed rate of prepayment each month
relative to the original number of contracts in a pool of contracts. ABS further
assumes that all the contracts in question are the same size and amortize at the
same rate and that each contract in each month of its life will either be paid
as scheduled or be paid in full. For example, in a pool of contracts originally
containing 10,000 contracts, a 1% ABS rate means that 100 contracts 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 contracts.
S-17
<PAGE>
The information in the ABS Table was prepared on the assumption that:
- the contracts prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases,
- each scheduled monthly payment on each contract is scheduled to be made
and is made on the last day of each month and each month has 30 days,
- distributions are made on the certificates on each distribution date,
- the balance in the reserve fund on each distribution date is the required
amount described under "DISTRIBUTIONS ON THE CERTIFICATES--RESERVE FUND"
in this prospectus supplement and
- the seller does not purchase the contracts.
The ABS Table also assumes that the contracts have been aggregated into
hypothetical pools with all of the contracts within each pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools will be such that each pool will be fully amortized by the end of
its remaining term to maturity.
<TABLE>
<CAPTION>
REMAINING
AGGREGATE TERM TO ORIGINAL TERM
NUMBER OF PRINCIPAL MATURITY TO MATURITY
POOL CONTRACTS BALANCE APR (IN MONTHS) (IN MONTHS)
- ---- --------- --------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
The hypothetical pools each have an assumed cut-off date of [ ]. The
ABS Table indicates the projected weighted average life of each class of
securities and sets forth the percent of the initial principal amount of each
class of securities that is projected to be outstanding after each of the
distribution dates shown at various constant ABS percentages.
The actual characteristics and performance of the contracts will differ from
the assumptions used to prepare the ABS Table. The assumptions used are
hypothetical and have been provided to give a general sense of how the principal
cash flows might behave under varying prepayment rates. Any difference between
the assumptions and the actual characteristics and performance of the contracts
or actual prepayment experience will affect the percentages of initial Class A
and Class B certificate balances outstanding over time and the weighted average
lives of the certificates.
<TABLE>
<CAPTION>
CLASS A CERTIFICATES
-----------------------------------------
ASSUMED ABS PERCENTAGE(2)
-----------------------------------------
PAYMENT DATES 0.50% 1.00% 1.50% 2.00%
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted Average Life (years)(1)............................
Weighted Average Life to Call (years)(1)(3).................
Optional Call Date..........................................
</TABLE>
- ------------------------
(1) The weighted average life of a certificate is determined by (i) multiplying
the amount of each principal payment on a certificate by the number of years
from the date of the issuance of the certificate to the distribution date on
which it is made, (ii) adding the results and (iii) dividing the sum by the
initial principal certificate balance of the certificate.
(2) An asterisk "*" means a percent of initial principal balance of more than
zero and less than 0.5%.
S-18
<PAGE>
(3) This calculation assumes the seller repurchases the contracts at the first
opportunity.
<TABLE>
<CAPTION>
CLASS B CERTIFICATES
-----------------------------------------
ASSUMED ABS PERCENTAGE(2)
-----------------------------------------
PAYMENT DATES 0.50% 1.00% 1.50% 2.00%
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted Average Life (years)(1)............................
Weighted Average Life to Call (years)(1)(3).................
Optional Call Date..........................................
</TABLE>
- ------------------------
(1) The weighted average life of a certificate is determined by (i) multiplying
the amount of each principal payment on a certificate by the number of years
from the date of the issuance of the certificate to the distribution date on
which it is made, (ii) adding the results and (iii) dividing the sum by the
initial certificate balance of the certificate.
(2) An asterisk "*" means a percent of initial principal balance of more than
zero and less than 0.5%.
(3) This calculation assumes the seller repurchases the contracts at the first
opportunity.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
CERTIFICATE FACTORS AND POOL FACTORS
The "CLASS A CERTIFICATE FACTOR" will be a seven-digit decimal indicating
the certificate balance of the Class A Certificates on the distribution date as
a fraction of the certificate balance of the Class A Certificates as of the
closing date. The "CLASS B CERTIFICATE FACTOR" will be a seven-digit decimal
indicating the certificate balance of the Class B Certificates on the
distribution date as a fraction of the certificate balance of the Class B
Certificates as of the closing date. The servicer will compute the certificate
factors each month. Initially, each factor will be 1.0000000 and thereafter will
decline to reflect reductions in the certificate balances. The portion of the
certificate balance for any class of certificates for a given month allocable to
a certificateholder can be determined by multiplying the original denomination
of the holder's certificate by the related certificate factor for that month.
The "CLASS A POOL FACTOR" will be a seven-digit decimal indicating the
certificate balance of the Class A Certificates on the distribution date as a
fraction of the aggregate principal balance of the contracts as of the cut-off
date. The "CLASS B POOL FACTOR" will be a seven-digit decimal indicating the
certificate balance of the Class B Certificates on the distribution date as a
fraction of the aggregate principal balance of the contracts as of the cut-off
date. The servicer will compute the pool factors each month.
You will receive monthly reports concerning the distributions received on
the contracts, the aggregate principal balance for the contracts, the related
certificate factors and pool factors and various other items of information
pertaining to the trust. Furthermore, the trustee will furnish you with
information for tax reporting purposes not later than the latest date permitted
by law. See "DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS--SERVICING--STATEMENTS TO SECURITYHOLDERS" in the accompanying
prospectus.
USE OF PROCEEDS
The depositor will use all of the proceeds from the sale of the
certificates, after depositing funds into the reserve fund and the yield
supplement account and paying expenses, to pay the purchase price for the
contracts to the seller. The purchase price for the contracts is $ . The
seller will use the proceeds it receives to pay down a warehouse receivables
securitization facility.
S-19
<PAGE>
DESCRIPTION OF THE CERTIFICATES
This section supplements the information in the accompanying prospectus
under the caption "DESCRIPTION OF THE CERTIFICATES". However, as these
statements are only summaries, you should read the pooling and servicing
agreement, a form of which has been filed as an exhibit to the registration
statement of which the accompanying prospectus forms a part. A copy of the
pooling and servicing agreement is available to you upon request to the
depositor and will be filed with the Securities Exchange Commission following
the issuance of the certificates.
GENERAL
The certificates will be issued pursuant to the terms of the pooling and
servicing agreement among the trustee, the depositor and the servicer.
Two classes of certificates evidencing undivided ownership interests in the
trust, designated as the:
- Class A Certificates, and
- Class B Certificates
will be issued.
The Class A Certificates will evidence in the aggregate an undivided
ownership interest of approximately % of the trust and the Class B
Certificates will evidence in the aggregate an undivided ownership interest of
approximately % of the trust.
The certificates will be delivered in book-entry form only and be issued in
minimum denominations of $1,000.
INTEREST
Interest will be distributable in respect of the certificates at the fixed
pass-through rates for each class of certificates shown on the cover page of
this prospectus supplement.
The trust will distribute interest in respect of the certificates on each
distribution date from Available Interest and amounts withdrawn from the reserve
fund as set forth under "DISTRIBUTIONS ON THE CERTIFICATES--DISTRIBUTIONS"
below.
Interest will be distributable to you monthly on the [ ] of each month
or, if that date is not a business day, on the next succeeding business day and
will be calculated for the interest period from and including the th day
of the prior month(or from and including the closing date, in the case of the
initial distribution date) to but excluding the th day of the next month
on the basis of a 360-day year consisting of twelve 30-day months.
If on any distribution date, the trust does not have sufficient funds to
make a full distribution of interest on any class the certificates, the amount
of the shortfall will be carried forward, and together with interest on the
shortfall amount at the applicable pass-through rate for that class, added to
the amount of interest distributable in respect of that class of certificates on
the next distribution date.
PRINCIPAL
On each distribution date, principal in respect of the certificates will be
distributable in an amount equal to the Monthly Principal for that distribution
date. The holders of the Class A Certificates and the Class B Certificates will
be entitled to receive a PRO RATA share of the amounts to be distributed in
respect of principal. However, no distributions of principal in respect of the
Class B Certificates will be made on any distribution date until interest and
principal in respect of the Class A Certificates has been distributed. Principal
in respect of the certificates will be distributed as set forth under
"DISTRIBUTIONS ON THE CERTIFICATES--DISTRIBUTIONS" below.
S-20
<PAGE>
MANDATORY PREPAYMENT
The seller, at its option, may repurchase all of the contracts owned by the
trust on any distribution date following the date on which the aggregate
principal balance of the certificates is less than 10% of the aggregate
principal balance of the contracts as of the cut-off date. The purchase price to
be paid in connection with the purchase will be at least equal to the sum of:
- the unpaid certificate balance of the certificates as of that distribution
date, together with all interest distributable in respect of the
certificates as of that distribution date;
- unreimbursed servicer advances;
- accrued but unpaid servicer fees;
- accrued but unpaid fees to the trustee;
- any other amounts payable at the time from Available Amounts; minus
- amounts on deposit in the reserve fund.
If the seller does purchase the contracts, the certificates will be paid in full
on the distribution date on which the purchase occurs.
VOTING RIGHTS
If a servicer default occurs, the trustee or holders of certificates
evidencing more than 50% of the aggregate principal balance of the contracts may
remove the servicer without the consent of any other holder of certificates. If
a servicer default occurs, holders of certificates evidencing more than 50% of
the aggregate principal balance of the contracts may waive any servicer default
other than a default in making any required deposits into the collection
account.
NOTICES
Certificateholders will be notified in writing by the trustee of any
servicer default or termination of, or appointment of a successor to, the
servicer promptly upon a responsible officer obtaining actual knowledge of these
events. Except for the monthly and annual reports to certificateholders
described this prospectus supplement, the trustee is not obligated under the
pooling and servicing agreement to forward any other notices to the
certificateholders. There are no provisions in the pooling and servicing
agreement for the regular or special meetings of certificateholders.
DISTRIBUTIONS ON THE CERTIFICATES
GENERAL
The trust will distribute principal and interest in respect of the
certificates on each distribution date from Available Interest and Available
Principal for the distribution date, as well as amounts permitted to be
withdrawn from the reserve fund. See "--RESERVE FUND" below. The precise
calculation of the funds available to the trust on each distribution date to
make distributions in respect of the certificates is set forth in the definition
of "AVAILABLE AMOUNTS", "AVAILABLE INTEREST" and "AVAILABLE PRINCIPAL" and the
definitions of the defined terms contained in those definitions set forth in the
Glossary. We refer you to those definitions.
SERVICING COMPENSATION AND REIMBURSEMENT OF SERVICER ADVANCES
On each distribution date, the servicer will be entitled to receive:
- the base servicing fee in an amount equal to the product of one twelfth of
one percent (1%) and the aggregate principal balance of the contracts as
of the last day of the second calendar month preceding the month in which
that distribution date falls; and
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<PAGE>
- any investment income earned on amounts on deposit in the collection
account during the prior calendar month.
The servicer will also be entitled to retain any late payment fees, prepayment
charges, if any, and other similar fees and charges received during the prior
calendar month.
The servicer will reimburse itself for servicer advances out of:
- amounts received by the servicer from the obligors on account of the
related delinquent contract payments;
- the proceeds, net of expenses incurred by the servicer, of the sale of the
repossessed financed vehicles securing the related delinquent contracts;
and
- payments on other contracts when the servicer has determined that a
contract as to which it has made advances is a Defaulted Contract.
DISTRIBUTIONS
On each distribution date, the trustee will distribute the following amounts
in the following order and priority from the following funds:
(1) from the Available Amounts, to the servicer, reimbursement of servicer
advances;
(2) from Available Interest, to the servicer, payment of the base servicing
fee;
(3) from Available Amounts, to the trustee, payment of the fees due and
owing to the trustee;
(4) from Available Interest, to the Class A Certificateholders, an amount
equal to the accrued and unpaid interest on the Class A Certificates,
including any accrued and unpaid interest on the Class A Certificates
payable on prior distribution dates plus interest on that accrued and
unpaid interest, and if the remaining Available Interest is insufficient,
the Class A Certificateholders will be entitled to receive interest first
from funds withdrawn from the reserve fund and second, if those amounts
are insufficient, from the Class B Percentage of Available Principal;
(5) from Available Interest, to the Class B Certificateholders, an amount
equal to the accrued and unpaid interest on the Class B Certificates,
including any accrued and unpaid interest on the Class B Certificates
payable on prior distribution dates plus interest on that accrued and
unpaid interest and if the remaining Available Interest is insufficient,
the Class B Certificateholders will be entitled to receive interest from
funds withdrawn from the reserve fund;
(6) from Available Amounts, to the Class A Certificateholders, an amount
equal to the Class A Principal Distributable Amount for such distribution
date and if the remaining Available Amounts are insufficient, the
Class A Certificateholders will be entitled to receive principal from
funds withdrawn from the reserve fund;
(7) from Available Amounts, to the Class B Certificateholders, an amount
equal to the Class B Principal Distributable Amount for such distribution
date and if the remaining Available Amounts are insufficient, the
Class B Certificateholders will be entitled to receive principal from
funds withdrawn from the reserve fund; and
(8) any remaining Available Amounts, to the reserve fund, an amount
necessary to increase the amount on deposit in the reserve fund to the
required amount.
RESERVE FUND
The reserve fund will be a segregated account in the name of [ ],
as collateral agent. The reserve fund will be created with an initial deposit by
the depositor on the closing date of an
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amount equal to $ which is less than the amount that is required to be on
deposit in the reserve fund. The reserve fund will thereafter be funded as
described above under "--DISTRIBUTIONS".
Amounts held from time to time in the reserve fund will be held for the
benefit of certificateholders and may be invested in investments acceptable to
the rating agencies rating certificates as being consistent with the ratings of
the certificates at the direction of the servicer. Investment income on those
investments will be paid to the depositor, upon the direction of the servicer,
to the extent that funds on deposit in the reserve fund on any distribution date
exceed the amount that is required to be on deposit in the reserve fund. If the
amount on deposit in the reserve fund on any distribution date exceeds the
amount that is required to be on deposit in the reserve fund on that
distribution date, the collateral agent will withdraw that excess and pay it to
the depositor. Upon any distribution to the depositor of those excess amounts,
neither the holders of the Class A Certificates nor the holders of the Class B
Certificates will have any rights in, or claims to, those amounts.
The amount that is required to be on deposit in the reserve fund on each
distribution date will initially be $[ ]. However, on any distribution
date, the amount that is required to be on deposit in the reserve fund will be
an amount equal to $[ ].
The servicer may, from time to time after the date of this prospectus
supplement, request each rating agency rating the certificates to approve a
formula for determining the amount that is required to be on deposit in the
reserve fund on each distribution date that is different from that described
above. If each rating agency delivers a letter to the trustee to the effect that
the use of any new formula will not result in a qualification, reduction or
withdrawal of its then-current rating of any class of certificates, then the
amount that is required to be on deposit in the reserve fund on each
distribution date will be determined in accordance with the new formula. The
pooling and servicing agreement will accordingly be amended, without the consent
of any certificateholder, to reflect the new calculation.
If the amounts of Available Interest and/or Available Principal available to
the trust for any distribution date are insufficient to make distributions of
principal and interest on the certificates, the collateral agent will withdraw
funds from the reserve fund for distribution to the certificateholders to cover
any shortfalls. If on the final scheduled distribution date, the certificate
balance of each class has not been reduced to zero, the collateral agent will
withdraw funds from the reserve fund to pay those certificates in full.
YIELD SUPPLEMENT ACCOUNT
On the closing date, the depositor will establish a yield supplement account
in the name of , as collateral agent. The initial deposit into the
yield supplement account will be $ .
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No additional deposits to the yield supplement account will be made after
the closing date. On each distribution date, the collateral agent will withdraw
from the yield supplement account and deposit in the collection account the
aggregate amount by which:
- one month's interest on the principal balance of each contract at a rate
equal to the weighted average pass-through rate on the certificates plus
1.00% exceeds
- one month's interest on that principal balance at the annual percentage
rate of that contract.
RATINGS OF THE CERTIFICATES
It is a condition of issuance that each of Standard & Poor's Ratings
Services and Moody's Investors Service, Inc.
- rate the Class A Certificates in its [ ] rating category,
- rate the Class B Certificates at least [ ] respectively.
The ratings address the likelihood of the timely receipt of interest and
distribution of principal in respect of each class of certificates on or before
the scheduled final distribution date. The ratings will be based primarily upon
the contracts and the related property, the reserve fund, the yield supplement
account and the subordination provided by the Class B Certificates, in the case
of the Class A Certificates.
We cannot assure you that any rating will not be lowered or withdrawn by the
assigning rating agency. In the event that ratings with respect to the
certificates are qualified, reduced or withdrawn, no person or entity will be
obligated to provide any additional credit enhancement with respect to the
certificates.
The ratings should be evaluated independently from similar ratings on other
types of certificates. A rating is not a recommendation to buy, sell or hold the
certificates, inasmuch as these ratings do not comment as to market price or
suitability for a particular investor. The ratings do not address the likelihood
of distributions of principal in respect of any class of certificates prior to
the scheduled final distribution date or the possibility of the imposition of
United States withholding tax with respect to non-United States Persons.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
TREATMENT OF TRUST AS GRANTOR TRUST
Winston & Strawn, as federal tax counsel to the trust, will deliver its
opinion that the trust will be treated for federal income tax purposes as a
grantor trust and not as an association (or a publicly traded partnership)
taxable as a corporation. They will further opine that each certificateholder
will be treated for federal income tax purposes as the owner of a pro rata
undivided interest in the income and assets of the trust. These opinions are
subject to the further explanation, assumptions and qualifications described in
the accompanying prospectus under the heading "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--GRANTOR TRUST". For federal income tax purposes, the trust will be
deemed to have acquired the following assets: the principal and interest due
with respect to each contract (excluding the portion retained by the seller),
any rights to receive payments under a yield supplement agreement, and certain
other rights in favor of the trust with respect to payments due on the
contracts.
TAX TREATMENT OF INVESTORS
Each certificateholder will be required to report on its federal income tax
return its pro rata share of the entire income from the contracts in the trust,
including interest, original issue discount, prepayment fees, assumption fees,
any gains on disposition of contracts, and late payment charges. A
certificateholder will also be required to report any payments received under a
yield supplement
S-24
<PAGE>
agreement to the extent that these payments are treated as income. Each
certificateholder will be entitled to deduct its pro rata share of servicing
fees, prepayment fees, assumption fees, and any losses recognized upon
disposition of contracts. A certificateholder's recognition of income required
to be reported on its return and its ability to deduct expenses of the trust are
subject to the further explanation, assumptions and qualifications described in
detail in the accompanying prospectus.
ERISA CONSIDERATIONS
CLASS A CERTIFICATES
Subject to the considerations set forth below and under "ERISA
CONSIDERATIONS" in the accompanying prospectus, the Class A Certificates may be
purchased by an employee benefit plan or an individual retirement account (a
"Benefit Plan") subject to ERISA or Section 4975 of the United States Internal
Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Benefit Plan
must determine that the purchase of a Class A Certificate is consistent with its
fiduciary duties under ERISA and does not result in a nonexempt prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the Code.
The United States Department of Labor (the "DOL") has granted to [ ]
and [ ] administrative exemptions (Prohibited Transaction Exemptions
[ ] and [ ], as amended by Prohibited Transaction Exemption 97-34
(the "Exemptions")) from some of the prohibited transaction rules of ERISA with
respect to the initial purchase, the holding and the subsequent resale by
Benefit Plans of certificates representing interests in asset backed pass
through trusts that consist of receivables, loans and other obligations that
meet the conditions and requirements of the Exemptions. The receivables covered
by the Exemptions include motor vehicle installment obligations such as the
contracts. The Exemptions also apply to transactions in connection with the
servicing, management and operation of the trust which might otherwise
constitute prohibited transactions.
Among the conditions that must be satisfied for either of the Exemptions to
apply to the acquisition by a Benefit Plan of the Class A Certificates are the
following:
1. The acquisition of the Class A Certificates by a Benefit Plan is on
terms (including the price for that Class A Certificates) that are at
least as favorable to the Benefit Plan as they would be in an
arm's-length transaction with an unrelated party.
2. The rights and interests evidenced by the Class A Certificates acquired
by the Benefit Plan are not subordinated to the rights and interests
evidenced by other certificates of the trust.
3. The Class A Certificates acquired by the Benefit Plan have received a
rating at the time of the acquisition that is in one of the three highest
generic rating categories from Standard & Poor's Rating Services ("S&P"),
Moody's Investors Service, Inc. ("Moody's") or Duff & Phelps Inc. ("D&P"
and together with S&P and Moody's, the "Rating Services").
4. The trustee is not an affiliate of any member of the Restricted Group
(as defined below).
5. The sum of all payments made to and retained by the underwriters in
connection with the purchase of the Class A Certificates represents not
more than reasonable compensation for underwriting the Class A
Certificates. The sum of all payments made to and retained by the
depositor pursuant to the transfer of the contracts to the trust
represents not more than the fair market value of those contracts. The
sum of all payments made to and retained by the servicer represents not
more than reasonable compensation for the servicer's services and
reimbursement of the servicer's reasonable expenses in connection
therewith.
6. The Benefit Plan investing in the Class A Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Commission
under the Securities Act of 1933, as amended.
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<PAGE>
The trust must also meet the following requirements:
1. The corpus of the trust must consist solely of assets of the type that
have been included in other investment pools.
2. Certificates in other investment pools must have been rated in one of
the three highest generic rating categories of any of the Rating Services
for at least one year prior to the Benefit Plan's acquisition of
certificates.
3. Certificates evidencing interests in other investment pools must have
been purchased by investors other than Benefit Plans for at least one
year prior to any Benefit Plan's acquisition of Class A Certificates.
The Exemptions do not apply in all respects to Benefit Plans sponsored by
the seller, the underwriters, the trustee, the servicer, any obligor with
respect to the contracts included in the trust constituting more than 5% of the
aggregate unamortized principal balance of the assets in the trust or any
affiliate of those parties (the "Restricted Group"). As of the date hereof, no
obligor with respect to the contracts included in the trust constitutes more
than 5% of the aggregate unamortized principal balance of the trust (i.e., the
initial principal amount of the certificates). Moreover, each Exemption provides
relief from specified self-dealing/conflict of interest prohibited transactions
only if, among other requirements,
1. in the case of the acquisition of Class A Certificates in connection
with the initial issuance, at least 50% of each class of certificates in
which Benefit Plans have invested is acquired by persons independent of
the Restricted Group and at least 50% of the aggregate interest in the
trust is acquired by persons independent of the Restricted Group;
2. a Benefit Plan's investment in the Class A Certificates does not exceed
25% of all of the Class A Certificates outstanding at the time of the
acquisition; and
3. immediately after the acquisition, no more than 25% of the assets of a
Benefit Plan with respect to which a person has discretionary authority
or renders investment advice are invested in certificates representing
interests in trusts containing assets sold or serviced by the same
entity.
The seller believes that the Exemptions will apply to the acquisition,
holding and resale of the Class A Certificates by a Benefit Plan and that all
conditions of the Exemptions other than those within the control of investors
will be met. However, there can be no assurance that the DOL or the IRS will not
take a contrary position, nor that that position will be sustained. One or more
alternative exemptions may be available with respect to specified prohibited
transactions to which the Exemptions are not applicable, depending in part upon
the type of a Benefit Plan's fiduciary making the decision to acquire the
Class A Certificates and the circumstances under which that decision is made.
See "ERISA CONSIDERATIONS" in the accompanying Prospectus. Any Benefit Plan
which acquires a beneficial ownership interest in a Class A Certificates will be
deemed, by virtue of the acceptance and acquisition of that ownership interest,
to have represented to the depositor and the trustee that that Benefit Plan is
an "accredited investor" for purposes of Rule 501(a)(1) of Regulation D under
the Securities Act.
CLASS B CERTIFICATES
Class B Certificates may not be acquired by an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA or Section 4975(e)(1) of the Code or any person acting on behalf of
such a plan or using the assets of such a plan to acquire the Class B
Certificates or any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity, except as provided below with respect to
insurance company general accounts. By its
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acceptance of a Class B Certificate, each holder thereof will be deemed to have
represented and warranted that it is not subject to the foregoing limitation.
In 1995, the DOL issued PTCE 95-60. Section III of PTCE 95-60 which exempts
from the application of the prohibited transaction provisions of Sections
406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code transactions in
connection with the servicing, management and operation of a trust (such as the
trust) in which an insurance company general account has an interest as a result
of its acquisition of certificates issued by the trust, provided that certain
conditions are satisfied. If these conditions are met, insurance company general
accounts would be allowed to purchase classes of certificates (such as the
Class B Certificates) which do not meet the requirements of the Exemptions
solely because they (i) are subordinated to other classes of certificates in the
trust and/or (ii) have not received a rating at the time of the acquisition in
one of the three generic highest rating categories from any of the Rating
Services. All other conditions of the Exemptions would have to be satisfied in
order for PTCE 95-60 to be available. Before purchasing Class B Certificates, an
insurance company general account seeking to rely on Section III of PTCE 95-60
should itself confirm that all applicable conditions and other requirements have
been satisfied.
ALL CERTIFICATES
A purchaser of the certificates should be aware, however, that even if the
conditions specified in one or more exemptions are met, the scope of the relief
provided by the applicable exemption or exemptions might not cover all acts that
might be construed as prohibited transactions.
Prospective Benefit Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemptions
or any other exemptions, and the potential consequences of any purchase in their
specific circumstances, prior to making an investment in a certificate.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA or Code Section 4975. However, that governmental plan may be subject to
federal, state or local law which is to a material extent similar to the
provisions of ERISA or Code Section 4975 ("Similar Law"). A fiduciary of a
governmental plan should make its own determination as to the need for and
availability of any exemptive relief under such Similar Law.
LEGAL PROCEEDINGS
None of the depositor, the servicer, the seller or the trust are parties to
any legal proceeding which could have a material adverse impact on your interest
in the certificates or in the trust's assets.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated [ ], the depositor has agreed to sell to each of the
underwriters named below and each of those underwriters has severally agreed to
purchase the following respective initial certificate balances of the
certificates at the respective public offering prices less the respective
underwriting discounts shown on the cover page of this prospectus supplement:
<TABLE>
<CAPTION>
INITIAL CERTIFICATE BALANCE OF INITIAL CERTIFICATE BALANCE OF
UNDERWRITER CLASS A CERTIFICATES CLASS B CERTIFICATES
- ----------- ------------------------------ ------------------------------
<S> <C> <C>
</TABLE>
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<PAGE>
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the certificates
being offered, if any of the certificates are purchased. The underwriters have
advised the depositor that they propose initially to offer the certificates to
the public at the respective public offering prices shown on the cover page of
this prospectus supplement, and to certain dealers at that price, less a
concession not in excess of the amount noted in the table below. The
underwriters may allow and the dealers may reallow to other dealers a discount
not in excess of the amount noted in the table below.
<TABLE>
<CAPTION>
SELLING CONCESSION REALLOWANCE
CLASS NOT TO EXCEED NOT TO EXCEED
- ----- ------------------ -------------
<S> <C> <C>
A
B
</TABLE>
After the initial public offering of the certificates, the offering prices
and other selling terms may be varied by the underwriters.
The following table shows the underwriting fees to be paid to the
underwriters by the depositor in connection with this offering. This
underwriting fee is the difference between the price to public and the amount
the underwriters pay to the depositor to purchase the certificates from the
depositor.
<TABLE>
<CAPTION>
PER CERTIFICATE TOTAL
--------------- --------
<S> <C> <C>
Class A..................................................... % $
Class B..................................................... % $
</TABLE>
The expenses of this offering, exclusive of underwriting commissions, are
estimated at $ and are payable by the depositor.
In connection with the offering of the certificates, [ ], on
behalf of the underwriters, may engage in overallotment, stabilizing
transactions or syndicate covering transactions in accordance with Regulation M
under the Securities Exchange Act of 1934. Overallotment transactions involve
syndicate sales in excess of the offering size creating a syndicate short
position. Stabilizing transactions permit bids to purchase the certificates so
long as the stabilizing bids do not exceed a specified minimum. Syndicate
covering transactions involve purchases of certificates in the open market after
the distribution has been completed in order to cover syndicate short positions.
Such over-allotment transactions, stabilizing and syndicate covering
transactions may cause the price of the certificates to be higher than they
would otherwise be in the absence of those transactions. The underwriters do not
represent that the underwriters will engage in those transactions nor that such
transactions, once commenced, will not be discontinued without notice.
The depositor and some of its affiliates have agreed to indemnify the
underwriters against some liabilities in connection with the sale of
certificates, including liabilities under the Securities Act of 1933, as
amended.
The certificates have no established trading market. The underwriters have
advised us that the underwriters intend to make a market in the certificates but
are not obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the certificates.
LEGAL MATTERS
Winston & Strawn, Chicago, Illinois, has provided a legal opinion relating
to the certificates in its capacity as special counsel to the depositor and the
servicer. Certain legal matters for the underwriters will be passed upon by
Simpson Thacher & Bartlett. The pooling and servicing agreement and the
certificates will be governed by the laws of the State of Illinois.
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<PAGE>
GLOSSARY
AVAILABLE AMOUNTS means, with respect to any distribution date, the sum of
the Available Interest and the Available Principal for such distribution date.
AVAILABLE INTEREST means, with respect to any distribution date, the total,
without duplication, of the following amounts received by the servicer on or in
respect of the contracts during the prior calendar month:
- all amounts allocable to interest payments on the contracts;
- the interest component of all proceeds of repossessed financed vehicles
and other proceeds of Defaulted Contracts;
- the interest component of the purchase price paid by the depositor in
repurchasing contracts from the trust on that distribution date as a
result of a breach of the representations and warranties with respect to
those contracts in the pooling and servicing agreement;
- the interest component of the purchase price paid by the servicer in
purchasing contracts from the trust on that distribution date as a result
of a breach of certain covenants with respect to those contracts in the
pooling and servicing agreement;
- servicer advances made by the servicer on that distribution date in
respect of delinquent interest payments for the prior calendar month;
- the interest component of the amount paid by the seller to purchase the
contracts when the aggregate principal balance of the certificates is
reduced to less than 10% of the aggregate principal balance of the
contracts as of the cut-off date; and
- all amounts received in respect of interest, dividends, gains, income and
earnings on investment of funds in the trust accounts.
AVAILABLE PRINCIPAL means, with respect to any distribution date, the total,
without duplication, of the following amounts received by the servicer on or in
respect of the contracts during the prior calendar month:
- all amounts allocable to principal payments on the contracts;
- the principal component of all proceeds of repossessed financed vehicles
and other proceeds of Defaulted Contracts;
- the principal component of the purchase price paid by the depositor in
repurchasing contracts from the trust on that distribution date as a
result of a breach of the representations and warranties with respect to
those contracts in the pooling and servicing agreement;
- the principal component of the purchase price paid by the servicer in
purchasing contracts from the trust on that distribution date as a result
of a breach of certain covenants with respect to those contracts in the
pooling and servicing agreement; and
- the principal component of the amount paid by the depositor to purchase
the contracts when the aggregate principal balance of the certificates is
reduced to less than 10% of the aggregate principal balance of the
contracts as of the cut-off date.
CERTIFICATE BALANCE for a particular class initially equals the amount set
forth on the cover page of this prospectus supplement for the related class and,
on any distribution date, will equal that original balance reduced by all
amounts allocable to principal paid on or prior to that distribution date on
that class.
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<PAGE>
CLASS A PERCENTAGE means the aggregate undivided ownership interest of [ ]%
evidenced by the Class A Certificates.
CLASS A PRINCIPAL CARRYOVER SHORTFALL means, with respect to any
distribution date, the excess, if any, of:
- the Class A Principal Distributable Amount for the preceding distribution
date, over
- the amount of principal that was actually distributed to holders of
Class A Certificates on such preceding distribution date.
CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT with respect to any distribution
date, equals the sum of:
- the product of the Class A Percentage and the Monthly Principal for such
distribution date, plus
- the Class A Principal Carryover Shortfall for such distribution date.
CLASS B PERCENTAGE means the aggregate undivided ownership interest of [ ]%
evidenced by the Class B Certificates.
CLASS B PRINCIPAL CARRYOVER SHORTFALL means, with respect to any
distribution date, the excess, if any, of:
- the Class B Principal Distributable Amount for the preceding distribution
date, over
- the amount of principal that was actually distributed to holders of
Class B Certificates on such preceding distribution date.
CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT with respect to any distribution
date, equals the sum of:
- the product of the Class B Percentage and the Monthly Principal for such
distribution date, plus
- the Class B Principal Carryover Shortfall for such distribution date.
A DEFAULTED CONTRACT will be a contract as to which (a) all or part of a
scheduled payment is 120 days or more than 120 days past due and the servicer
has not repossessed the related financed vehicle or (b) the servicer has, in
accordance with its customary servicing procedures, determined that eventual
payment in full is unlikely and has either repossessed and liquidated the
related financed vehicle or repossessed and held the related financed vehicle in
its repossessed inventory for 90 days, which ever occurs first, or (c) as to
which the obligor has suffered an insolvency event.
MONTHLY PRINCIPAL means, as to any distribution date, the following amount:
the amount by which:
- the Principal Balance of the contracts as of the first day of the calendar
month prior to the calendar month in which such distribution date occurs
(or, in the case of the first distribution date, the Principal Balance of
the contracts as of the initial cut-off date), exceeds:
- the Principal Balance of the contracts as of the first day of the calendar
month in which the distribution date occurs,
provided, that on the final scheduled distribution date, Monthly Principal will
equal to the aggregate sum of the Class A Certificate Balance and the Class B
Certificate Balance on such date.
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<PAGE>
PRINCIPAL BALANCE means the aggregate unpaid principal balance of each
contract as of the cut-off date, reduced by all payments received by the
servicer allocable to principal and, if that contract was prepaid in full during
the prior calendar month, all prepayments and other amounts applied by the
servicer as of such date to the payment of principal on that contract.
Any contract that became a Defaulted Contract during that calendar month or
which was a contract which the seller, performance guarantor, servicer or the
depositor was obligated to purchase as of the end of that calendar month will,
for purposes of computing the Principal Balance be deemed to be zero on and
after the last day of that calendar month.
UNITED STATES PERSONS means:
- A citizen or resident of the United States,
- A corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof,
- An estate the income of which is includible in gross income for United
States federal income tax purposes, regardless of its source, or
- A trust, (a) with respect to which a court within the United States is
able to exercise primary supervision over its administration, and one or
more United States fiduciaries have the authority to control all of its
substantial decisions, or (B) otherwise, the income of which is subject to
U.S. federal income tax regardless of its source.
S-31
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 16, 2000
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
DEALER AUTO RECEIVABLES TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
(ISSUABLE IN SERIES)
DEALER AUTO RECEIVABLES CORP.
AS DEPOSITOR
PREMIER AUTO FINANCE, INC.,
AS SERVICER
THE TRUSTS:
The depositor will form a new trust to issue each series of securities. The
trust will offer the securities under this prospectus and a prospectus
supplement which will be prepared separately for each series. Each trust will
own a pool of automobile retail installment contracts.
THE SECURITIES:
- will consist of asset-backed securities sold periodically in one or more
series which may include one or more classes of notes and/or one or more
classes of certificates;
- will be paid only from the assets of the related trust;
- will be rated in one of the four highest rating categories by at least one
nationally recognized statistical rating organization;
- may have one or more forms of credit enhancement; and
- will be issued as part of a designated series that may include one or more
classes with payment rights that are senior or subordinate to the rights
of one or more of the other classes of securities.
------------------------
YOU SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS" ON
PAGE 7 OF THIS PROSPECTUS AND THE OTHER RISK FACTORS INCLUDED IN THE
ACCOMPANYING PROSPECTUS SUPPLEMENT.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The amounts, prices and terms of each offering of securities will be
determined at the time of sale and will be described in a prospectus supplement
that will be attached to this prospectus.
This prospectus may not be used to offer and sell any series of securities
unless accompanied by the prospectus supplement for that series.
PROSPECTUS DATED , 2000.
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TABLE OF CONTENTS
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Important Notice About Information Presented in this
Prospectus and the Accompanying Prospectus Supplement..... iv
Prospectus Summary.......................................... 1
Risk Factors................................................ 7
You must rely only upon payments from the trust's assets
for repayment which may not be sufficient to make full
payments on your securities............................. 7
You may experience reduced returns on your investment
resulting from prepayments on the contracts, repurchases
of the contracts, liquidations of defaulted contracts
and early termination of the trust...................... 7
Occurrence of events of default under the indenture may
result in insufficient funds to make payments on your
securities.............................................. 8
Paid-ahead simple interest contracts may affect the
weighted average life of the securities................. 8
The price at which you can resell your securities may
decrease if the ratings of your securities decline...... 9
Subordination may cause some classes of securities to bear
additional credit risk and does not ensure payment of
the more senior classes of securities................... 9
Future delinquency and loss experience of the contracts
may vary substantially from the servicer's historical
experience.............................................. 9
Interests of other persons in the contracts or the
financed vehicles could reduce the funds available to
make payments on your securities........................ 9
Limitations on enforceability of security interests in the
financed vehicles may hinder the trust's ability to
realize the value of the financed vehicles.............. 10
Contracts that fail to comply with consumer protection
laws may be unenforceable, which may result in losses on
your investment......................................... 10
Repurchase obligation of the depositor and the seller
provides you only limited protection against prior liens
on the contracts........................................ 11
Bankruptcy of the obligors may reduce or delay collections
on the contracts, and disposition of the financed
vehicles relating to these or other defaulting obligors
may be delayed or may not result in complete recovery of
amounts due............................................. 11
If bankruptcy court determines that the transfer of
contracts from the originating dealers to the seller or
from the seller to the depositor was not a true sale
then payments on the contracts could be delayed
resulting in losses or delays in payments on your
securities.............................................. 11
If a bankruptcy court decides to consolidate the assets
and liabilities of the depositor and the seller then
payments on the contracts could e delayed resulting in
losses or delays in payments on the securities.......... 12
Proceeds of the sale of contracts may not be sufficient to
pay your securities in full; failure to pay principal on
your securities will not constitute an event of default
until maturity.......................................... 12
Commingling of collections could result in reduced
payments to you......................................... 12
You may not be able to resell your securities............. 12
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If the trust enters into a currency or an interest rate
swap, payments on the securities will be dependent on
payments made under the swap agreement.................. 13
The rating of a swap counterparty may affect the ratings
of the securities....................................... 13
The Depositor............................................... 14
The Trusts.................................................. 14
Use of Proceeds............................................. 16
The Trustee................................................. 16
The Seller and Originating Dealers.......................... 17
Seller.................................................... 17
Originating Dealers....................................... 17
The Servicer................................................ 17
General................................................... 17
Underwriting and Origination.............................. 18
Insurance................................................. 20
Collection Procedures..................................... 20
Repossession.............................................. 20
Extensions................................................ 21
Year 2000................................................. 22
The Performance Guarantor................................... 22
The Contracts............................................... 22
Weighted Average Lives of the Securities.................... 24
Factors and Trading Information............................. 25
Description of the Notes and Indenture...................... 25
General................................................... 25
Payments.................................................. 26
Pro-Rata Pay/Subordinate Notes............................ 26
Variable Funding Note..................................... 26
Optional Purchase of Contracts and Prepayment of Notes.... 26
The Indenture............................................. 27
Description of the Certificates............................. 32
General................................................... 32
Distributions............................................. 32
Pro-Rata Pay/Subordinate Certificates..................... 32
Optional Purchase of Contracts and Prepayment of
Certificates............................................ 33
The Pooling and Servicing Agreement....................... 33
Trust Accounts............................................ 34
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Information Regarding the Securities........................ 34
Interest Rates............................................ 34
Credit and Cash Flow Enhancement.......................... 35
Yield Supplement Account; Yield Supplement Agreement...... 37
Book-Entry Registration................................... 38
Description of the Transfer and Servicing Agreements........ 42
Sale and Assignment of Contracts by Seller................ 42
Transfer of Contracts by Depositor........................ 43
Representations and Warranties Made by the Seller and the
Depositor............................................... 43
Performance Guarantee..................................... 45
Collection Account........................................ 45
Servicing................................................. 46
List of Securityholders................................... 52
Insolvency of Trust....................................... 52
Payment of Notes.......................................... 52
Administration Agreement.................................. 52
Amendment................................................. 52
Legal Aspects of the Contracts.............................. 53
General................................................... 53
Security Interests........................................ 53
Repossession.............................................. 55
Notice of Sale; Redemption Rights......................... 55
Deficiency Judgments and Excess Proceeds.................. 56
Bankruptcy Considerations................................. 56
Consumer Protection Laws.................................. 57
Other Limitations......................................... 58
Material Federal Income Tax Consequences.................... 59
General................................................... 59
Owner Trusts.............................................. 60
Grantor Trusts............................................ 71
FASITs.................................................... 77
ERISA Considerations........................................ 80
Ratings of the Securities................................... 81
Plan of Distribution........................................ 81
Legal Matters............................................... 81
Where You Can Find More Information......................... 82
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the securities in two separate documents
that offer varying levels of detail:
- this prospectus--which provides general information, some of which may not
apply to a particular series of securities including your series, and
- the accompanying prospectus supplement--which provides a summary of the
specific terms of your series of securities.
We have included cross-references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
discussions. The table of contents included in this prospectus and the
accompanying prospectus supplement provide the pages on which these captions are
located.
Whenever we use words like "intends," "anticipates" or "expects" or similar
words in this prospectus, we are making a forward-looking statement, or a
projection of what we think will happen in the future. Forward-looking
statements are inherently subject to a variety of circumstances, many of which
are beyond our control and could cause actual results to differ materially from
what we anticipate. Any forward-looking statements in this prospectus speak only
as of the date of this prospectus. We do not assume any responsibility to update
or review any forward-looking statement contained in this prospectus to reflect
any change in our expectation about the subject of that forward-looking
statement or to reflect any change in events, conditions or circumstances on
which we have based any forward-looking statement.
You should rely only on the information contained in this document,
including the information described under the heading "WHERE YOU CAN FIND MORE
INFORMATION" in the prospectus. We have not authorized anyone to provide you
with any different information or make any representation not contained in this
prospectus. If anyone makes such a representation to you, you should not rely on
it.
iv
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PROSPECTUS SUMMARY
The following is only a summary of selected information from the prospectus
and provides a general overview of relevant terms of the securities. It does not
contain all the information that may be important to you. You should read
carefully this entire prospectus and the accompanying prospectus supplement to
understand all of the terms of the offering. In addition, you may wish to read
the documents governing the transfers and servicing of the contracts, the
formation of the trusts and the issuance of the securities. Those documents have
been filed as exhibits to the registration statement of which this prospectus is
a part.
There are material risks associated with an investment in the securities.
See "RISK FACTORS" in this prospectus and in the accompanying prospectus
supplement for a discussion of factors you should consider before investing in
the securities.
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Trust.................................. For each series of securities, the depositor will form
either a grantor trust or an owner trust.
An owner trust will issue notes and/or certificates and
will be formed by a trust agreement between the depositor
and the trustee of the owner trust.
A grantor trust will issue only certificates and will be
formed by a pooling and servicing agreement among the
depositor, the servicer and the trustee of the grantor
trust.
Depositor.............................. Dealer Auto Receivables Corp., a wholly-owned subsidiary
of Premier Auto Finance, Inc., will deposit the contracts
into the trust.
Seller................................. Premier Auto Finance, L.P. will sell the contracts to the
depositor for deposit into the trust.
Originating Dealers.................... Automobile dealers who are, directly or indirectly,
limited partners in the seller. The originating dealers
originate the contracts in accordance with the
underwriting standards set by Premier Auto Finance, Inc.
under dealer agreements governing the assignment of the
contracts to the seller. The seller acquires the contracts
from the originating dealers in the ordinary course of its
business pursuant to the dealer agreements.
Servicer............................... Premier Auto Finance, Inc. will service the contracts
unless otherwise specified in your prospectus supplement.
Performance Guarantor.................. Virginia Surety Company, Inc. will guarantee the
performance of the seller's obligations under the purchase
agreement relating to breaches of representations and
warranties regarding the contracts. See "THE PERFORMANCE
GUARANTOR" in this prospectus.
Trustee................................ The trustee of the trust for your series of securities
will be identified in your prospectus supplement.
Indenture Trustee...................... If the trust issues notes, the trustee for the indenture
pursuant to which the notes will be issued will be
identified in your prospectus supplement.
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Administrator.......................... Premier Auto Finance, Inc. will provide notices and
perform other administrative functions of each trust
issuing notes under an indenture.
The Securities......................... A series of securities may include:
- one or more of classes of notes which will be issued
pursuant to an indenture; and/or
- one or more classes of certificates, whether or not
a class of notes is issued as part of the series.
Terms of the Securities................ Your prospectus supplement provides the particular terms
of your class of notes and/or certificates, including:
- the stated principal amount of each class of notes
and the stated certificate balance of each class of
certificates; and
- the interest rate, which may be fixed, variable,
adjustable or some combination of these rates, or
method of determining the interest rate.
The terms of a class of notes may differ from those of
other classes of notes of the same series and the terms of
a class of certificates may differ from those of other
classes of certificates of the same series in one or more
aspects, including:
- timing and priority of payments;
- seniority;
- allocations of losses;
- interest rate or formula for calculating the
interest rate;
- amount of interest or principal payments;
- whether interest or principal will be payable to
holders of the class if specified events occur;
- the right to receive collections from designated
portions of the contracts owned by the trust;
- scheduled final payment date; and
- the ability of holders of a class to direct the
trustee to take specified remedies.
Trust Assets........................... The property of each trust will primarily be a pool of
contracts secured by new and used automobiles and
light-duty trucks and amounts due or collected under the
contracts on or after a cut-off date specified in your
prospectus supplement and will include related assets
including:
- security interests in the financed vehicles;
- proceeds from claims on insurance policies covering
the financed vehicles or the obligors;
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- certain rebates of premiums and other amounts
relating to insurance policies and other items
financed under the contracts;
- the rights of the depositor in the agreements
identified in your prospectus supplement;
- amounts deposited in bank accounts specified in your
prospectus supplement; and
- proceeds from liquidated assets, including
repossessed vehicles.
The Contracts.......................... All of the contracts will be retail installment contracts
originated directly by the seller or purchased by the
seller from the originating dealers or other entities that
finance the retail purchase of new and used automobiles
and light-duty trucks.
Your prospectus supplement provides information about:
- the initial aggregate principal balance of the
contracts transferred to the trust;
- the number of contracts;
- the average contract principal balance;
- the geographical distribution of the contracts;
- the distribution of the contracts by annual
percentage rate;
- the remaining term of the contracts;
- the weighted average remaining term of the
contracts; and
- the weighted average annual percentage rate on the
contracts.
Mandatory Purchase or Replacement of a
Contract............................. The depositor will make representations and warranties
regarding the contracts when it transfers the contracts to
the trust, and the seller will make representations and
warranties regarding the contracts when it sells the
contracts to the depositor. In the event of an uncured
breach of any of these representations that materially and
adversely affects the trust's or securityholders' interest
in the contract or the collectibility of the contract, the
depositor will be obligated to repurchase the contract
from the trust and the seller will be obligated to
repurchase the contract from the depositor. See
"DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS--REPRESENTATIONS AND WARRANTIES MADE BY THE
SELLER AND THE DEPOSITOR" in this prospectus and "WEIGHTED
AVERAGE LIVES OF THE SECURITIES" in your prospectus
supplement.
Credit And Cash Flow Enhancement....... The depositor may arrange for protection from losses to
one or more classes of the securities. Credit enhancement
may include:
- a cash collateral account;
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- a financial guaranty insurance policy;
- subordination of one or more other classes of
securities;
- one or more reserve funds;
- over-collateralization;
- letters of credit or other credit or liquidity
facilities;
- surety bonds;
- guaranteed investment contracts;
- repurchase obligations;
- cash deposits;
- third party payments or other support; or
- other arrangements which may become suitable in
light of credit enhancement practices or
developments in the future.
In addition, the depositor may develop and include in the
trusts features designed to ensure the timely payment of
amounts owed to you. These cash flow enhancement features
may include any one or more of the following:
- yield supplement agreements;
- liquidity facilities;
- cash deposits;
- third party payments or other support; or
- other arrangements which may become suitable in
light of cash flow enhancement practices or
developments in the future.
Your prospectus supplement will describe the specific
terms of any credit or cash flow enhancement applicable to
your securities.
Servicing; Servicing Fee............... The servicer will be responsible for servicing, managing
and administering the contracts and financed vehicles, and
maintaining custody of, enforcing and making collections
on the contracts.
The trust will pay the servicer a monthly fee equal to a
percentage of the aggregate principal balance of the
contracts as of the last day of the second calendar month
preceding the month in which that payment date falls. The
fee will be payable out of amounts received on the
contracts.
The servicer will also receive additional servicing
compensation in the form of investment earnings on certain
bank accounts of the trust and late fees, prepayment fees
and other administrative fees and expenses or similar
charges received in respect of the contracts by the
servicer during that month. See "DESCRIPTION OF
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THE TRANSFER AND SERVICING
AGREEMENTS--SERVICING--SERVICING COMPENSATION AND PAYMENT
OF EXPENSES" in this prospectus.
Advances............................... The servicer may be obligated to advance interest that is
due but unpaid by the obligor. In addition, the servicer
may be obligated to advance principal of any contracts
that are classified as "PRECOMPUTED CONTRACTS" rather than
as "SIMPLE INTEREST CONTRACTS". You should refer to "THE
CONTRACTS" for a description of precomputed contracts and
simple interest contracts. The servicer will not be
obligated to make any advance if it determines that it
will not be able to recover an advance from an obligor.
The trust will reimburse the servicer for the advances it
has made from late collections on the contracts for which
it has made advances or from collections generally if the
servicer determines that a contract as to which it has
made an advance is a defaulted contract.
Your prospectus supplement will describe the nature of the
servicer's obligation to make advances to the trust and
the reimbursement of those advances.
You should refer to "DESCRIPTION OF THE TRANSFER AND
SERVICING AGREEMENTS--SERVICING--ADVANCES" in this
prospectus for more detailed information on advances and
reimbursement of advances.
Optional Purchase of Contracts......... Once the aggregate principal balance of the securities is
equal to or less than 10% of the initial aggregate
principal balance of the contracts, the seller, at its
option, may repurchase all of the contracts held by the
trust. Upon such a purchase, the securities of that trust
will be prepaid in full. See "DESCRIPTION OF THE NOTES AND
INDENTURE--OPTIONAL PURCHASE OF CONTRACTS AND PREPAYMENT
OF NOTES" and "DESCRIPTION OF THE CERTIFICATES--OPTIONAL
PURCHASE OF CONTRACTS AND PREPAYMENT OF CERTIFICATES" in
this prospectus.
TAX STATUS:
Grantor Trusts......................... If your prospectus supplement specifies that the related
trust will be treated as a "grantor trust," Winston &
Strawn, as counsel to the trust, will deliver an opinion
that:
- the trust will be treated as a grantor trust for
federal income tax purposes and not as an
"ASSOCIATION" or "PUBLICLY-TRADED PARTNERSHIP"
taxable as a corporation; and
- each certificateholder will be treated as the owner
of a pro rata undivided interest in the income and
assets of the trust.
Owner Trusts........................... If your prospectus supplement specifies that the related
trust will be treated as an "owner trust":
1. Winston & Strawn will deliver an opinion that:
- the notes will be characterized as debt for federal
income tax purposes; and
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- the owner trust will not be characterized as an
"ASSOCIATION" or "PUBLICLY-TRADED PARTNERSHIP"
taxable as a corporation;
2. by purchasing a note, you will agree to treat your note
as debt for federal, state and local income tax
purposes; and
3. by purchasing a certificate, you will agree to treat
the owner trust as a partnership in which you are a
partner for federal, state and local income tax
purposes.
You should refer to "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" in this prospectus and your prospectus
supplement for more detailed information on the
application of federal income tax laws and consult your
tax advisor about the federal income tax consequences of
purchasing, owning and disposing of notes and/ or
certificates, and the tax consequences in any state or
other taxing jurisdiction.
FASITs................................. If your prospectus supplement specifies that an election
will be made for the trust to be treated as a "financial
asset securitization investment trust," or FASIT, Winston
& Strawn will deliver an opinion that, assuming timely
filing of a FASIT election and compliance with the terms
of the governing documents, the trust, or one or more
segregated pools of trust assets, will qualify as one or
more FASITs.
ERISA Considerations................... Subject to the considerations described in "ERISA
CONSIDERATIONS" in this prospectus and your prospectus
supplement, employee benefit plans that are subject to the
Employee Retirement Income Security Act of 1974, as
amended, may purchase:
- notes issued by an owner trust; and
- certificates of a class issued by a grantor trust
that are not subordinated to any other class.
Unless your prospectus supplement specifies otherwise,
employee benefit plans and individual retirement accounts
may not purchase:
- subordinated classes of certificates issued by a
grantor trust; or
- certificates issued by an owner trust.
You should refer to "ERISA CONSIDERATIONS" in this
prospectus and your prospectus supplement for more
detailed information regarding the ERISA eligibility of
any class of securities.
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RISK FACTORS
The following risk factors and the risk factors in your prospectus
supplement describe the principal risk factors relating to an investment in the
securities. You should carefully consider the following risk factors and the
additional risk factors described in the section captioned "RISK FACTORS" in
your prospectus supplement before you invest in any class of securities.
YOU MUST RELY ONLY UPON PAYMENTS FROM THE TRUST'S ASSETS FOR REPAYMENT WHICH MAY
NOT BE SUFFICIENT TO MAKE FULL PAYMENTS ON YOUR SECURITIES
The securities represent interests solely in the trust or indebtedness of
the trust and will not be insured or guaranteed by the originating dealers, the
seller, the performance guarantor, the servicer, the depositor, or any of their
respective affiliates, or the related trustee or any other person or entity. The
only source of payment on your securities are payments received on the contracts
held by the trust and credit enhancement, if any, for your securities. If a
contract held by the trust becomes a defaulted contract, the only sources of
payment for amounts owed on that contract will be the proceeds from the sale of
the related financed vehicle and a deficiency judgment, if any, against the
obligor under the defaulted contract. Since the market value of the financed
vehicle may decline faster than the amounts due on the contract, the trust may
not recover the entire amount due on the contract. Your prospectus supplement
may describe some forms of credit enhancement which are intended to make up for
deficiencies in the proceeds and recoveries on the contracts. However, this
protection is limited and if the credit enhancement is exhausted, you will be
paid solely from current distributions on the contracts.
YOU MAY EXPERIENCE REDUCED RETURNS ON YOUR INVESTMENT RESULTING FROM PREPAYMENTS
ON THE CONTRACTS, REPURCHASES OF THE CONTRACTS, LIQUIDATIONS OF DEFAULTED
CONTRACTS AND EARLY TERMINATION OF THE TRUST
A higher than anticipated level of prepayments of the contracts or
liquidations of defaulted contracts may cause a trust to pay principal on your
securities sooner than you expected. Also, a trust may pay principal on your
securities sooner than you expected if the depositor or servicer repurchase
contracts from the trust. You may not be able to reinvest the principal paid to
you at yields that are equivalent to the yields on your securities; therefore,
the ultimate return you receive on your investment in the securities may be less
than the return you expected on the securities.
The contracts included in the trust may be prepaid, in full or in part,
voluntarily or as a result of defaults, theft of or damage to the related
vehicles or for other reasons. The depositor will be required to repurchase a
contract from the trust if a breach of its representations and warranties
relating to that contract materially and adversely affects the trust's or the
securityholders' interest in the contract or the collectibility of the contract.
In that event, the seller, or the performance guarantor in the event of the
seller's nonperformance, will be obligated to repurchase the contract from the
depositor. In addition, the servicer will be required to purchase contracts from
the trust if it breaches certain covenants with respect to those contracts. The
seller may purchase all remaining contracts from the trust when the outstanding
aggregate principal balance of the securities is 10% or less of the initial
aggregate principal balance of the contracts as of the related cut-off date.
The depositor cannot fully predict the extent to which prepayments on the
contracts by the related obligors will shorten the life of the securities. The
rate of prepayments on the contracts may be influenced by a variety of economic,
social and other factors including:
- changes in customer requirements;
- the level of interest rates;
- the level of casualty losses; and
- the overall economic environment.
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The depositor cannot assure you that prepayments on the contracts held by
the trust will conform to any historical experience. The depositor cannot
predict the actual rates of prepayments which will be experienced on the
contracts. However, your prospectus supplement may present information as to the
principal balances of the securities remaining on each payment date under
several hypothetical prepayment rates. You will bear all reinvestment risk
resulting from prepayments on the contracts and the corresponding acceleration
of payments on the securities. See "WEIGHTED AVERAGE LIVES OF THE SECURITIES" in
your prospectus supplement.
We expect that the final payment of each class of securities will occur
prior to its scheduled final payment date because of the prepayment and purchase
considerations described above. If sufficient funds are not available to pay any
class of notes in full on its scheduled final payment date, an event of default
will occur under the related indenture and final payment of that class of notes
will occur later than that date.
OCCURRENCE OF EVENTS OF DEFAULT UNDER THE INDENTURE MAY RESULT IN INSUFFICIENT
FUNDS TO MAKE PAYMENTS ON YOUR SECURITIES
If a trust fails to pay principal of any class of notes on its final
scheduled payment date, or fails to pay interest on any notes within five days
of the due date, the indenture trustee or the holders of more than 50% of the
aggregate amount of notes or the class or the classes of notes described in your
prospectus supplement may declare the entire amount of the notes to be due
immediately. If this happens, the holders of more than 50% of the aggregate
amount of notes or the class or classes of notes described in your prospectus
supplement may direct the indenture trustee to sell the contracts and prepay the
notes. In such event, there may not be sufficient funds to pay all of the
classes of securities in full.
PAID-AHEAD SIMPLE INTEREST CONTRACTS MAY AFFECT THE WEIGHTED AVERAGE LIFE OF THE
SECURITIES
If an obligor on a simple interest contract makes a payment on the contract
ahead of schedule, the weighted average life of the securities could be
affected. This is because the additional scheduled payments will be treated as a
principal prepayment and applied to reduce the principal balance of the related
contract. Obligors are generally not required to make any scheduled payments
during the period for which it was paid-ahead. During this period, interest will
continue to accrue on the contract principal balance, but the contract would not
be considered delinquent. Although the servicer may be required to make interest
advances during this paid-ahead period, the servicer will not be required to
make principal advances. Furthermore, when the obligor resumes the required
payments, they may be insufficient to cover the interest that has accrued since
the last payment by that obligor. This situation will continue until the
regularly scheduled payments are once again sufficient to cover all accrued
interest and to reduce the principal balance of the contract.
Generally paid-ahead payments shorten the weighted average lives of the
securities when the paid-ahead amount is applied to the payment of principal on
the securities; however, in certain circumstances the weighted average lives of
the securities may be extended. In addition, liquidation proceeds will be
applied first to reimburse any advances made by the servicer, therefore, to the
extent the servicer makes advances on a paid-ahead simple interest contract
which subsequently goes into default, the loss on this contract may be larger
than would have been the case had advances not been made.
The seller's portfolio of contracts has historically included simple
interest contracts which have been paid-ahead by one or more scheduled monthly
payments. We cannot predict the number of contracts which may become paid-ahead
simple interest contracts or the amount of scheduled payments which may be paid
ahead.
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THE PRICE AT WHICH YOU CAN RESELL YOUR SECURITIES MAY DECREASE IF THE RATINGS OF
YOUR SECURITIES DECLINE
At the initial issuance of the securities of a trust, at least one
nationally recognized statistical rating organization will rate the securities
of the trust in one of the four highest rating categories. At any time, these
rating agencies may lower their respective ratings of the securities or withdraw
their ratings entirely. If a rating assigned to any security is lowered or
withdrawn for any reason, you may not be able to resell your securities or you
may be able to resell them only at a substantial discount. For more detailed
information regarding the ratings assigned to the securities, see "RATINGS OF
THE SECURITIES" in this prospectus and "RATINGS OF THE SECURITIES" or "RATINGS
OF THE CERTIFICATES" in your prospectus supplement.
SUBORDINATION MAY CAUSE SOME CLASSES OF SECURITIES TO BEAR ADDITIONAL CREDIT
RISK AND DOES NOT ENSURE PAYMENT OF THE MORE SENIOR CLASSES OF SECURITIES
A trust may pay interest and principal on some classes of securities prior
to paying interest and principal on other classes of securities. The
subordination of some classes of securities to others means that the
subordinated classes of securities are more likely to suffer the consequences of
delinquent payments and defaults on the contracts than the more senior classes
of securities.
The more senior classes of securities could lose the credit enhancement
provided by the more subordinate classes if delinquencies and defaults on the
contracts increase and if the collections on the contracts and any credit
enhancement described in your prospectus supplement are insufficient to pay even
the more senior classes of securities.
Your prospectus supplement will describe any subordination provisions
applicable to your securities.
FUTURE DELINQUENCY AND LOSS EXPERIENCE OF THE CONTRACTS MAY VARY SUBSTANTIALLY
FROM THE SERVICER'S HISTORICAL EXPERIENCE
We will present the historical delinquency and loss experience of the
portfolio of contracts originated directly or purchased by the seller and
serviced by the servicer in your prospectus supplement. However, the actual
results for the contracts transferred to your trust could be substantially
worse. If so, you may not receive interest and principal payments on your
securities in the amounts and at the times you expect.
INTERESTS OF OTHER PERSONS IN THE CONTRACTS OR THE FINANCED VEHICLES COULD
REDUCE THE FUNDS AVAILABLE TO MAKE PAYMENTS ON YOUR SECURITIES
Another person could acquire an interest in a contract that is superior to
that of the trust because the servicer will retain possession of the contracts
and the contracts will not be segregated or marked as belonging to the trust. If
a person purchases contracts, or takes a security interest therein, for value in
the ordinary course of its business and obtains possession of the contracts
without actual knowledge of the trust's interest, that person will acquire an
interest in the contracts superior to the interest of the trust and some or all
of the collections on the contracts may be not available to make payments on the
securities.
Another person could acquire an interest in a financed vehicle that is
superior to that of the trust because of the failure to identify the trust as
the secured party on the related certificate of title. The seller will assign
its security interests in the financed vehicles to the depositor, and the
depositor will assign its security interests in the financed vehicles to the
trust. The seller's assignment to the depositor, and the depositor's subsequent
assignment to the trust, are subject to state vehicle registration laws. These
registration laws require that the secured party's name appear on the
certificate or similar registration of title in order for the secured party's
security interest to be perfected. To
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facilitate servicing and reduce administrative costs, the servicer will continue
to hold the certificates of title or ownership for the vehicles and will not
endorse or otherwise amend the certificates of title or ownership to identify
the trust as the new secured party. As a result, the trust may not have a
perfected security interest in the financed vehicles in certain states because
the certificates or similar registrations of title will not be amended to
reflect the assignment of the security interests in the financed vehicles to the
trust. In addition, because the trust will not be identified as the secured
party on any certificate of title or similar registration of title, the security
interest of the trust in the vehicles may be defeated through fraud, forgery,
negligence or error.
The holders of some types of liens, such as tax liens or mechanics liens,
may have priority over the trust's security interest in the financed vehicles.
The trust may lose its security interest in a financed vehicle confiscated by
the government.
In the event that the trust must rely upon repossession and sale of the
financed vehicle securing a defaulted contract to recover amounts due on the
defaulted contract, the trust's ability to realize upon the financed vehicle
would be limited by the failure to have a perfected security interest in the
related financed vehicle or the existence of a senior security interest in the
related financed vehicle. In this event, you may be subject to delays in payment
and may incur losses on your investment in the securities as a result of
defaults or delinquencies by obligors. See "LEGAL ASPECTS OF THE CONTRACTS--
SECURITY INTERESTS" in this prospectus.
LIMITATIONS ON ENFORCEABILITY OF SECURITY INTERESTS IN THE FINANCED VEHICLES MAY
HINDER THE TRUST'S ABILITY TO REALIZE THE VALUE OF THE FINANCED VEHICLES
State law limitations on the enforceability of security interests and the
manner in which a secured party may dispose of collateral may limit the trust's
ability to obtain or dispose of collateral in a timely fashion. This could
reduce or delay the availability of funds to make payments on your securities.
Under these state law limitations:
- some jurisdictions require that the obligor be notified of the default and
be given a period of time within which it may cure the default prior to or
after repossession; and
- the obligor may have the right to redeem collateral for its obligations
prior to or after the actual sale by paying the secured party the unpaid
balance of the obligation plus the secured party's expenses for
repossessing, holding and preparing the collateral for disposition.
CONTRACTS THAT FAIL TO COMPLY WITH CONSUMER PROTECTION LAWS MAY BE
UNENFORCEABLE, WHICH MAY RESULT IN LOSSES ON YOUR INVESTMENT
The contracts are consumer contracts subject to many federal and state
consumer protection laws. If any of the contracts do not comply with one or more
of these laws, the servicer may be prevented from or delayed in collecting
amounts due on the contracts. If that happens, payments on the securities could
be delayed or reduced. See "LEGAL ASPECTS OF THE CONTRACTS--CONSUMER PROTECTION
LAWS" in this prospectus.
Each of the depositor and seller will make representations and warranties
relating to the contracts' compliance with these laws and the enforceability of
the contracts. If those representations and warranties are not true as to any
contract and the breach materially and adversely affects the trust's or the
securityholders' interest in the contract or the collectibility of the contract,
the depositor will be obligated to repurchase the contract from the trust and
the seller, or the performance guarantor in the event of the seller's
nonperformance, will be required to repurchase the contract from the depositor.
There can be no assurance that the depositor, the seller or the performance
guarantor will be able to repurchase a contract at the time when it is asked to
do so.
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REPURCHASE OBLIGATION OF THE DEPOSITOR AND THE SELLER PROVIDES YOU ONLY LIMITED
PROTECTION AGAINST PRIOR LIENS ON THE CONTRACTS
Federal or state law may grant liens on contracts that have priority over
the trust's interest. If the creditor associated with any prior lien on a
contract exercises its remedies, the cash proceeds from the contract and related
financed vehicle available to the trust will be reduced. In that event, there
may be a delay or reduction in distributions to you. An example of a lien
arising under federal or state law is a tax lien on property of the seller or
depositor arising prior to the time a contract is conveyed to the trust. Such a
tax lien would have priority over the interest of the trust in the contracts.
The seller will warrant to the depositor, and the depositor will warrant to
the trust, that there are no prior liens on the contracts. In addition, the
seller will warrant to the depositor, and the depositor will warrant to the
trust, that it will not grant any lien on the contracts. If those warranties are
not true as to any contract and the breach materially and adversely affects the
trust's or the securityholders' interest in the contract or the collectibility
of the contract, the depositor will be obligated to repurchase the contract from
the trust and the seller, or the performance guarantor in the event of the
seller's nonperformance, will be required to repurchase the contract from the
depositor. There can be no assurance that the depositor, the seller or the
performance guarantor will be able to repurchase a contract at the time when it
is asked to do so.
BANKRUPTCY OF THE OBLIGORS MAY REDUCE OR DELAY COLLECTIONS ON THE CONTRACTS AND
DISPOSITION OF THE FINANCED VEHICLES RELATING TO THESE OR OTHER DEFAULTING
OBLIGORS MAY BE DELAYED OR MAY NOT RESULT IN COMPLETE RECOVERY OF AMOUNTS DUE
Bankruptcy and insolvency laws affect the risk of loss on the contracts of
obligors who become subject to bankruptcy proceedings. Those laws could result
in the write-off of contracts of bankrupt obligors or result in delay in
payments due on the contracts. For example, if the obligor becomes bankrupt or
insolvent, the trust may need the permission of a bankruptcy court to obtain and
sell its collateral. As a result, you may be subject to delays in receiving
payments, and you may also suffer losses if available credit enhancement for the
securities is insufficient.
IF A BANKRUPTCY COURT DETERMINES THAT THE TRANSFER OF CONTRACTS FROM THE
ORIGINATING DEALERS TO THE SELLER OR FROM THE SELLER TO THE DEPOSITOR WAS NOT
A TRUE SALE THEN PAYMENTS ON THE CONTRACTS COULD BE DELAYED RESULTING IN
LOSSES OR DELAYS IN PAYMENTS ON YOUR SECURITIES
If an originating dealer or the seller became a debtor in a bankruptcy case,
creditors of that party, or that party acting as debtor-in-possession, may
assert that the transfer of the contracts was ineffective to remove the
contracts from that party's estate. In that case, the distribution of payments
on the contracts to the trust might be subject to the automatic stay provisions
of the United States bankruptcy code. This would delay the distribution of those
payments to you for an uncertain period of time. Furthermore, reductions in
payments under the contracts to the trust may result if the bankruptcy court
rules in favor of the creditors or the debtor-in-possession. In either case, you
may experience delays or reductions in distributions or payments to you. In
addition, a bankruptcy trustee would have the power to sell the contracts if the
proceeds of the sale could satisfy the amount of the debt deemed owed by the
originating dealer or the seller, as the case may be. The bankruptcy trustee
could also substitute other collateral in lieu of the contracts to secure the
debt. Additionally, the bankruptcy court could adjust the debt if the
originating dealer or the seller were to file for reorganization under Chapter
11 of the bankruptcy code. Any of these actions could result in losses or delays
in payments on your securities. Each of these parties will represent and warrant
that the conveyance of the contracts by it is in each case a valid sale and
transfer of the contracts. See "LEGAL ASPECTS OF THE CONTRACTS--BANKRUPTCY
CONSIDERATIONS."
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IF A BANKRUPTCY COURT DECIDES TO CONSOLIDATE THE ASSETS AND LIABILITIES OF THE
DEPOSITOR AND THE SERVICER OR THE SELLER THEN PAYMENTS ON THE CONTRACTS COULD
BE DELAYED RESULTING IN LOSSES OR DELAYS IN PAYMENTS ON THE SECURITIES
If the servicer or the seller became a debtor in a bankruptcy case, the
servicer or the seller, as the case may be, or a creditor or party acting as
debtor-in-possession of the servicer or the seller could request a bankruptcy
court to order that the assets and liabilities of the servicer or the seller, as
the case may be, be substantially consolidated with the depositor's assets and
liabilities. If the bankruptcy court did consolidate the assets and liabilities
of the servicer or the seller and depositor, delays and possible reductions in
the amounts of distributions on the securities could occur. See "LEGAL ASPECTS
OF THE CONTRACTS--BANKRUPTCY CONSIDERATIONS."
PROCEEDS OF THE SALE OF CONTRACTS MAY NOT BE SUFFICIENT TO PAY YOUR SECURITIES
IN FULL; FAILURE TO PAY PRINCIPAL ON YOUR SECURITIES WILL NOT CONSTITUTE AN
EVENT OF DEFAULT UNTIL MATURITY
If so directed by the holders of the requisite percentage of outstanding
notes of a series issued by a trust following an acceleration of the notes upon
an event of default, the indenture trustee will sell the contracts owned by the
trust in certain circumstances. However, there is no assurance that the market
value of those contracts will at any time be equal to or greater than the
aggregate principal amount of the notes or the sum of the aggregate principal
amount of the notes and the aggregate principal balance of the certificates.
Therefore, upon a sale of the contracts, there can be no assurance that
sufficient funds will be available to repay your securities in full. In
addition, the amount of principal required to be paid to you on each payment
date will generally be limited to amounts available in the collection account
and the reserve fund, if any. The failure to pay principal of your securities
generally will not result in the occurrence of an event of default until the
final scheduled payment date for your securities. See "DESCRIPTION OF THE NOTES
AND INDENTURE--THE INDENTURE--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT"
in this prospectus.
COMMINGLING OF COLLECTIONS COULD RESULT IN REDUCED PAYMENTS TO YOU
If permitted by the rating agencies rating the securities, the servicer may
hold collections it receives from the obligors on the contracts with its own
funds until the day prior to the next date on which distributions will be made
on the securities. If the servicer does not pay these amounts to the trust when
required to do so, the trust may be unable to make the payments owed on your
securities. In the event the servicer becomes a debtor in a bankruptcy case, the
trust may not have a perfected security interest in these collections. In that
case, you may suffer losses on your investment.
YOU MAY NOT BE ABLE TO RESELL YOUR SECURITIES
There is currently no public market for the securities and we cannot assure
you that one will develop. Thus, you may not be able to resell your securities
at all, or may be able to do so only at a substantial discount. The underwriters
may assist in resales of the securities but they are not obligated to do so. We
cannot predict whether there will be a secondary market for these types of
securities or if one develops, how liquid it would be.
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IF THE TRUST ENTERS INTO A CURRENCY OR AN INTEREST RATE SWAP, PAYMENTS ON THE
SECURITIES WILL BE DEPENDENT ON PAYMENTS MADE UNDER THE SWAP AGREEMENT
If the trust enters into a swap agreement, its ability to protect itself
from shortfalls in cash flow caused by currency or interest rate changes will
depend to a large extent on the terms of the swap agreement and whether the swap
counterparty performs its obligations under the swap. If the trust does not
receive the payments it expects from the swap, the trust may not have adequate
funds to make all payments owed on your securities when due, if ever.
THE RATING OF A SWAP COUNTERPARTY MAY AFFECT THE RATINGS OF THE SECURITIES
If a trust enters into a swap, the rating agencies that rate the trust's
securities will consider the provisions of the swap agreement and the rating of
the swap counterparty. If a rating agency downgrades the debt rating of the swap
counterparty, it may downgrade the rating of the securities. In such an event,
you may not be able to resell your securities or you may be able to resell them
only at a substantial discount.
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THE DEPOSITOR
The depositor is Dealer Auto Receivables Corp., a corporation organized
under the laws of the State of Delaware in February 2000. Premier Auto
Finance, Inc. owns all of the depositor's issued and outstanding stock. The
principal executive offices of the depositor are located at 230 West Monroe
Street, Chicago, Illinois 60606 (telephone number (312) 456-1250).
Premier Auto Finance, Inc. formed the depositor, solely for the transactions
described in this prospectus and other similar transactions. Under the
depositor's certificate of incorporation, the depositor is permitted to engage
only in the following activities:
- acquiring contracts, interests in pools of contracts and the interests of
the seller in financed vehicles and other related property;
- transferring and conveying the contracts and security interests in the
related financed vehicles to the trusts;
- issuing and selling notes, certificates or other securities secured by or
representing interests in pools of contracts and related property;
- executing and performing obligations under the relevant agreements
regarding the formation of the trusts and the transfer and servicing of
the pools of contracts and related property;
- holding or transferring securities issued by the trusts;
- investing proceeds from the sale of securities; and
- engaging in other transactions, including entering into agreements that
are necessary, suitable or convenient to accomplish the foregoing or are
incidental or connected to the foregoing.
The depositor is prohibited from incurring any debt, issuing any obligations
or incurring any liabilities, except in connection with the formation of any
trust and the issuance of the related series of securities issued by the trust.
The depositor is not responsible for payment of any principal, interest or any
other amount in respect of any series of securities.
THE TRUSTS
The depositor will establish each trust pursuant to a trust agreement or a
pooling and servicing agreement for the transactions described in this
prospectus. Each trust will be a common law trust or a statutory business trust.
Each trust may issue one or more classes of securities, representing debt of or
beneficial ownership interests in the trust.
On or before the date of the initial issuance of any securities by a trust,
the seller will sell the pool of contracts and the related property to the
depositor pursuant to a purchase agreement and the depositor will transfer the
pool of contracts and the related property to the trust in exchange for the
securities issued by the trust pursuant to a sale and servicing agreement or a
pooling and servicing agreement.
To the extent provided in the prospectus supplement, the depositor may
convey additional contracts to the trust after the closing date as frequently as
daily during a funding period, not to exceed 90 days, specified in the
prospectus supplement. A trust will purchase any contracts subsequently added to
the trust with amounts deposited in a pre-funding account on the closing date.
Any subsequent contracts will be required to conform to the requirements
described in the applicable prospectus supplement. Any subsequent contracts will
also be assets of trust. Any funds remaining on deposit in a pre-funding account
at the end of the funding period will be used to make a payment or distribution
of principal on the securities issued by the trust.
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To the extent provided in the prospectus supplement, all or a portion of the
principal collected on the contracts may be applied by the trustee to the
acquisition of subsequent contracts during a period specified in the prospectus
supplement rather than used to make or distribute payments of principal to
securityholders during that period. These securities would then possess an
interest only period, also commonly referred to as a "REVOLVING PERIOD", which
will be followed by an "AMORTIZATION PERIOD", during which principal will be
paid. Any interest only or revolving period may terminate prior to the end of
the specified period and result in the earlier than expected principal repayment
of the securities.
The property of each trust, as further specified in your prospectus
supplement, will consist of:
- the contracts and the right to receive all scheduled payments and
prepayments received on the contracts on or after the cut-off date, but
excluding any scheduled payments due on or after, but received prior to,
the cut-off date;
- amounts that may be held in separate trust accounts maintained by the
trustee or the indenture trustee for the trust, including any reserve fund
or yield supplement account;
- security interests in the financed vehicles securing the contracts and any
related property;
- rights with respect to any repossessed financed vehicles;
- the rights to proceeds from claims on theft, physical damage, credit life
and disability insurance policies covering the financed vehicles or the
obligors;
- the seller's rights against the originating dealers under the dealer
agreements and against other third parties under the agreements pursuant
to which the seller purchased the contracts;
- certain rebates of premiums and other amounts relating to insurance
policies, extended service contracts or other repair agreements and other
items financed under the contracts;
- the depositor's rights against the seller under the purchase agreement
pursuant to which the seller sold the pool of contracts to the depositor
and against the performance guarantor under the performance guarantee
pursuant to which the performance guarantor guaranteed the seller's
obligations under the purchase agreement;
- the right to receive payments from the depositor obligated to repurchase
contracts which do not meet specified representations made by depositor in
the sale and servicing agreement or the pooling and servicing agreement;
- the trust's rights against the servicer under the transfer and servicing
agreements;
- credit or cash flow enhancement for the securities specified in the
applicable prospectus supplement; and
- all proceeds of the foregoing.
The property of a trust may also include a derivative arrangement for any
series or any class of securities. A derivative arrangement may include a
guaranteed rate agreement, a maturity liquidity facility, a tax protection
agreement, an interest rate cap or floor agreement, an interest rate or currency
swap agreement or any other similar arrangement. If the property of the trust
issuing your securities includes any of these types of assets, additional
information concerning them will be provided to you in your prospectus
supplement.
If the trust issues notes, the trust will pledge its assets to the indenture
trustee for the benefit of the noteholders to secure its obligations under the
notes.
No trust will engage in any business activity other than:
- issuing notes and/or ownership interests in the trust;
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- purchasing contracts, security interests in the related financed vehicles
and related property;
- holding and dealing with assets of the trust;
- making payments on the securities it issued;
- entering into and performing the duties, responsibilities and functions
required under any of the related pooling and servicing agreement, sale
and servicing agreement, indenture, contracts and related documents, as
the case may be; and
- matters incidental to the foregoing.
The assets of a trust will be separate from the assets of all other trusts
created by the depositor. Accordingly, the assets of one trust will not be
available to make payments on the securities issued by any other trust.
USE OF PROCEEDS
The proceeds from the sale of the securities of each trust, after funding a
portion of the cash collateral account or other form of credit enhancement and
paying the expenses of the depositor, will be used by the depositor to pay the
purchase price due to Premier Auto Finance, L.P., as seller pursuant to the
purchase agreement.
THE TRUSTEE
The depositor will specify the trustee for each trust and, if the trust is
issuing notes, the indenture trustee under the indenture in the applicable
prospectus supplement. The trustee's or the indenture trustee's liability in
connection with the issuance and sale of the related securities is limited
solely to the express obligations set forth in the related trust agreement,
pooling and servicing agreement, sale or servicing agreement or indenture, as
applicable. A trustee may resign at any time, in which event, the depositor will
be obligated to appoint a successor. An indenture trustee may resign at any
time, in which event, the trust or the administrator, on the trust's behalf,
will be obligated to appoint a successor. A trustee that becomes insolvent or
otherwise ceases to be eligible to continue in that capacity under the related
pooling and servicing agreement or trust agreement may be removed by the
depositor. An indenture trustee that becomes insolvent or otherwise ceases to be
eligible to continue in its capacity under the indenture may be removed by the
trust or the administrator, on the trust's behalf. In those circumstances, the
servicer or the administrator, as the case may be, will be obligated to appoint
a successor. Any resignation or removal of a trustee will not become effective
until acceptance of the appointment of a successor trustee.
In addition, the holders of more than 50% of the aggregate principal amount
of the notes or the class or classes of the notes described in your prospectus
supplement may remove the indenture trustee without cause and may appoint a
successor indenture trustee. If a trust issues a class of notes that is
subordinated to one or more other classes of notes and an event of default
occurs under the related indenture, the indenture trustee may be deemed to have
a conflict of interest under the Trust Indenture Act of 1939 and may be required
to resign as trustee for one or more of the classes of notes. In any such case,
the indenture will provide for a successor indenture trustee to be appointed for
those classes of notes.
Each of the trustee and the indenture trustee and any of its respective
affiliates may hold securities in its own name or as a pledgee. For the purpose
of meeting the legal requirements of some jurisdictions, the servicer and the
related trustee will have the power to appoint co-trustees or separate trustees
of all or any part of the trust.
You will find the addresses of the principal offices of the trust and the
trustee in your prospectus supplement.
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THE SELLER AND ORIGINATING DEALERS
SELLER
Premier Auto Finance, L.P. is an limited partnership formed in the State of
Illinois in November 1992. The seller's principal executive offices are located
at 230 West Monroe Street, Chicago, Illinois 60606 (telephone number
(312) 456-1300). The Auto Conduit Corporation ("TACC"), a wholly-owned
subsidiary of Premier Auto Finance, Inc., is the sole general partner of the
seller. Each limited partner of the seller is a dealer group consisting of a
single automobile dealership or related group of automobile dealerships and/or
persons associated with or controlling such dealership or group.
Each limited partner is required to make an equity contribution to the
seller in exchange for its limited partnership interest. The seller utilizes the
capital contributions, together with other funds, to purchase retail installment
contracts relating to the sale of new and used automobiles and light-duty trucks
that have been originated by dealerships affiliated with the limited partners or
by other third parties that finance the purchase of new or used automobiles and
light-duty trucks. In addition, the seller may originate contracts directly. All
of the contracts are originated in accordance with Premier Auto Finance, Inc.'s
underwriting standards and procedures discussed below under "THE SERVICER--
UNDERWRITING AND ORIGINATION."
ORIGINATING DEALERS
The originating dealers consist of automobile dealerships located throughout
the United States. The originating dealers finance the retail purchase of new
and used automobiles and light-duty trucks through installment contracts and
retain a security interest on the financed vehicles. All of the contracts are
originated in accordance with Premier Auto Finance, Inc.'s underwriting
standards and procedures discussed below under "THE SERVICER--UNDERWRITING AND
ORIGINATION." Each originating dealer will transfer the contracts and related
interests to the seller pursuant to a dealer agreement with the seller that
governs the transfer of the contracts. As of , approximately
originating dealers had transferred contracts to the seller.
In each dealer agreement, the applicable originating dealer makes the
following representations and warranties, among others, regarding each contract
and financed vehicle transferred to the seller:
- the contract is a legal, valid and binding payment obligation of the
obligor enforceable against the obligor in accordance to its terms;
- the contract is secured by a first priority perfected security interest in
the financed vehicle; and
- the originating dealer has no knowledge that any information provided by
the obligor to the seller is false or misleading.
In the event of a breach of any representation or warranty with respect to a
contract, the originating dealer is obligated to repurchase the contract from
the seller.
THE SERVICER
GENERAL
Premier Auto Finance, Inc. will manage and service the contracts held by
each trust.
Premier Auto Finance, Inc. was incorporated in Delaware in October 1990. The
servicer is a wholly-owned indirect subsidiary of Virginia Surety Company, Inc.
The servicer's principal executive offices are located at 230 West Monroe
Street, Chicago, Illinois 60606 (telephone number (312) 456-1300). Its
nationwide servicing center is located at 5050 North Broadway, Chicago,
Illinois 60640 (telephone number 800-364-9737).
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UNDERWRITING AND ORIGINATION
The servicer, subject to TACC's oversight, provides all administrative,
credit underwriting, collection and accounting services for the contracts
originated by the dealers and acquired by the seller. Premier Auto
Finance, Inc. underwrites motor vehicles contracts on behalf of the seller. For
contracts originated by dealers, the applicable dealer submits an application by
facsimile to the servicer at one of its four regional offices located in Irvine,
California, Chicago, Illinois, Tinicum, Pennsylvania, and Fairport, New York.
Upon receiving an application from a dealer, a contract processor enters the
information from the application into the servicer's computer system.
The application of each potential obligor is evaluated individually based
upon uniform underwriting standards developed by Premier Auto Finance, Inc.
These underwriting standards are intended to assess a potential obligor's
ability to repay all amounts due under the contract and the adequacy of the
related financed vehicle as collateral, based upon a review of the information
contained in the contract application. The material credit information required
for the contract application includes the applicant's real time credit history
obtained from a third party credit bureau reporting agency, income, deposit
accounts, liabilities, employment history and a description of the financed
vehicle intended to secure the contract. The material criteria considered in
evaluating the individual applications are:
- Auto-enhanced credit bureau score;
- The obligor's payment history based on information known directly by the
servicer or provided by various credit reporting agencies with respect to
present and past debt;
- A debt service to gross monthly income ratio test;
- Collateral protection based on the loan to value ratio, taking into
account the age, type and market value of the financed vehicle and the
term of the contract; and
- Stability of the obligor with specific regard to the obligor's length of
residence, occupation, length of employment and whether the obligor rents
or owns.
The servicer uses consumer reporting agency scores or credit bureau scores
to assist in the underwriting process. The credit bureau score is a factor in
evaluating credit risk and provides the primary basis for a decision. The
servicer's standard guidelines permit retail installment contracts with credit
bureau scores of 570 and above to be underwritten. A credit analyst reviews each
application, taking into account the applicable credit score and the other
criteria set forth above, except for a limited number of applications which are
automatically approved upon satisfaction of higher thresholds in respect of the
above referenced approval criteria or which are automatically denied upon
failure to satisfy the servicer's minimum thresholds in respect of the
above-referenced approval criteria. The underwriting and consumer reporting
agency scores are intended to provide a basis for lending decisions, but are not
meant to supersede the judgment of the credit analyst in weighing and
considering all the above-referenced approval criteria.
On occasion, the servicer approves contract applications at variance with
its standard credit guidelines. However, to gain approval, a contract
application that does not comply with all of the guidelines must have strong
compensating factors that demonstrate the ability of the potential obligor to
pay all amounts due under the contract. If an application for a contract is
approved after failing to comply with the servicer's guidelines, the approval
generally occurs because the credit analyst has conditioned the purchase of the
contract on additional requirements, such as a larger down payment, a reduction
in the term of the financing or the addition of a co-applicant to the contract.
However, the servicer does not revise or recalculate the obligor's credit score
to reflect the strength of a co-applicant.
After review of an application, a credit analyst or manager notifies the
applicable dealer as to whether the application has been approved (subject to
the receipt of the required documentation), denied or is the subject of a
counter-offer. If the response to the dealer includes a counter-offer from
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Premier Auto Finance, Inc. (which can include an additional down payment, a
reduction in the term of the financing, or the addition of a co-applicant to the
contract), those stipulations become a condition of the approval. Subsequent to
approval, if the seller is the chosen source of financing, the servicer will
obtain the necessary documentation for processing the contract, consisting of
the following:
- A credit application;
- The only original of the executed contract;
- An agreement by the obligor to provide insurance naming the seller as loss
payee;
- Title application or guarantee of title;
- An application for registration;
- A co-signer notification (if applicable);
- Documentary support for any supplemental warranty purchased with respect
to the financed vehicle;
- Acceptable vehicle valuation documentation consisting of the dealer
invoice or sticker for new cars and reference to the most recently
published National Automobile Dealers Association Used Car Price Guide or
other comparable price guide such as Black Book or Kelly Blue Book, based
on year, make and model of the related financed vehicle for used cars; and
- Any other required documentation.
Once the appropriate documentation is obtained for funding, the file
relating to the contract is forwarded to a contract processor for a pre-funding
audit. The contract processor then audits the documents for completeness and
consistency with the application, providing final approval for purchase of the
contract once these requirements have been satisfied.
The amount advanced pursuant to the underwriting guidelines for a contract
is determined by the applicant's bureau score and credit analyst's review. For
purposes of determining the advance rate, the servicer segregates applicants
into four tiers based on their credit scores. Each tier has a limit on advance
ratios and has certain down payment requirements. Higher tiers require lower
advance rates or higher down payments or both. The amount advanced is a
percentage of the manufacturer's suggested retail price for a new vehicle or the
"Trade In" value stated in a commonly utilized used car price guide for a used
vehicle in each case plus taxes and title and license fees on the finance
vehicle averaging an additional 7%.
However, the amount advanced under a contract may be less, or in limited
circumstances more, than the maximum permissible amount due to a number of
factors, including down payment requirements, trade-in equity and credit score.
In addition, in connection with the financing of a new or used vehicle, the
seller will also finance accessories, extended service contracts and other
insurance products under a contract. Although the advance rate for each contract
in its serviced portfolio is not specifically tracked, the servicer estimates
that the average advance rate of the contracts is less than 100%. In those
limited circumstances in which the amount advanced exceeds the maximum
permissible amount, such amount generally does not exceed 130% of the maximum
permissible amount.
The servicer performs detailed analyses of its portfolio of contracts to
evaluate the effectiveness of its credit guidelines and scoring process. If
external economic factors, credit delinquency levels or credit loss levels
change, credit guidelines are adjusted to maintain a level of asset quality
deemed acceptable by management. Each day, the credit manager and credit
supervisors review a group of contracts to ensure that credit analysts are
following established policies and procedures. In addition, the servicer
randomly reviews, on a monthly basis, the quality of the contracts to ensure
compliance with established policies and procedures. In accordance with its
reasonable business judgment, the servicer's credit underwriting standards may
change at any time.
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INSURANCE
The contracts require obligors to maintain insurance coverage, including
comprehensive fire, theft and collision coverage, insuring the financed vehicle
in an amount at least equal to the financed vehicle's fair market value. The
originating dealers are responsible for ensuring that each obligor obtains
proper insurance coverage and that the seller is named as loss payee. The
servicer does not systematically track whether insurance coverage remains in
effect after the seller has acquired a contract from an originating dealer. The
servicer does not "force place" insurance when it discovers that a financed
vehicle is not insured.
In the event that an obligor fails to maintain any required insurance and
this failure results in a loss under a contract which is not covered by the
credit enhancement available for your securities, you could suffer a loss on
your investment.
COLLECTION PROCEDURES
The servicer has established a comprehensive set of collection policies and
procedures. These policies and procedures utilize a computerized collection
system to assist in collection efforts and the prompt investigation and
evaluation of the causes of any delinquency. The computerized collection system
provides relevant obligor information, including the obligor's current address,
phone number, contract information and other records of contacts. The collection
system allows the servicer's collection personnel to record notes regarding the
account and facilitates review of collection personnel activity. The information
provided by the collection system allows the servicer to modify its priorities
regarding which obligors to contact and provides extensive reports concerning
contract delinquencies.
The servicer categorizes contracts into one of four tiers based on the
credit score of the obligor. Tier 1 obligors have higher credit scores and are
lower risks. Conversely, Tier 4 obligors have lower credit scores and are
generally higher risks. The servicer sends payment booklets to all Tier 1, Tier
2 and Tier 3 obligors and sends a monthly "advice of payment" or invoice to all
Tier 4 obligors.
The servicer performs collection activities with respect to delinquent
contracts, including the prompt investigation and evaluation of the causes of
the delinquency. The servicer considers a contract to be delinquent when the
obligor makes any payment that is less than 95% of a scheduled monthly payment.
The servicer collects overdue payments using several different methods,
including telephone calls and mailings. Different collection strategies are
utilized depending on the particular risk level of an obligor. Generally, the
number of days before the servicer commences its collection strategies is
greater for low risk obligors than in the case of high risk obligors. The
servicer uses an automated outbound phone system to call past due obligors at
varying times depending on the obligor's credit tier. Usually, a collections
representative will initiate telephone contact when a contract becomes 16 days
past due and will continue to contact the obligor until the delinquency is
resolved. To maximize contact time with customers, the servicer utilizes a
predictive dialer to contact obligors.
In addition to its telephone based collection operations, the servicer uses
two type of letters in its collection strategies:
- a notice of past due payment letter which is mailed to an obligor's
mailing address at 12 or 16 days past due depending on state law, and
- if required by state law, a notice of default and right to cure letter
which is mailed to an obligor's mailing address at 35, 40 or 45 days past
due depending on state law.
REPOSSESSION
If the servicer determines that an obligor will not or cannot pay past due
amounts, it will commence repossession procedures. Although the servicer may
repossess the financed vehicles at any time after a contractual default, it
typically commences repossession activities only after a contract is 60 days
past due.
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Repossession may occur without regard to the length or existence of a
payment delinquency if:
- the contract is deemed uncollectible;
- collection personnel determine that the financed vehicle is in danger of
being damaged, destroyed or otherwise unavailable for repossession; or
- the obligor voluntarily surrenders the financed vehicle.
Repossessions are conducted by third parties who are engaged in the business
of repossessing vehicles for secured parties. After repossession, the obligor,
in accordance with applicable state law, may have an additional 10 to 30 days to
redeem the financed vehicle by paying past due amounts, repossession costs and
other amounts required by state law before the financed vehicle is sold at
auction. The servicer typically assigns the repossessed vehicles to a third
party vehicle merchandiser which tracks the servicer's repossessed vehicles and
arranges for their sale nationwide. Upon the sale of the repossessed vehicle,
the servicer will pursue any remaining deficiency to the extent deemed practical
and to the extent permitted by law. The servicer first attempts to collect
deficiency balances using its own employees for approximately 120 days after
charge off. After that, the servicer refers the charged-off contracts to third
party collection agencies.
Losses may occur in connection with delinquent contracts and can arise in
several ways, including the inability to locate the financed vehicle or the
obligor, uninsured losses or as a result of a discharge of the obligor in a
bankruptcy proceeding. The servicer generally charges-off a contract:
- when the servicer deems the contract uncollectible;
- if the financed vehicle is not repossessed, during the month when 5% or
more of an installment due under the contract becomes more than 120 days
past due;
- if the financed vehicle is repossessed, when all sale proceeds, insurance
claims and refunds of financed insurance policies and extended warranties
have been received; or
- when an obligor files for bankruptcy and the servicer determines that its
loss is known.
EXTENSIONS
The servicer's collection policies and procedures may, on a case-by-case
basis, allow for extensions of the due dates of payments on contracts. It is the
servicer's policy that extensions are offered only in the following instances:
- if the servicer believes that the obligor's financial difficulty has been
resolved or will no longer impair the obligor's ability to make future
payments and that the obligor has a satisfactory income source for making
the next payment;
- the extension will result in the obligor's account being brought current;
- the total credit-related extensions granted on the contract will not
exceed six months in the aggregate;
- there has been no more than two credit-related extensions granted on the
contract in the immediately preceding twelve months;
- the obligor has made the first four scheduled payments on the contract, or
in the case of balloon contracts, the first six scheduled payments on the
contract;
- the obligor agrees to make the next payment by an acceptable date; and
- the financed vehicle's condition is favorable.
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Any deviation from the servicer's collection policies and procedures
regarding the grant of an extension requires the concurrence of a collection
supervisor.
YEAR 2000
The seller and servicer initiated and completed a program designed to
resolve the potential impact of the year 2000 on the ability of its computerized
information systems to accurately process information that may be date
sensitive. The seller and servicer identified the critical data storage and
operating systems and developed plans to ensure the readiness of systems to
process dates beyond the year 2000. Furthermore, the seller and servicer
communicated with the originating dealers, financial institutions and suppliers
to determine the risk created by those parties' failure to remediate their own
year 2000 issues.
To date, neither the seller nor the servicer has experienced any problems
relating to the year 2000 issue. In addition, neither the seller nor the
depositor expects to incur material costs in the future as a result of the year
2000 issue. There is no assurance that either the seller or servicer will not
experience problems in the future as a result of the year 2000 issue.
THE PERFORMANCE GUARANTOR
Virginia Surety Company, Inc. was incorporated in Illinois in January 1982.
Virginia Surety Company, Inc. is an Illinois licensed insurance company that
underwrites and administers comprehensive extended warranty and other consumer
service programs. It is a wholly owned subsidiary of Aon Corporation. Its
principal executive offices are located at 123 North Wacker Drive, Chicago,
Illinois 60606 (telephone number (312) 701-4670). We will provide its total
assets and stockholders' equity as of a recent date in your prospectus
supplement.
If the seller fails to perform any of its obligations under the purchase
agreements relating to breaches of its representations and warranties regarding
the contracts, the performance guarantor will be obligated to perform the
seller's obligations pursuant to the performance guarantee.
THE CONTRACTS
The contracts have been originated or purchased in accordance with the
underwriting standards determined by Premier Auto Finance, Inc. The seller
either originated the contracts directly or acquired the contracts in the
ordinary course of its business from the originating dealers or other parties
that finance the retail purchase of new or used automobiles and light-duty
trucks. The contracts to be held by each trust will be randomly selected from
the contracts in the seller's portfolio that meet the criteria specified in your
prospectus supplement. The seller will not use selection procedures adverse to
the holders of the securities issued by the trust when selecting the contracts
from qualifying contracts. These criteria provide that each contract:
- was originated in the United States and the obligor is not a federal,
state or local governmental entity;
- provides for either
- level monthly payments which provide interest at the annual percentage
rate and fully amortize the amount financed over an original term to
maturity no greater than the number of months specified in your
prospectus supplement, or
- interest at the annual percentage rate and requires a lump sum payment
at maturity substantially in excess of monthly payments and which has a
maturity no greater than the number of months specified in your
prospectus supplement;
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- is attributable to the purchase of a new or used automobile or light-duty
truck and is secured by that vehicle; and
- satisfies the other criteria, if any, set forth in your prospectus
supplement.
Each contract will provide for the allocation of payments made by the
obligors according to
- the simple interest method;
- the actuarial method; or
- the sum of periodic balances or sum of monthly payments method which we
refer to as Rule of 78s contracts and, together with the actuarial
contracts, as the "PRECOMPUTED CONTRACTS".
SIMPLE INTEREST CONTRACTS. Payments on simple interest contracts will be
applied first to interest accrued through the date immediately preceding the
date of payment and then to unpaid principal. Accordingly, if an obligor pays an
installment before its due date, the portion of the payment allocable to
interest for the payment period will be less than if the payment had been made
on the due date. As a result, the principal balance will be amortized more
rapidly than scheduled. Conversely, if an obligor pays an installment after its
due date, the portion of the payment allocable to interest for the payment
period will be greater than if the payment had been made on the due date. In
that event, the principal balance will be amortized more slowly than scheduled
and a larger portion of the principal balance may be due on the final scheduled
payment date. No adjustment to the scheduled monthly payments is made in the
event of early or late payments, although in the case of late payments the
obligor may be subject to a late charge.
ACTUARIAL CONTRACTS. An actuarial contract provides for amortization of the
loan over a series of fixed level monthly installments. Each scheduled payment
consists of an amount of interest equal to 1/12 of the stated annual percentage
rate of the contract multiplied by the scheduled principal balance of the
contract and an amount of principal equal to the remainder of the scheduled
payment. No adjustment to the scheduled monthly payments is made in the event of
early or late payments, although in the case of late payments the obligor may be
subject to a late charge.
RULE OF 78S CONTRACTS. A Rule of 78s contract provides for the payment of a
specified total amount of payments, in monthly installments, which total
represents the principal amount financed and finance charges in an amount
calculated on the basis of the related annual percentage rate for the term of
that contract. The rate at which the amount of finance charges is earned and,
correspondingly, the amount of each scheduled payment allocated to reduction of
the outstanding principal balance are calculated in accordance with the "Rule of
78s." Under the "Rule of 78s," the portion of each payment allocable to interest
is higher during the early months of the term and lower during later months than
under a constant yield method for allocating payments between interest and
principal. All payments received on a Rule of 78s contract will be allocated
pursuant to the related sale and servicing agreement or pooling and servicing
agreement on an actuarial basis. No adjustment is made in the event of early or
late payments, although in the case of late payments the obligor may be subject
to a late charge.
In the event of a prepayment in full, whether voluntarily or by
acceleration, of a precomputed contract, a rebate of the portion of the total
amount of payments under the contract allocable to "unearned" interest charges
will be made to the obligor. In the event of the prepayment in full, whether
voluntarily or by acceleration, of a simple interest contract, a rebate will not
be made to the obligor, but the obligor will be required to pay interest only to
the date immediately preceding the date of prepayment. The amount of a rebate
under a precomputed contract will always be less than or equal to the remaining
scheduled payments of interest that would have been due under a simple interest
contract for which all remaining payments were made on schedule. Rebates under
the Rule of 78s contracts will not affect payments to you because the payments
will be determined using the actuarial method.
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Each trust will account for the Rule of 78s contracts as if those contracts
were actuarial contracts. Amounts received upon prepayment in full of a Rule of
78s contract in excess of the then outstanding principal balance of the contract
and accrued interest thereon, calculated pursuant to the actuarial method, will
not be paid or passed through to you but will be deemed to be an excess amount
and released to the seller or otherwise applied as set forth in your prospectus
supplement.
We will provide information about the contracts to be held by your trust in
your prospectus supplement, including, to the extent appropriate:
- the distribution by the states of origination;
- the aggregate principal balances of contracts consisting of precomputed
contracts and simple interest contracts;
- the aggregate principal balances of contracts secured by new vehicles and
by used vehicles;
- the average principal balance of the contracts and the range of principal
balances;
- the average original amount financed of the contracts and the range of
original amount financed;
- the weighted average annual percentage rate and the range of annual
percentage rates;
- the weighted average original term of the contracts and the range of
original terms of the contracts; and
- the weighted average remaining term of the contracts and the range of
remaining terms of the contracts.
WEIGHTED AVERAGE LIVES OF THE SECURITIES
The weighted average lives of the securities of any trust will be a function
of the weighted average lives of the contracts held by the trust. The weighted
average lives of the contracts will be influenced by the rate at which the
principal balances of the related contracts are paid. The term "WEIGHTED AVERAGE
LIFE" means the average amount of time during which each dollar of principal of
a contract is outstanding.
All of the contracts will be prepayable at any time without penalty to the
obligor. However, partial prepayments on the precomputed contracts will not be
paid on the payment date following the month in which they were received but
will be retained and applied towards payments due in later months. If
prepayments in full are received on the precomputed contracts or if full or
partial prepayments are received on the simple interest contracts, the actual
weighted average lives of the contracts will be shorter than the scheduled
weighted average lives of the contracts set forth in your prospectus supplement.
Prepayments include optional prepayments by obligors, liquidations due to
default, partial prepayments from rebates of extended warranties and insurance
premiums, as well as receipts of proceeds from physical damage, credit life and
disability insurance policies. Prepayment rates are influenced by a variety of
economic, social and other factors, including the fact that an obligor generally
may not sell or transfer the financed vehicle securing a contract without the
consent of the servicer.
We cannot predict the rate of prepayment on the contracts in either stable
or changing interest rate environments. The servicer maintains limited records
of the historical prepayment experience of the contracts included in its
portfolio but is not aware of any publicly available industry statistics for the
entire industry that set forth prepayment experience for receivables similar to
the contracts. The servicer believes that its prepayment experience is
consistent with that generally found in the industry. However, neither the
servicer nor the depositor can assure you that prepayments will conform to
historical experience. The weighted average lives of the securities will also be
impacted to the extent
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that the depositor, the seller or the performance guarantor is obligated to
repurchase contracts from a given trust as a result of breaches of particular
representations and warranties relating to the contracts. See "DESCRIPTION OF
THE TRANSFER AND SERVICING AGREEMENTS--SALE AND ASSIGNMENT OF CONTRACTS BY
SELLER" and "--TRANSFER OF CONTRACTS BY DEPOSITOR" in this prospectus. The
weighted average lives of the securities will also be impacted to the extent the
servicer is obligated to purchase contracts from a given trust as a result of
breaches of certain covenants relating to the contracts. See "DESCRIPTION OF THE
TRANSFER AND SERVICING AGREEMENTS--SERVICING" in this prospectus. In addition,
early retirement of the securities may be effected by the exercise of the option
of the seller to purchase all of the contracts remaining in the trust when the
aggregate principal balance of the contracts is 10% or less of the aggregate
principal balance as of the cut-off date. You will bear all of the reinvestment
risk resulting from the rate of prepayments of the contracts.
Your prospectus supplement may set forth additional information regarding
the maturity and prepayment considerations applicable to your pool of contracts
and your securities.
FACTORS AND TRADING INFORMATION
The "NOTE FACTOR" or "CERTIFICATE FACTOR" for any class of notes or
certificates issued by an owner trust, respectively, will be a seven-digit
decimal indicating the principal amount of that class of securities on the
payment date as a fraction of the respective principal amount thereof as of the
closing date. The servicer will compute the note factor and certificate factor
each month. Initially, each factor will be 1.0000000 and thereafter will decline
to reflect reductions in the principal amount of each class of notes and
reductions in the certificate balance. The servicer will compute the principal
amount by allocating payments in respect of the contracts to principal and
interest using the simple interest method. The portion of the principal amount
of any class of notes and of the certificate balance for any class of
certificates for a given month allocable to a securityholder can be determined
by multiplying the original denomination of the holder's security by the related
note factor or certificate factor, as the case may be, for that month.
The "POOL FACTOR" for any class of certificates issued by a grantor trust
will be a seven-digit decimal indicating the certificate balance of that class
of certificates on the distribution date as a fraction of the aggregate
principal balance of the contracts as of the cut-off date. The servicer will
compute the pool factor each month and will be calculated by dividing the
certificate balance for that class of certificates as of the close of business
on the last day of the preceding month by the aggregate principal balance of the
contracts as of the cut-off date.
You will receive monthly reports concerning the payments received on the
contracts, the aggregate principal balance of the contracts, the related note
factors, certificate factors, pool factors and various other items of
information pertaining to the related trust. Furthermore, the trustee or the
indenture trustee will furnish you with information for tax reporting purposes
not later than on the latest date permitted by law. See "DESCRIPTION OF THE
TRANSFER AND SERVICING AGREEMENTS--SERVICING--STATEMENTS TO SECURITYHOLDERS" in
this prospectus.
DESCRIPTION OF THE NOTES AND INDENTURE
GENERAL
The issuance of each series of notes will be under an indenture, a form of
which was filed with the Securities and Exchange Commission as an exhibit to the
registration statement of which this prospectus is a part. In addition, a copy
of the indenture for a series of notes will be filed with the Securities and
Exchange Commission following the issuance of each series. This summary
describes the material terms common to each indenture and the notes. This
summary is subject to, and qualified in its entirety by reference to, all of the
provisions of the indenture and the notes.
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The notes of each series will be issued in fully registered form only and
will represent the obligations of a separate trust. Notes will be available for
purchase by you in the denominations specified in your prospectus supplement.
Your prospectus supplement will provide additional information specific to
your notes.
PAYMENTS
Your prospectus supplement will describe as to your class of notes:
- the timing and priority of payments of principal and interest;
- the amount and method of determining payments of principal and interest;
- the priority of the application of the trust's available funds to its
expenses and payments on its securities; and
- the interest rates or the formula for determining the interest rates.
Your rights to receive payments may be senior or subordinate to the rights
of holders of other classes of notes. Furthermore, each class of notes may have
a different interest rate, which may be a fixed, variable or adjustable interest
rate or any combination of the foregoing. See "INFORMATION REGARDING THE
SECURITIES--INTEREST RATES" in this prospectus.
Payments of principal and interest on any class of notes will be made on a
pro rata basis among all noteholders of that class. If the amount of funds
available to make a payment on a class of notes is less than the required
payment, the noteholders will receive their pro rata share of the amount
available for that class.
PRO-RATA PAY/SUBORDINATE NOTES
One or more classes of notes may be payable on an interest only or principal
only basis. In addition, the notes may include two or more classes that differ
as to timing, sequential order, priority of payment, interest rate or amount of
payments of principal or interest or both. Payments of principal or interest or
both on any class may be made upon the occurrence of specified events, in
accordance with a schedule or formula, or on the basis of collections from
designated assets of the trust. A series may include one or more classes of
notes, as to which accrued interest will not be distributed but rather will be
added to the principal or notional balance of the notes on each payment date.
VARIABLE FUNDING NOTE
A trust may issue one or more classes of notes having particular maturity
dates and at the same time the trust may issue variable funding notes which
relate to those particular maturity dates. These notes may have a balance that
may decrease based on the amortization of contracts or increase based on
principal collections used to purchase additional contracts.
OPTIONAL PURCHASE OF CONTRACTS AND PREPAYMENT OF NOTES
At its option, the seller may purchase all of the contracts owned by a trust
on any payment date following the date on which the unpaid aggregate principal
balance of the securities is less than 10% of the unpaid aggregate principal
balance of the contracts as of the cut-off date. Except as otherwise described
in your prospectus supplement, the purchase price to be paid in connection with
the purchase shall be at least equal to the sum of:
- the unpaid principal balance of the securities as of that payment date;
- accrued but unpaid interest on the securities to that payment date;
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- unreimbursed servicer advances; and
- accrued but unpaid servicer fees.
If the seller purchases the contracts, the related notes will be repaid in full
on the payment date on which the purchase occurs. In no event will you or the
related trust be subject to any liability to the seller as a result of or
arising out of the seller's optional purchase of the contracts.
THE INDENTURE
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT
The trust and the indenture trustee may, without your consent, may enter
into one or more supplemental indentures for any of the following purposes:
- to correct or amplify the description of any property at any time subject
to the lien of the indenture;
- to evidence the succession of another person to the trust and the
assumption by any such successor of the covenants of the trust;
- to add to the covenants of the trust or to surrender any right or power
conferred upon the trust in the indenture;
- to convey, transfer, assign, mortgage or pledge any property to or with
the indenture trustee;
- to cure any ambiguity, to correct or supplement any provision in the
indenture which may be inconsistent with any other provision in the
indenture;
- to evidence and provide for the acceptance of the appointment by a
successor indenture trustee with respect to the notes and to add to or
change any of the provisions of the indenture as shall be necessary to
facilitate the administration of the trusts by more than one indenture
trustee;
- to modify, eliminate or add to the provisions in the indenture to the
extent necessary to qualify the indenture under the Trust Indenture Act;
or
- to elect into the FASIT provisions of the Code, provided the indenture
trustee receives an opinion of counsel that such election will not
adversely affect the noteholders.
In addition, if the indenture trustee receives an opinion of counsel that a
modification will not have a material adverse effect on the noteholders, the
trust and the indenture trustee may, without your consent, enter into one or
more supplemental indentures to, among other things, add, modify or eliminate
any provisions of the indenture or modify your rights as a noteholder.
MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT
With the consent of the holders of more than 50% of the outstanding
principal amount of the notes or the class or classes of notes described in your
prospectus supplement, the trust and the indenture trustee may modify the
indenture and your rights under it.
Without the consent of the holder of each outstanding note affected,
however, no modification may:
- reduce the principal amount or interest rate or change the due date of any
payment;
- modify the manner of application of collections in respect of the
contracts to payments on the notes;
- impair your right to sue to enforce payment provisions of the indenture;
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- reduce the percentage of the aggregate principal amount of the notes
needed for consents of noteholders;
- permit the creation of any lien on collateral under the indenture ranking
prior to or on a parity with the lien of the indenture;
- adversely affect the manner of determining notes outstanding for voting
purposes;
- reduce the percentage of the aggregate principal amount of the notes
needed to sell or liquidate the assets of a trust if the proceeds of sale
will be insufficient to pay the notes in full; or
- modify the provisions of the indenture relating to these types of
indenture modification without the consent of all noteholders.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
Events of default under each indenture will consist of:
- a default for five days or more in the payment of interest due on any
note;
- failure to pay the unpaid principal amount of any class of notes on the
final scheduled payment date for that class of notes;
- a default in the observance or performance of any provisions set forth in
the indenture other than those dealt with specifically elsewhere, which
default has a material adverse effect on the noteholders and continues for
60 days after written notice thereof is given to the trust by the
indenture trustee or by holders of at least 25% of the aggregate principal
amount of the notes or the class or classes of notes described in your
prospectus supplement;
- any representation or warranty made by the trust in the indenture or in
any certificate delivered pursuant thereto was incorrect as of the time
made, and continues to be incorrect for a period of 60 days after notice
thereof is given to the trust by the indenture trustee or by holders of at
least 25% of the aggregate principal amount of the notes or the class or
classes of notes described in your prospectus supplement; or
- events of bankruptcy, insolvency, receivership or liquidation of the
trust.
If an event of default should occur and be continuing with respect to the
notes of a series, other than an event of default caused by an event of
bankruptcy, insolvency, receivership or liquidation of the trust, the indenture
trustee or the holders of more than 50% of the aggregate principal amount of the
notes or the class or classes of notes described in your prospectus supplement
may declare the principal amount of the notes to be immediately due and payable.
If an event of default caused by an event of bankruptcy, insolvency,
receivership or liquidation of the trust should occur and be continuing with
respect to the notes of a series, the principal amount of the notes will be
immediately due and payable. This declaration may be rescinded by the holders of
more than 50% of the aggregate principal amount of the notes or the class or
classes of notes described in your prospectus supplement if:
- the trust has made all payments of principal and interest then due on the
notes (assuming the notes had not been accelerated); and
- the trust has paid all amounts then owing to the indenture trustee.
If the notes of a series have been declared to be due and payable following
an event of default, the indenture trustee may:
- institute proceedings to collect amounts due or foreclose on the trust
assets;
- exercise remedies as a secured party; or
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- sell the trust assets, or elect to have the trust maintain possession of
the trust assets.
The indenture trustee, however, may not sell the trust assets following an
event of default, unless:
- the holders of all the outstanding notes consent to the sale;
- the proceeds of the sale are sufficient to pay in full the principal and
accrued interest on all the outstanding notes at the date of the sale; or
- there has been an event of default arising from the failure to pay
principal or interest on the notes and the indenture trustee determines
that the trust assets would not be sufficient on an ongoing basis to make
all payments on the notes as the payments would have become due if the
obligations had not been declared due and payable and the indenture
trustee obtains the consent of the holders of more than 66 2/3% of the
aggregate principal amount of the notes or the class or classes of notes
described in your prospectus supplement.
Following a declaration upon an event of default that the notes are immediately
due and payable, the application of any proceeds of any sale of the trust assets
will be in the order of priority described in the prospectus supplement for your
class of notes.
If an event of default occurs and is continuing, 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 the notes if the
indenture trustee reasonably believes it will not be adequately indemnified
against the costs, expenses and liabilities which it may incur in complying with
that request. Holders of more than 50% of the aggregate principal amount of the
notes or the class or classes of notes described in your prospectus supplement
will have the right to direct the time, method and place of conducting any
proceeding or any remedy available to the indenture trustee.
No holder of a note will have the right to institute any proceeding with
respect to the indenture, unless:
- the holder previously has given to the indenture trustee written notice of
a continuing event of default;
- the holders of not less than 25% in principal amount of the outstanding
notes or the class or classes of notes described in your prospectus
supplement make written request of the indenture trustee to institute the
proceeding in its own name as indenture trustee;
- the holder or holders offer the indenture trustee reasonable indemnity;
- the indenture trustee has for 60 days failed to institute the proceeding;
and
- no direction inconsistent with that written request has been given to the
indenture trustee during the 60-day period by the holders of a majority in
principal amount of the outstanding notes or the class or classes of notes
described in your prospectus supplement.
Notwithstanding the foregoing, noteholders will have the absolute and
unconditional right to receive payment of the principal of and interest on a
note and to institute suit for the enforcement of such payment, which right may
not be impaired without the individual noteholder's consent.
In addition, the indenture trustee and noteholders, by accepting the notes,
will covenant that they will not at any time institute against the depositor or
the trust any bankruptcy, reorganization or other proceeding under any federal
or state bankruptcy or similar law.
None of the trustee of the trust in its individual capacity, the holder of
any certificate representing an ownership interest in the trust, the seller, the
performance guarantor, the depositor, or any of their respective owners,
beneficiaries, agents, officers, directors, employees, affiliates, successors or
assigns
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will be personally liable for the payment of the notes or for any agreement or
covenant of the trust contained in the indenture.
COVENANTS
Each indenture will provide that the trust may not consolidate with or merge
into any other entity, unless:
- the entity formed by or surviving the consolidation or merger is organized
under the laws of the United States or any state;
- the 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;
- no event of default shall have occurred and be continuing immediately
after the merger or consolidation;
- the rating agencies rating the notes advise the indenture trustee that the
rating of the notes then in effect would not be reduced or withdrawn as a
result of the merger or consolidation;
- the indenture trustee has received an opinion of counsel to the effect
that the consolidation or merger would have no material adverse tax
consequence to the trust or to any noteholder or certificateholder; and
- the trust or the person, if other than the trust, formed by or surviving
the consolidation or merger has a net worth, immediately after the
consolidation or merger, that is (a) greater than zero and (b) not less
than the net worth of the trust immediately prior to giving effect to the
consolidation or merger.
Each indenture will provide that the trust will not, among other things:
- except as expressly permitted by the related indenture or trust agreement,
transfer any of the assets of the trust;
- claim any credit on or make any deduction from, the principal and interest
payable in respect of the related notes, other than amounts withheld under
the bankruptcy code or applicable state law, or assert any claim against
any present or former holder of notes because of the payment of taxes
levied or assessed upon the trust;
- dissolve or liquidate in whole or in part;
- permit the validity or effectiveness of the indenture to be impaired or
permit the release of any person from any covenants or obligations
relating to the notes under the indenture except as expressly permitted in
the indenture; or
- except as expressly permitted in the indenture, permit any lien or claim
to burden any assets of the trust.
Each indenture will provide that each trust may engage in only those
activities specified above under "THE TRUSTS." Each trust will be prohibited
from incurring, assuming or guaranteeing any indebtedness other than
indebtedness incurred under the notes and the indenture or otherwise in
accordance with the related indenture, trust agreement and sale and servicing
agreement.
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ANNUAL COMPLIANCE STATEMENT
Each trust will be required to file annually with the applicable indenture
trustee a written statement as to the fulfillment of its obligations under the
indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
Each indenture trustee will be required to mail each year to all noteholders
of the related series a brief report relating to:
- its eligibility and qualification to continue as indenture trustee under
the related indenture;
- any amounts advanced by it under the indenture;
- the amount, interest rate and maturity date of certain indebtedness owing
by the trust to the indenture trustee in its individual capacity;
- the property and funds physically held by the indenture trustee; and
- any action taken by it that materially affects the notes and that has not
been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
The discharge of an indenture will occur with respect to the assets securing
the notes of a series upon the delivery to the related indenture trustee for
cancellation of all the notes or, with certain limitations, upon deposit with
the indenture trustee of funds sufficient for the payment in full of all of the
notes.
TRUST ACCOUNTS
Under each indenture, if the applicable indenture trustee has a rating of
A-1+/P-1 by Standard & Poor's Ratings Services and Moody's Investors
Service, Inc., the indenture trustee will establish and maintain segregated bank
accounts for the trust. If the applicable indenture trustee has a rating lower
than A-1+/P-1, the indenture trustee will establish and maintain segregated
trust accounts or accounts in a qualified institution. These accounts will
include, among others, a "COLLECTION ACCOUNT" and a "DISTRIBUTION ACCOUNT." The
trust accounts may, as described in the prospectus supplement for your notes,
also include a cash collateral or reserve fund account as credit enhancement.
"QUALIFIED INSTITUTION" means the corporate trust department of the
indenture trustee or any other depositary institution:
- organized under the laws of the United States or any state or any domestic
branch of a foreign bank;
- the deposits of which are insured by the Federal Deposit Insurance
Corporation; and
- which has, or whose parent corporation has, short-term or long-term debt
ratings acceptable to Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
The indenture trustee will invest funds in the trust accounts at the
direction of the servicer. All investments will be generally limited to
investments acceptable to the rating agencies rating the notes as being
consistent with the ratings of those notes that will mature not later than the
business day preceding the applicable payment date or any later date approved by
the rating agencies. If the rating agencies permit the investment of funds on
deposit in a cash collateral or reserve fund account in investments that mature
beyond a payment date, the amount of cash available in the cash collateral or
reserve fund account may be less than the amount required to be withdrawn from
that trust account to cover shortfalls in collections on the contracts and a
temporary shortfall in the amounts paid to the
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noteholders may result. Investment earnings on funds deposited in the trust
accounts will be paid to the person described in your prospectus supplement.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The issuance of each series of certificates will be under the terms of a
trust agreement or a pooling and servicing agreement, a form of each of which
has been filed with the Securities and Exchange Commission as an exhibit to the
registration statement of which this prospectus is a part. In addition, a copy
of the trust agreement or the pooling and servicing agreement for a series of
certificates will be filed with the Securities and Exchange Commission following
the issuance of the certificates. This summary describes the material terms
common to the certificates issued by each trust. This summary is subject to, and
qualified in its entirety by reference to, all the provisions of the
certificates, the trust agreement or pooling and servicing agreement, as
applicable.
The certificates of each series will be issued in fully registered form only
and will represent an ownership interest in the trust. Certificates will be
available for purchase by you in the denominations specified in your prospectus
supplement.
Your prospectus supplement will provide additional information specific to
your certificates.
DISTRIBUTIONS
Your prospectus supplement will describe as to your class of certificates:
- the timing and priority of distributions on account of principal and
interest;
- the amount and method of determining distributions on account of principal
and interest;
- the priority of the application of the trust's available funds to its
expenses and distributions on its securities;
- allocation of losses on the contracts among the classes of certificates;
and
- the interest rates or the formula for determining the interest rates.
Your rights to receive distributions may be senior or subordinate to holders
of other classes of certificates. Furthermore, each class of certificates may
have a different interest rate, which may be a fixed, variable or adjustable
interest rate or any combination of the foregoing. See "INFORMATION REGARDING
THE SECURITIES--INTEREST RATES" in this prospectus.
Distributions of principal and interest with respect to any class of
certificates will be made on a pro rata basis among all certificateholders of
that class. If the amount of funds available to make a distribution with respect
to a class of certificates is less than the required payment, the
certificateholders will receive their pro rata share of the amount available for
that class.
PRO-RATA PAY/SUBORDINATE CERTIFICATES
One or more classes of certificates may be payable on an interest only or
principal only basis. In addition, the certificates may include two or more
classes that differ as to timing, sequential order, priority of payment,
interest rate or amount of distributions of principal or interest or both.
Distributions of principal or interest or both on any class may be made upon the
occurrence of specified events, in accordance with a schedule or formula, or on
the basis of collections from designated assets of the trust. A series may
include one or more classes of certificates, as to which accrued interest will
not be distributed but rather will be added to the principal or notional balance
of the certificates on each payment date.
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OPTIONAL PURCHASE OF CONTRACTS AND PREPAYMENT OF CERTIFICATES
At its option, the seller may purchase all of the contracts owned by a trust
on any payment date following the date on which the aggregate unpaid principal
balance of the securities is less than 10% of the aggregate unpaid principal
balance of the contracts as of the cut-off date. Except as otherwise described
in your prospectus supplement, the purchase price to be paid in connection with
the purchase shall be at least equal to the sum of:
- the unpaid principal balance of the securities as of that payment date;
- accrued but unpaid interest on the certificates to the payment date;
- unreimbursed servicer advances; and
- accrued but unpaid servicer fees.
If the seller purchases the contracts, the related certificates will be paid in
full on the payment date on which the purchase occurs. In no event will you or
the related trust be subject to any liability to the seller as a result of or
arising out of the seller's optional purchase of the contracts.
THE POOLING AND SERVICING AGREEMENT
MODIFICATION OF THE POOLING AND SERVICING AGREEMENT WITHOUT
CERTIFICATEHOLDER CONSENT
In the case of a grantor trust, the depositor and the trustee may, without
your consent, correct or supplement any provision in the pooling and servicing
agreement that is ambiguous or inconsistent with any other provision of the
pooling and servicing agreement. In addition, if the trustee receives an opinion
of counsel that a modification will not have a material adverse effect on the
certificateholders, the depositor and the trustee may, without your consent,
enter into one or more supplements to the pooling and servicing agreement to,
among other things, add, modify or eliminate any provisions of the pooling and
servicing agreement or modify your rights as a certificateholder.
MODIFICATION OF POOLING AND SERVICING AGREEMENT WITH CERTIFICATEHOLDER
CONSENT
With the consent of the holders of more than 50% of the outstanding
principal amount of the certificates or the class or classes of certificates
described in your prospectus supplement, the depositor and the trustee may
modify the pooling and servicing agreement and your rights under it.
Without the consent of the holder of each outstanding certificate affected,
however, no modification may:
- reduce the principal amount or pass-through rate or change the due date of
any distribution;
- modify the manner of application of collections in respect of the
contracts to distributions in respect of the certificates;
- impair your right to sue to enforce payment provisions of the pooling and
servicing agreement;
- reduce the percentage of the aggregate certificate balance of the
certificates needed for consents of certificateholders;
- permit the creation of any lien on collateral under the pooling and
servicing agreement ranking prior to or on a parity with the lien of the
pooling and servicing agreement;
- adversely affect the manner of determining certificates outstanding for
voting purposes; or
- modify the provisions of the pooling and servicing agreement relating to
these types of pooling and servicing agreement modification without the
consent of all certificateholders.
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TRUST ACCOUNTS
Under the pooling and servicing agreement or trust agreement, if the
applicable trustee has a rating of A-1+/P-1 by Standard & Poor's Ratings
Services and Moody's Investors Service, Inc., the trustee will establish and
maintain segregated bank accounts for the trust. If the applicable trustee has a
rating lower than A-1+/P-1, the trustee will establish and maintain segregated
trust accounts or accounts in a qualified institution. These accounts will
include, among others, in the case of a grantor trust, a "COLLECTION ACCOUNT"
and, in the case of an owner trust, a "DISTRIBUTION ACCOUNT."
"QUALIFIED INSTITUTION" means the corporate trust department of the trustee
or any other depositary institution:
- organized under the laws of the United States or any state or any domestic
branch of a foreign bank;
- the deposits of which are insured by the Federal Deposit Insurance
Corporation; and
- which has, or whose parent corporation has, short-term or long-term debt
ratings acceptable to Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
The trustee will invest funds in the trust accounts at the direction of the
servicer. All investments will be generally limited to investments acceptable to
the rating agencies rating the certificates as being consistent with the ratings
of those certificates that will mature not later than the business day preceding
the applicable payment date or any later date approved by the rating agencies.
See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" in this
prospectus for summaries of the material terms of the trust agreements and the
pooling and servicing agreements pursuant to which certificates will be issued.
INFORMATION REGARDING THE SECURITIES
INTEREST RATES
A class of securities may bear interest at a fixed, variable or adjustable
rate per annum, as more fully described below and in your prospectus supplement.
FIXED RATE SECURITIES. Each class of fixed rate securities will bear
interest at the applicable per annum interest rate or pass through rate,
specified in the applicable prospectus supplement. Interest on each class of
fixed rate securities will be computed on the basis of a 360-day year consisting
of twelve 30-day months or on such other day count basis as is specified in your
prospectus supplement.
FLOATING RATE SECURITIES. Each class of floating rate securities will bear
interest during each applicable interest period at a rate per annum determined
by reference to a base rate, plus or minus a specified spread, if any, or
multiplied by the spread multiplier, if any, as specified in the applicable
prospectus supplement. The "SPREAD" is a number of basis points to be added to
or subtracted from the related base rate. The "SPREAD MULTIPLIER" is a
percentage of the related base rate by which that base rate will be multiplied
to determine the applicable interest rate. Your prospectus supplement will
designate one of the following base rates as applicable to a floating rate
security:
- London interbank offered rate;
- commercial paper rates;
- Treasury rate;
- federal funds rate;
- negotiable certificates of deposit rate; or
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- any other base rate that is set forth in your prospectus supplement.
Your prospectus supplement will specify whether the interest rate will be
reset daily, weekly, monthly, quarterly, semiannually, annually or some other
specified period and the dates on which that interest rate will be reset. If the
reset date does not fall on a business day, then the reset date will be
postponed to the next succeeding business day; except that with respect to
securities having a base rate based on the London interbank offered rate, if the
reset date falls in the next succeeding calendar month, then the reset date will
be the immediately preceding business day.
Interest on each class of floating rate security will accrue on an
Actual/360 basis, an Actual/Actual basis, or a 30/360 basis. For floating rate
securities calculated on an Actual/360 basis and Actual/Actual basis, accrued
interest for each interest period will be calculated by multiplying:
1. the face amount of that floating rate security;
2. the applicable interest rate; and
3. the actual number of days in the related interest period, and dividing
the resulting product by 360 or 365, as applicable.
For floating rate securities calculated on a 30/360 basis, accrued interest
for an interest period will be computed on the basis of a 360-day year
consisting of twelve 30-day months, irrespective of how many days are actually
in that interest period.
Floating rate securities may also have either or both of the following:
- a maximum limitation, or ceiling, on the rate at which interest may accrue
during any interest period; and
- a minimum limitation, or floor, on the rate at which interest may accrue
during any interest period.
The applicable interest rate will in not exceed the maximum rate permitted
by applicable law.
Each trust issuing floating rate securities will appoint a calculation agent
to calculate interest rates on each class of floating rate securities. Your
prospectus supplement will set forth the identity of the calculation agent,
which may be the related trustee or indenture trustee with respect to that
series. All determinations of interest by the calculation agent shall, in the
absence of manifest error, be conclusive for all purposes and binding on the
holders of floating rate securities of a given class. All percentages resulting
from any calculation on floating rate securities will be rounded to the nearest
one hundred-thousandth of a percentage point, with five one millionths of a
percentage point rounded upwards, and all dollar amounts used in or resulting
from that calculation on floating rate securities will be rounded to the nearest
cent.
A class of floating rate securities may also have either or both of the
following, in each case expressed as an annual rate: (1) a maximum limitation,
or ceiling, on the rate at which interest may accrue during any interest period,
which may be an available funds cap rate and (2) a minimum limitation, or floor,
on the rate at which interest may accrue during any interest period. The
interest rate on either type of security will not be higher than the maximum
rate permitted by applicable law.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the applicable provider, if any, will be set forth in the applicable prospectus
supplement. This credit or cash flow enhancement may be in one or more of the
following forms:
- subordination of one or more classes of securities;
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- reserve fund;
- over-collateralization;
- letter of credit;
- credit or liquidity facility;
- financial guaranty insurance policy;
- surety bond;
- guaranteed investment contract or other interest rate protection
agreement;
- repurchase obligation;
- yield supplement agreement;
- other agreements with respect to third party payments or other support; or
- cash deposit or other arrangement that may be described in your prospectus
supplement.
Credit and cash flow enhancement is intended to enhance the likelihood that
you will receive the full amount of principal and interest due on your
securities and to decrease the likelihood that you will experience losses. The
enhancement for a class or series of securities will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal of and interest on those securities. If losses occur which exceed the
amount covered by any credit or cash flow enhancement or which are not covered
by any credit or cash flow enhancement, you will bear your allocable share of
deficiencies, as described in your prospectus supplement. In addition, if a form
of enhancement covers more than one class or series of securities, you will be
subject to the risk that the enhancement will be exhausted by the claims of
securityholders of other classes or series.
If so provided in the prospectus supplement, the depositor or the trust may
replace the credit or cash flow enhancement for any class of securities with
another form of credit or cash flow enhancement without the consent of the
securityholders, provided that the rating agencies rating that class of
securities at the request of the depositor confirm that that substitution will
not result in the reduction or withdrawal of the rating of that class of
securities.
RESERVE FUND
The trust, the depositor or a third party may establish for a series or
class of securities an account or reserve fund, which will be maintained with a
collateral agent or the related trustee or indenture trustee. The reserve fund
will be funded by an initial deposit by the trust, the depositor or a third
party on the closing date in the amount set forth in your prospectus supplement
and, if the related trust has a pre-funding account, will also be funded on each
date that the trust acquires subsequent contracts from the depositor to the
extent described in the applicable prospectus supplement. The amount on deposit
in the reserve fund will be increased on each payment date thereafter up to the
specified reserve fund balance by the deposit in the reserve fund of the amount
of collections on the related contracts available therefor as described in the
prospectus supplement.
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Your prospectus supplement will describe the circumstances and manner under
which payments may be made out of the reserve fund, either to make payments or
distributions to you or to the servicer or a third party. Monies on deposit in
the reserve fund may be invested in investments acceptable to the rating
agencies rating the securities as being consistent with the ratings of those
securities under the circumstances and in the manner described in the related
sale and servicing agreement, the pooling and servicing agreement or indenture.
Earnings on investment of funds in the reserve fund in eligible investments will
be paid to the person described in your prospectus supplement under the
circumstances described in your prospectus supplement on each payment date. Any
monies remaining on deposit in the reserve fund upon termination of the trust
also will be released to the depositor or its assignee.
FINANCIAL GUARANTY INSURANCE POLICY
The trust may enter into agreements with an insurer such that the insurer
guarantees payments of principal and/or interest on the securities. If, on the
date so specified in the prospectus supplement, the amount available to the
trust to make a payment or distribution, of principal or interest due on the
securities is less than the amount of such payment or distribution, the trustee
or indenture trustee by delivering a notice to the insurer shall demand payment
under the insurance policy in an amount equal to the deficiency. Your prospectus
supplement will describe the circumstances and manner under which payments may
be made under the insurance policy, either to you, or the trustee or the
indenture trustee, as the case may be.
CASH COLLATERAL ACCOUNT
The prospectus supplement may provide that upon the occurrence of any
servicer default, the servicer may be obligated to establish a segregated cash
collateral account as security for the servicer's obligations under the sale and
servicing agreement or pooling and servicing agreement.
YIELD SUPPLEMENT ACCOUNT; YIELD SUPPLEMENT AGREEMENT
YIELD SUPPLEMENT ACCOUNT. A yield supplement account may be established
with respect to any class or series of securities. The terms relating to any
yield supplement account will be set forth in your prospectus supplement. Each
yield supplement account will hold funds to be applied by the related trustee or
indenture trustee to provide payments to you in respect of contracts that have
annual percentage rates less than the required rate specified in your prospectus
supplement.
On each payment date, the related trustee or indenture trustee will transfer
to the collection account from monies on deposit in the yield supplement account
an amount specified in the applicable prospectus supplement in respect of the
contracts having annual percentage rates less than the required rate for that
payment date. Amounts on deposit on any payment date in the yield supplement
account in excess of the required yield supplement amount specified in the
applicable prospectus supplement, after giving effect to all payments to be made
on that payment date, will be released to the depositor. The depositor will not
have any obligation after the related closing date to deposit any amounts into
the yield supplement account even if the amount on deposit in that account is
less than the required yield supplement amount for any payment date. Monies on
deposit in the yield supplement account may be invested in investments
acceptable to the rating agencies rating the securities as being consistent with
the ratings of those securities under the circumstances and in the manner
described in the related sale and servicing agreement, pooling and servicing
agreement or yield supplement agreement. Earnings on investment of funds in the
yield supplement account in eligible investments will be paid to the person
described in your prospectus supplement on each payment date. Any monies
remaining on deposit in the yield supplement account upon the termination of the
trust also will be released to the person described in your prospectus
supplement.
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YIELD SUPPLEMENT AGREEMENT. If a yield supplement account is to be
established with respect to a series of securities, on or prior to the related
closing date, the depositor, any third party responsible for making deposits
into the yield supplement account and the related trustee or indenture trustee,
as the case may be, will enter into a yield supplement agreement with the
servicer and the entity with which the account is maintained. The depositor will
assign its rights under the yield supplement agreement to the applicable trustee
for the benefit of the applicable securityholders.
BOOK-ENTRY REGISTRATION
Each class of securities offered by this prospectus will be represented by
one or more certificates registered in the name of Cede & Co., as nominee of the
Depository Trust Company. Unless your prospectus supplement states otherwise,
you may hold your securities through DTC in the United States, or Clearstream
(formerly Cedelbank) or the Euroclear System in Europe, if you are a participant
of those systems, or indirectly through organizations that are participants in
those systems.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under to Section 17A of the Securities Exchange Act of 1934.
DTC was created to hold securities for its direct participants and to facilitate
the clearance and settlement of securities transactions between its direct
participants through electronic book-entries, thereby eliminating the need for
physical movement of certificates. DTC's direct participants include:
- the underwriters offering the securities to you;
- securities brokers and dealers;
- banks;
- trust companies; and
- clearing corporations, and may include 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 direct participant, either directly or indirectly.
To facilitate subsequent transfers, DTC will register all deposited
securities in the name of DTC's nominee, Cede & Co. DTC has no knowledge of the
actual holders of the securities; DTC's records reflect only the identify of its
direct participants to whose accounts the securities are credited, which may or
may not be the securityholders. DTC's direct and indirect participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
You have no entitlement to receive a certificate representing your interest
in a class of securities. As long as the securities are registered in the name
of Cede & Co., any action to be taken by your or any other holders will be taken
by DTC upon instructions from DTC's participants. All distributions, notices,
reports and statements to you will be delivered to Cede & Co., as the registered
holder of the securities, for distribution to you in compliance with DTC
procedures.
You will receive all payments of principal and interest on the securities
through direct participants or indirect participants. DTC will forward the
payments to its direct participants which will forward them to the indirect
participants or securityholders. Under a book-entry format, you may experience
some delay in their receipt of payments, since payments will be forwarded to
Cede & Co. as nominee of DTC. The trustee or indenture trustee will not
recognize you as a holder of securities under the trust agreement or pooling and
servicing agreement or indenture. You may exercise the rights as a holders of
securities only indirectly through DTC and its direct participants and indirect
participants.
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Because DTC can act only on behalf of direct participants, who in turn act on
behalf of indirect participants, and on behalf of banks, trust companies and
other persons approved by it, there may be limits on your ability to pledge the
securities to persons or entities that do not participate in the DTC system, or
to otherwise act with respect to securities, due to the absence of physical
securities for the securities.
Arrangements among the various parties govern conveyance of notices and
other communications by:
- DTC to direct participants;
- by direct participants to indirect participants; and
- by direct participants and indirect participant to holders, subject to any
statutory or regulatory requirements as may be in effect from time to
time.
Standing instructions and customary practices govern payments by DTC
participants to you, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and will be the
responsibility of the DTC participant and not of DTC, the indenture trustee, the
trustee, the depositor or the seller, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment or distribution of
principal and interest to DTC is the responsibility of the indenture trustee or
trustee, disbursement of the payments or distributions to direct participants
shall be the responsibility of DTC and disbursement of payments to you shall be
the responsibility of the direct participants and the indirect participants.
Purchases of securities under the DTC system must be made by or through
direct participants, which will receive a credit for the securities on DTC's
records. The ownership interest of each actual holder is in turn to be recorded
on the direct participants' and indirect participants' records. You will not
receive written confirmation from DTC of your purchase, but you are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of your holdings, from the direct participant or indirect
participant through which you entered into the transaction. Entries made on the
books of DTC's participants acting on behalf of you evidence transfers of
ownership interests in the securities.
DTC has advised the depositor that it will take any action permitted to be
taken by a holder of securities only at the direction of one or more direct
participants to whose accounts with DTC the securities are credited.
Additionally, DTC has advised the depositor that to the extent that the pooling
and servicing agreement, the trust agreement or the indenture, as applicable,
requires that any action may be taken only by holders representing a specified
percentage of the aggregate outstanding principal amount of the securities, DTC
will take the action only at the direction of and on behalf of direct
participants, whose holdings include undivided interests that satisfy the
specified percentage.
DTC may discontinue providing its services as securities depositary with
respect to any class of securities at any time by giving reasonable notice to
the trustee or the indenture trustee, as applicable. Under these circumstances,
in the event that a successor securities depositary is not obtained, fully
registered, certificated securities are required to be printed and delivered. A
trust may decide to discontinue use of the system of book-entry transfers
through DTC or a successor securities depositary. In that event, fully
registered, certificated securities will be delivered to you. See "--ISSUANCE OF
DEFINITIVE SECURITIES AT A LATER DATE."
The information in this section concerning DTC and DTC's book-entry system
are from sources that the depositor believes to be reliable, but the depositor
does not take any responsibility for the accuracy of this information.
Clearstream (formerly Cedelbank) and Euroclear will hold omnibus positions
on behalf of the participants in the Clearstream and Euroclear systems,
respectively, through customers' securities
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accounts in Clearstream's and Euroclear's names on the books of their respective
depositaries which in turn will hold these positions in customers' securities
accounts in the depositaries' names on the books of DTC.
Clearstream is incorporated under the laws of Luxembourg as a professional
depositary. Clearstream holds securities for its participants and facilitates
the clearance and settlement of securities transactions between its participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates.
Indirect access to Clearstream is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear's participants
through simultaneous electronic book entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. The Brussels, Belgium
office of Morgan Guaranty Trust Company of New York operates Euroclear, under
contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation. Euroclear's operator conducts all operations and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with
Euroclear's operator. Euroclear Clearance Systems S.C. establishes policy for
Euroclear on behalf of Euroclear's participants, including banks, securities
brokers and dealers, and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
Morgan Guaranty Trust Company of New York is the Belgian branch of a New
York banking corporation which is a member bank of the Federal Reserve System.
As such, the Board of Governors of the Federal Reserve System and the New York
Banking Department, as well as the Belgian Banking Commission, regulates and
examines it.
Euroclear holds all securities on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
operator acts under the Euroclear Terms and Conditions only on behalf of
Euroclear's participants, and has no record of or relationship with persons
holding through Euroclear's participants.
Transfers between direct participants will comply with DTC rules. Transfers
between Clearstream's participants and Euroclear's participants will comply with
their rules and operating procedures.
DTC will effect, under DTC rules, cross-market transfers between persons
holding directly or indirectly through DTC in the United States, on the one
hand, and directly or indirectly through Clearstream or Euroclear, on the other,
through the relevant European international clearing system through its
depository; however, these cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in this system as required by its rules and procedures and within
its established deadlines, European time. The relevant European international
clearing system will, if the transaction meets its settlement requirement,
deliver instructions to its depositary to take action to effect final settlement
on its behalf by delivering or receiving securities in DTC, and making or
receiving payment using its normal procedures for same-day funds settlement
applicable to DTC. Clearstream participants and Euroclear participants may not
deliver instructions directly to the depositories.
Because of time-zone differences, credits of securities in Clearstream or
Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing day, dated the business
day following the DTC settlement date, and the credits or any transactions in
the securities settled during the processing day will be reported to the
relevant Clearstream participant
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or Euroclear participant on that business day. Cash received in Clearstream or
Euroclear as a result of sales of securities by or through a Clearstream
participant or a Euroclear participant to a DTC participant will be received
with value on the DTC settlement date but will be available in the relevant
Clearstream or Euroclear cash account only as of the business day following
settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of securities among participants of
DTC, Clearstream and Euroclear, they are under no obligation to perform or
continue to perform these procedures and these procedures may be discontinued at
any time.
Except as required by law, none of the seller, the performance guarantor,
the servicer, the depositor, the trustee or the indenture trustee will have any
liability for any aspect of the records relating to, actions taken or
implemented by, or payments made on account of, beneficial ownership interests
in the securities held through DTC, or for maintaining, supervising or reviewing
any records or actions relating to beneficial ownership interests.
ISSUANCE OF DEFINITIVE SECURITIES AT A LATER DATE
The trust will issue the notes, if any, and certificates, if any, in fully
registered, definitive form to beneficial owners or their nominees rather than
to DTC or its nominee, only if:
(1) DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the securities, and the
trustee or the indenture trustee is unable to locate a qualified successor;
(2) The administrator of the trust or the trustee, as applicable, at its
option, elects to terminate the book-entry system through DTC; or
(3) After the occurrence of an event of default or a servicer default
with respect to those securities, holders representing at least a majority
of the outstanding principal amount of the notes or the outstanding
certificate balance of the certificates, as the case may be, of that series,
acting together as a single class, advise the applicable indenture trustee
or trustee through DTC in writing that the continuation of a book-entry
system through DTC with respect to those notes or certificates is no longer
in the best interests of the holders of those securities.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the applicable indenture trustee or trustee must notify all
beneficial owners for each class of securities held through DTC of the
availability of securities in fully registered, definitive form. Upon surrender
by DTC of the global note representing the securities and instructions for
reregistration, the indenture trustee or trustee will issue these fully
registered, definitive securities, and the indenture trustee or trustee will
recognize the holders of fully registered, definitive securities.
Additionally, upon the occurrence of any event described above, the
indenture trustee or trustee will distribute principal of and interest on the
securities directly to you as required by the indenture or trust agreement or
pooling and servicing agreement, as applicable. Distributions will be made by
check, mailed to your address as it appears on the register maintained by the
applicable trustee or indenture trustee. Upon at least five days' notice to
holders of a class of securities, however, the indenture trustee or trustee will
make the final payment on any security only upon presentation and surrender of
the security at the office or agency specified in the notice of final
distribution to the securityholders. The indenture trustee or trustee will make
the final payment in this manner whether the securities are in book-entry form
or definitive form.
You may transfer any fully registered, definitive security of any class at
the offices of the indenture trustee or trustee or its agent in New York, New
York, which the indenture trustee or trustee shall designate on or prior to the
issuance of any fully registered, definitive securities with respect to that
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class. There is no service charge for any registration of transfer or exchange,
but the indenture trustee or trustee may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection with the
transfer or exchange.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summarizes the material terms of the following agreements:
- the purchase agreement pursuant to which the seller will sell and assign
all right, title and interest in the pool of contracts and the related
property to the depositor;
- the performance guarantee pursuant to which the performance guarantor will
guarantee the performance of the seller's obligations under the purchase
agreement relating to breaches of representations and warranties regarding
the contracts;
- the sale and servicing agreement or pooling and servicing agreement
pursuant to which the depositor will deposit the pool of contracts and the
related property to the trust and the servicer will agree to service those
contracts;
- the trust agreement, or in the case of a grantor trust, the pooling and
servicing agreement, pursuant to which a trust will be created and
certificates will be issued; and
- the administration agreement pursuant to which Premier Auto Finance, Inc.
will undertake specified administrative duties with respect to a trust
that issues notes.
Forms of these documents, which we collectively refer to as the "TRANSFER
AND SERVICING AGREEMENTS", have been filed as exhibits to the registration
statement of which this prospectus is a part. In addition, a copy of the
relevant transfer and servicing agreements relating to a series of securities
will be filed with the Securities and Exchange Commission following the sale of
those securities. This summary describes the material terms expected to be
common to each transfer and servicing agreement. This summary is subject to, and
qualified in its entirety by reference to, all the provisions of the transfer
and servicing agreements relating to a particular series. You should read the
forms of the transfer and servicing agreements filed as noted above.
SALE AND ASSIGNMENT OF CONTRACTS BY SELLER
Premier Auto Finance, L.P. will be the seller of the contracts and the
related property to the depositor for deposit into the trust. The seller will
acquire the contracts originated by the originating dealers throughout the
United States pursuant to the dealer agreements and by other third parties. In
addition, the seller may directly originate contracts.
On or before the applicable closing date, the seller will sell to the
depositor under a purchase agreement all of its interest in the following:
- the contracts and the right to receive all scheduled payments and
prepayments received on the contracts on or after the cut-off date, but
excluding any scheduled payments due on or after, but received prior to,
the cut-off date;
- security interests in the financed vehicles securing the contracts and any
related property;
- the rights to proceeds from claims on theft, physical damage, credit life
and disability insurance policies covering the financed vehicles or the
obligors;
- the seller's rights against the originating dealers under the dealer
agreements and against other third parties under the agreements pursuant
to which the seller purchased the contracts;
- certain rebates of premiums and other amounts relating to insurance
policies, extended service contracts or other repair agreements and other
items financed under the contracts; and
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- all proceeds of the foregoing.
TRANSFER OF CONTRACTS BY DEPOSITOR
Pursuant to a sale and servicing agreement or pooling and servicing
agreement, as applicable, on the applicable closing date, the depositor will
transfer to the trust all of its interest in the following:
- all property acquired by the depositor from the seller under the purchase
agreement;
- amounts that may be held in separate trust accounts maintained by the
trustee or indenture trustee for the trust, including any reserve fund or
yield supplement account;
- the depositor's rights against the seller under the purchase agreement
pursuant to which the seller sold the pool of contracts to the depositor
and against the performance guarantor under the performance guarantee
pursuant to which the performance guarantor guaranteed the seller's
obligations; and
- all proceeds of the foregoing.
The depositor will designate the servicer as custodian to maintain physical
possession, as the trust's agent, of the contracts and any other documents
relating to the contracts. To facilitate servicing and save administrative
costs, the documents will not be physically segregated from other similar
documents that are in the servicer's possession, or marked to reflect the
transfer to the trust. However, UCC financing statements will be filed in the
applicable jurisdictions reflecting:
- the sale and assignment of the contracts and the security interests in the
financed vehicles and the related property by the seller to the depositor;
- the transfer of the contracts, the security interests in the financed
vehicles, the related property and the depositor's rights against the
seller under the purchase agreement and the depositor's rights against the
performance guarantor under the performance guarantee by the depositor to
the trust; and
- if applicable, the pledge by the trust of the trust assets to the
indenture trustee.
The seller and servicer's accounting records and computer systems will also
reflect these assignments and, if applicable, the pledge. Because the contracts
will remain in the servicer's possession and will not be stamped or otherwise
marked to reflect the assignment to the trust, if a subsequent purchaser were
able to take physical possession of the contracts without knowledge of the
assignment, the trust's interest in the contracts could be defeated. In
addition, in some cases, the trust's security interest in collections that have
been received by the servicer but not yet remitted to the related collection
account could be defeated. See "LEGAL ASPECTS OF THE CONTRACTS--SECURITY
INTERESTS" in this prospectus.
The depositor will cause the applicable trustee and the indenture trustee,
if any, concurrently with the depositor's transfer and assignment of the
contracts and related property to the trust, to execute and deliver the related
notes and/or certificates to the depositor. The depositor will apply the net
proceeds received from the sale of the certificates and the notes of a given
series to the purchase of the related contracts from the seller and, to the
extent specified in the applicable prospectus supplement, to make any required
initial deposit into the reserve fund and the yield supplement account, if any.
REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER AND THE DEPOSITOR
The seller and the depositor will make the following representations and
warranties, among others, regarding the contracts and the related financed
vehicles included in each pool of contracts transferred by the seller to the
depositor and by the depositor to the trust as of the related cut-off date or,
in the
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case of any contract acquired by the depositor or the trust after the closing
date, as of the date described in the prospectus supplement:
- the information with respect to the contracts provided in the schedule to
the purchase agreement, sale and servicing agreement or pooling and
servicing agreement, as applicable, is true and correct in all material
respects;
- immediately prior to the transfer of a contract, the contract was owned by
the transferring party free and clear of any lien or other adverse claim;
- the contract was originated by an originating dealer or other third party
for the retail financing of a motor vehicle and acquired by the seller in
the ordinary course of its business or originated directly by the seller
in the ordinary course of its business;
- the contract is secured by a first priority perfected security interest in
favor of the seller in the related financed vehicle;
- the contract contains customary and enforceable provisions such that the
rights and remedies of the holder thereof shall be adequate for the
realization against the financed vehicle;
- no liens or claims have been filed, including liens for work, labor,
materials or unpaid taxes relating to a financed vehicles, that would be
prior to, or equal or coordinate with the lien granted by the contract;
- no provisions of the contract have been waived, altered or modified in any
material respect, except by instruments or documents contained in the
files relating to the contract;
- the contract is a valid and binding payment obligation of the obligor and
its terms are enforceable, except as enforcement may be limited by
insolvency, bankruptcy, moratorium, reorganization, or other similar laws
affecting enforceability of creditors' rights and the availability of
equitable remedies;
- the contract is neither subject to rights of rescission, setoff,
counterclaim or defense nor is any such claim being asserted or
threatened;
- the contract, at the time it was made, complied and, as of the closing
date, complies in all material respects with the laws of the United States
or any state, including consumer credit, truth-in-lending, equal credit
opportunity and disclosure laws;
- the obligor is not subject to bankruptcy or other insolvency proceedings;
- the contract is a U.S. dollar-denominated obligation and the obligor's
billing address is located in one of the states of the United States, the
District of Columbia or Puerto Rico;
- the obligor under the contract is required to maintain casualty insurance
with respect to the related financed vehicle in an amount that is
consistent with the servicer's normal servicing requirements; and
- the contract and the financed vehicle satisfy the selection criteria for
the related pool of contracts described in the applicable prospectus
supplement.
In the event of a breach of any representation or warranty with respect to a
contract that materially and adversely affects the trust's or any noteholder's
or certificateholder's interest in the contract or the collectibility of the
contract, the depositor will be obligated to repurchase the contract from the
trust and the seller will be obligated to repurchase the contract from the
depositor. However, the depositor and the seller need not repurchase the
contract if the depositor or the seller cures the breach by the last day of the
calendar month following the calendar month in which the servicer, the trustee
or the indenture trustee becomes aware and gives notice to the depositor or the
seller of the breach or the depositor or the seller becomes aware of the breach.
Any purchase shall be made as of the last day of that calendar month at a price
equal to the remaining principal balance of the contract
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plus accrued and unpaid interest at the annual rate of interest specified in the
contract through the end of that calender month. The related trustee or the
indenture trustee may enforce this purchase obligation on your behalf, and will
constitute your sole remedy available against the depositor or the seller for
any uncured breach of its representations and warranties in the sale and
servicing agreement or pooling and servicing agreement, as applicable, and the
purchase agreement, except that the seller will indemnify:
- the related trustees,
- the related trust, and
- you
against losses, damages, liabilities and claims which may be asserted
against any of them as a result of third-party claims arising out of the facts
giving rise to that breach.
Upon the purchase by the seller of a contract, the indenture trustee, if
any, the trust and the depositor will release the contract and its interest in
the related financed vehicles to the seller.
PERFORMANCE GUARANTEE
In the event the seller fails to repurchase a contract that it is obligated
to repurchase pursuant to a purchase agreement, then the performance guarantor
will be obligated to repurchase the contract.
COLLECTION ACCOUNT
In the case of a trust issuing notes, the indenture trustee will establish
and maintain the collection account in the name of the indenture trustee for the
benefit of the noteholders under the indenture. In the case of a trust issuing
only certificates, the trustee will maintain the collection account in the name
of the trustee for the benefit of the certificateholders under the pooling and
servicing agreement. The servicer will deposit the following amounts into the
collection account no later than the second business day after processing by the
servicer:
- all payments made by the obligors under the contracts;
- all proceeds of the contracts and the financed vehicles; and
- all payments made by the depositor under the sale and servicing agreement
or pooling and servicing agreement to repurchase any contract as a result
of a breach of a representation or warranty, as described under
"REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER AND THE DEPOSITOR"
above.
However, if the conditions to making monthly deposits into the collection
account set forth in the applicable sale and servicing agreement or pooling and
servicing agreement (including the satisfaction of the minimum ratings of the
servicer and the absence of a servicer default) are satisfied and if permitted
by the rating agencies rating the securities, the servicer may retain
collections received on the contracts during each month until the business day
immediately prior to the related payment date. Pending deposit into the
collection account, the servicer will not be obligated to segregate collections
from its own funds and may use collections for its own benefit. To the extent
set forth in the applicable prospectus supplement, the servicer may, in order to
satisfy the requirements set forth in the sale and servicing agreement or
pooling and servicing agreement obtain a letter of credit or other security for
the benefit of the related trust to secure timely remittances of collections on
the contracts.
The servicer may withdraw from the collection account any amounts deposited
in error or required to be repaid to an obligor, based on the servicer's
good-faith determination that the amount was deposited in error or must be
returned to the obligor.
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Collections on a contract made during a month will be applied in the
following order:
- first, to reimburse any outstanding advances made by the servicer with
respect to the contract;
- second, to the related scheduled payment, in the case of a precomputed
contract, or to interest accrued to date and then to principal until the
principal balance is brought current, in the case of a simple interest
contract; and
- third, to pay any late fees or extension fees owing.
Any collections on a contract remaining after those applications will be
considered an "EXCESS PAYMENT". Excess payments constituting a prepayment in
full of precomputed contracts and any excess payments relating to simple
interest contracts will be applied as a prepayment of principal. All other
excess payments in respect of precomputed contracts will be held by the
servicer, or if the servicer has not satisfied the requirements to deposit
collections on the contracts monthly as described above, deposited in an account
to be established with the indenture trustee or the trustee for the benefit of
the securityholders to be held until the payment date following the month during
which such prepaid amount would have been due under the related contract.
SERVICING
The servicer will be obligated under the sale and servicing agreement or
pooling and servicing agreement, as applicable, to service the contracts with
reasonable care, using that degree of skill and attention that the servicer
generally exercises with respect to all comparable motor vehicle retail
installment contracts it services for itself and others in accordance with its
credit and collections policies and applicable law. In performing these duties,
the servicer shall comply in all material respects with its credit and
collection policies and procedures described above under "THE
SERVICER--UNDERWRITING AND ORIGINATION", as modified from time to time. The
servicer may delegate servicing responsibilities to third parties or affiliates,
provided that the servicer will remain obligated to the related trust for the
proper performance of its servicing responsibilities.
The servicer is responsible for:
- reviewing the contract files;
- monitoring and tracking any property and sales taxes to be paid by
obligors;
- billing, collecting and recording payments from obligors;
- communicating with and providing billing records to obligors;
- depositing funds into the collection account;
- receiving payments as the trust's agent on the insurance policies
maintained by the obligors and communicating with insurers;
- issuing reports to the trustee and indenture trustee, if any, specified in
the relevant transfer and servicing agreements;
- repossessing and remarketing financed vehicle following obligor defaults;
and
- paying the fees and ordinary expenses of the trusts and the trustees.
The servicer is obligated to act in a commercially reasonable manner with
respect to the repossession and disposition of financed vehicles following a
contract default with a view to realizing proceeds at least equal to the
financed vehicle's fair market value.
If the servicer determines that eventual payment in full of a contract is
unlikely, the servicer will follow its normal practices and procedures to
recover all amounts due upon that contract, including repossessing and disposing
of the related financed vehicle at a public or private sale, or taking any other
action permitted by applicable law. See "LEGAL ASPECTS OF THE CONTRACTS" in this
prospectus. The servicer will be entitled to recover all reasonable
out-of-pocket expenses incurred by it in liquidating a contract and disposing of
the related financed vehicle.
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The servicer will be permitted to grant payment extensions on a contract in
accordance with its credit and collection policies and procedures if the
servicer believes in good faith that an extension is necessary to avoid
liquidation of the contract and will maximize the amount to be received by the
trust under the contract provided that the final scheduled payment date on the
contract, as extended, would not be later than the month preceding the latest
final scheduled payment date set forth in the applicable prospectus supplement
and the rescheduling or extension would not modify the terms of the contract in
a manner which constitutes a cancellation of the contract and the creation of a
new contract for federal income tax purposes.
Subject to the limitations described below, the servicer will be permitted
to agree to modifications or amendments to a contract in accordance with its
credit and collection polices and guidelines.
The servicer will covenant that it will not:
- release any financed vehicle from the security interest granted in the
related contract;
- do anything to impair the trust's rights in the contracts;
- alter the annual percentage rate of any contract;
- modify the number of payments under a contract; or
- increase the amount financed under a contract.
In the event of any breach by the servicer of these covenants with respect
to a contract that materially and adversely affects the trust's or the
noteholders' or certificateholders' interest in the contract or the
collectibility of the contract, the servicer will be obligated to purchase the
contract. However, the servicer need not do so if the servicer cures the breach
by the last day of the calendar month following the calendar month in which the
servicer becomes aware of the breach or the trustee or the indenture trustee
gives notice to the servicer of the breach. Any purchase shall be made as of the
last day of that calendar month at a price equal to the remaining principal
balance of the contract plus accrued and unpaid interest at the annual rate of
interest specified in the contract through the end of that calendar month. The
related trustee or indenture trustee may enforce this purchase obligation on
your behalf and this will constitute your sole remedy available against the
servicer for any uncured breach of those covenants, except that the servicer
will indemnify:
- the related trustee(s);
- the related trust; and
- you
against losses, damages, liabilities and claims which may be asserted against
any of them as a result of third-party claims out of facts giving rise to that
breach.
EVIDENCE AS TO COMPLIANCE
Annually, the servicer will be obligated to deliver to the trustee and the
indenture trustee if any, a report from a nationally recognized accounting firm
stating that the accounting firm has audited the financial statements of the
servicer's direct or indirect parent and issued an opinion on those financial
statements and that the accounting firm has examined and provided a report as to
the servicer's controls over the servicing of the contracts.
Annually the servicer will be obligated to deliver to the trustee and the
indenture trustee, if any, a certificate signed by an officer stating that the
servicer has fulfilled its obligations under the sale and servicing agreement or
the pooling and servicing agreement, as applicable, during the preceding twelve-
month period in all material respects or, if there has been a default in the
fulfillment of any obligation, describing such default.
You may obtain copies of these reports and certificates by delivering a
request in writing to the trustee or the indenture trustee, as the case may be,
at the address set forth in your prospectus supplement.
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SERVICER DEFAULT
A servicer default under a sale and servicing agreement or a pooling and
servicing agreement will occur if:
- the servicer fails to make any required payment or deposit or fails to
direct the trustee or the indenture trustee to make any required
distributions and the failure continues for five business days after
written notice from the trustee or indenture trustee or discovery by the
servicer;
- the servicer fails to observe in any material respect any agreements of
the servicer set forth in the sale and servicing agreement or the pooling
and servicing agreement and the failure (1) materially and adversely
affects the rights of the noteholders or the certificateholders, and
(2) continues unremedied for 30 days after written notice to the servicer
by the trustee or the indenture trustee or by holders of more than 25% of
the aggregate principal amount of the notes or the class or classes of
notes described in your prospectus supplement issued by the trust or, if
the trust has no notes outstanding, by holders of more than 25% of the
aggregate certificate balance of the certificates or the class or classes
of certificates described in your prospectus supplement;
- events of bankruptcy or insolvency occur with respect to the servicer; or
- any representation, warranty or statement of the servicer made under the
sale and servicing agreement or the pooling and servicing agreement is
incorrect in any material respect, and (1) has a material adverse effect
on the noteholders or the certificateholders, and (2) continues uncured
for 30 days after written notice to the servicer by the trustee or the
indenture trustee or by holders of more than 25% of the aggregate
principal amount of the notes or the class or classes of notes described
in your prospectus supplement issued by the trust or, if the trust has no
notes outstanding, by holders of more than 25% of the aggregate
certificate balance of the certificates or the class or classes of
certificates described in your prospectus supplement.
RIGHTS UPON SERVICER DEFAULT
If a servicer default remains unremedied, the indenture trustee or the
holders of more than 50% of the aggregate principal amount of the notes or the
class or classes of notes described in your prospectus supplement issued by the
trust or, if the trust has no notes outstanding, the trustee or the holders of
more than 50% of the aggregate certificate balance of the certificates or the
class or classes of certificates described in your prospectus supplement may
terminate all of the rights and obligations of the servicer under the sale and
servicing agreement or pooling and servicing agreement. When this happens, the
indenture trustee, the trustee or a successor servicer selected by the indenture
trustee or the trustee will succeed to all the responsibilities, duties and
liabilities of the servicer under the sale and servicing agreement or pooling
and servicing agreement.
If the indenture trustee or the trustee is unwilling or unable to act as the
successor servicer, it may appoint, or petition a court to appoint, a successor
servicer. The indenture trustee or the trustee may arrange for compensation to
the successor servicer but that compensation may not exceed the base servicing
fee payable to the servicer. Any successor servicer will not be liable for any
acts or omissions of the prior servicer occurring prior to a transfer of the
servicer's servicing and related functions or for any breach by the prior
servicer of any of its obligations.
If a trust has notes outstanding, the holders of more than 50% of the
aggregate principal amount of the notes or the class or classes of notes
described in your prospectus supplement may waive any servicer default, other
than a default in making any required deposits into the collection account. If a
trust has no notes outstanding, the holders of more than 50% of the aggregate
certificate balance of the certificates or the class or classes of certificates
described in your prospectus supplement issued by the trust may waive any
servicer default, other than a default in making any required deposits into the
collection account.
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MATTERS REGARDING THE SERVICER
The servicer may not resign from its obligations under the sale and
servicing agreement or pooling and servicing agreement except if its duties are
no longer permissible under applicable law. No resignation will become effective
until a successor servicer has assumed the servicer's obligations and duties
under the sale and servicing agreement or pooling and servicing agreement.
Removal of the servicer is permissible only upon the occurrence of a servicer
default as discussed above.
The servicer will be obligated to maintain an insurance policy or financial
guarantee bond in customary form covering errors and omissions by the servicer.
Each sale and servicing agreement and pooling and servicing agreement will
provide that neither the servicer nor any of its directors, officers, employees
or agents will be under any liability to the trust or you for taking any action
or for refraining from taking any action pursuant to that agreement or for
errors in judgment; except that neither the servicer nor any person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of the
servicer's duties under that agreement or by reason of reckless disregard of its
obligations and duties under that agreement.
In addition, the servicer will not be obligated to appear in, prosecute or
defend any legal action that is not incidental to the servicer's servicing
responsibilities under the related sale and servicing agreement or pooling and
servicing agreement and that, in its opinion, may cause it to incur any expense
or liability. The servicer may, however, undertake any reasonable action that it
may deem necessary or desirable in respect of that agreement, the rights and
duties of the parties thereto and the interests of the securityholders under
that agreement. In that event, the legal expenses and costs of that action and
any liability resulting therefrom will be expenses, costs and liabilities of the
servicer, and the servicer will not be entitled to be reimbursed therefor.
The servicer may at any time without notice or consent (a) delegate
substantially all of its duties under a sale and servicing agreement or pooling
and servicing agreement, as the case may be, to any corporation more than 50% of
the voting stock of which is owned directly or indirectly by Aon Corporation or
(b) perform specific duties under a sale and servicing agreement or pooling and
servicing agreement, as the case may be, through subcontractors. In no event
will such delegation or subcontracting relieve the servicer of its duties under
that sale and servicing agreement or pooling and servicing agreement, for which
the servicer shall remain primarily responsible.
Under the circumstances specified in each sale and servicing agreement or
pooling and servicing agreement, any entity into which the servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the servicer is a party, or any entity succeeding to all or
substantially all of the business of the servicer will be the successor of the
servicer under that agreement.
The servicer will indemnify:
- the related trustee(s);
- the related trust; and
- you
against losses, damages, liabilities and expenses incurred by reason of the
servicer's bad faith or gross negligence in the performance of its obligations
under the sale and servicing agreement or pooling and servicing agreement, as
the case may be or resulting from the use, ownership or operation by the
servicer of a financed vehicle.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Compensation to the servicer will include a base monthly fee equal:
- to the product of the percentage per annum specified in your prospectus
supplement multiplied by the beginning monthly principal balance of the
contracts,
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plus any
- late fees;
- prepayment charges, if any;
- documentation fees;
- extension fees and other administrative charges; and
- if specified in the prospectus supplement, investment earnings on funds
deposited in the trust accounts.
The servicer will pay all expenses incurred by it in connection with its
activities under the transfer and servicing agreements. The servicer will be
authorized to waive any administrative fees or extension fees that may be
collected in the ordinary course of servicing any contract.
STATEMENTS TO TRUSTEES AND TRUST
On or prior to each payment date the servicer will provide to the applicable
indenture trustee, if any, and the applicable trustee a statement setting forth
with respect to a series of securities substantially the same information that
is required to be provided in the periodic reports to be provided to
securityholders of that series described under "--STATEMENTS TO SECURITYHOLDERS"
below.
STATEMENTS TO SECURITYHOLDERS
With respect to each series of securities that includes notes, on or prior
to each payment date, the servicer will prepare and provide to the related
indenture trustee a statement to be delivered to you on that payment date. With
respect to each series of securities that includes certificates, on or prior to
each payment date, the servicer will prepare and provide to the related trustee
a statement to be delivered to you on the payment date. Each statement will
include the following information:
- the amount of the payment allocable to the principal amount of each class
of those notes and to the certificate balance of each class of those
certificates;
- the amount of the payment allocable to interest on each class of
securities of that series;
- the amount of the distribution allocable to the yield supplement deposit,
if any;
- the aggregate principal balance of the contracts as of the close of
business on the last day of the preceding month;
- the amount of base servicing fees paid to the servicer;
- the interest rate or pass-through rate for the interest period relating to
the succeeding payment date for any class of notes or certificates of that
series with variable or adjustable rates;
- the amount, if any, otherwise distributable to one or more subordinated
classes of notes or certificates that has instead been distributed to more
senior classes of notes or certificates on that payment date;
- the outstanding principal amount and the note factor for each class of
those notes, and the certificate balance and the certificate factor for
each class of those certificates, each after giving effect to all payments
allocable to the principal of each class of notes and to the certificate
balance of the certificates on that date;
- the amount of advances made by the servicer in respect of the related
contracts and the preceding month and the amount of unreimbursed advances
in respect of contracts determined by the servicer to be defaulted
contracts during that month;
- the balance of any related reserve fund, yield supplement account or other
credit or liquidity enhancement on that date, after giving effect to
changes thereto on that date and the amount of those changes;
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- during the funding period, the remaining amount on deposit in the
pre-funding account on the last day of the preceding month;
- for the first such date that is on or immediately following the end of the
funding period, the amount remaining in the pre-funding account to be used
to make a payment or distribution of principal on the securities issued by
the trust; and
- the total amount of monthly prepayments determined by the servicer to be
due in one or more future months on deposit in the related trust account
or held by the servicer, if permitted by the rating agencies rating the
securities, with respect to the related contracts and the change in that
amount from the immediately preceding payment date.
You may obtain copies of the statements by delivering a request in writing
addressed to the applicable trustee or indenture trustee at its address set
forth in your prospectus supplement.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each trust, the applicable trustee
will mail to each person who at any time during that calendar year has been a
securityholder with respect to that trust and received any payment a statement
containing information for the purposes of that securityholder's preparation of
federal income tax returns. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in
this prospectus.
ADVANCES
If the scheduled payment due on a precomputed contract is not received in
full by the end of the month in which it is due, the servicer will make an
advance to the trust in an amount equal to the shortfall. If the scheduled
payment on a simple interest contract is not received in full by the end of the
month in which it is due, the servicer will make an advance to the trust in an
amount equal to the product of the principal balance of the simple interest
contract as of the first day of that month and one-twelfth of its annual
percentage rate minus the amount of interest actually received on the simple
interest contract during that month. No advances of principal will be made with
respect to simple interest contracts. The servicer will not be obligated to make
an advance to the extent that it determines, in its sole discretion, that the
advance will not be recovered from subsequent collections on or in respect of
the related contract.
All advances shall be reimbursable to the servicer, without interest, if and
when a payment relating to a contract with respect to which an advance has
previously been made is subsequently received. In addition, upon the
determination by the servicer that a contract is a defaulted contract, it will
be entitled to recover unreimbursed advances in respect of that contract from
collections on or in respect of other contracts. A defaulted contract is any
contract (a) all or part of a scheduled payment is 120 days or more than
120 days past due and the servicer has not repossessed the related financed
vehicle, (b) the servicer has, in accordance with its customary servicing
procedures, determined that eventual payment in full is unlikely and has either
repossessed and liquidated the related financed vehicle or repossessed and held
the related financed vehicle in its repossessed inventory for 90 days, which
ever occurs first, or (c) as to which the obligor has suffered an insolvency
event.
NET DEPOSITS
As an administrative convenience and as long as specified conditions are
satisfied, the servicer will be permitted to make the deposit of collections,
aggregate advances and payments for purchases of contracts from the trust for or
with respect to a month net of payments to be made to the servicer with respect
to that month. The servicer may cause to be made a single, net transfer to the
collection account. The servicer, however, will account to the related trustee,
and you with respect to each trust as if all deposits, payments and transfers
were made individually. With respect to any trust that issues both certificates
and notes, if the related payment dates are not the same for all classes of
securities, all distributions, deposits or other remittances made on a payment
date will be treated as having been distributed, deposited or remitted on the
same payment date for the applicable month for purposes of determining other
amounts required to be distributed, deposited or otherwise remitted on a payment
date.
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LIST OF SECURITYHOLDERS
Three or more holders of the notes of any class in a series or one or more
holders of those notes of that class evidencing not less than 25% of the
aggregate principal amount of those notes then outstanding may, by written
request to the related indenture trustee, obtain access to the list of all
noteholders maintained by that indenture trustee for the purpose of
communicating with other noteholders with respect to their rights under the
related indenture or under those notes. An indenture trustee may elect not to
afford the requesting noteholders access to the list of noteholders if it agrees
to mail the desired communication or proxy, on behalf of and at the expense of
the requesting noteholders, to all noteholders of that series.
Three or more holders of the certificates of any class in a series or one or
more holders of those certificates of that class evidencing not less than 25% of
the certificate balance of those certificates may, by written request to the
related trustee, obtain access to the list of all certificateholders maintained
by that trustee for the purpose of communicating with other certificateholders
with respect to their rights under the related trust agreement or pooling and
servicing agreement or under those certificates.
The related trustee will provide to the servicer within 15 days after
receipt of a written request from the servicer, a list of the names of all
noteholders or certificateholders of record as of the most recent applicable
record date.
No transfer and servicing agreement will provide for the holding of annual
or other meetings of securityholders.
INSOLVENCY OF TRUST
Each trust agreement will provide that the related trustee does not have the
power to commence a voluntary proceeding in bankruptcy with respect to the
related trust without the unanimous prior approval of all certificateholders of
that trust and the delivery to that trustee by each certificateholder of a
certificate certifying that that certificateholder reasonably believes that that
trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding notes issued by a trust and the
satisfaction and discharge of the related indenture, the trustee will succeed to
all the rights of the indenture trustee, and the certificateholders of that
series will succeed to all the rights of the noteholders of that series, under
the related sale and servicing agreement, except as otherwise provided in the
sale and servicing agreement.
ADMINISTRATION AGREEMENT
Premier Auto Finance, Inc., in its capacity as administrator, will enter
into an administration agreement with each trust that issues notes and the
related indenture trustee pursuant to which the administrator will agree to
provide notices and perform other administrative obligations of the trust under
the related indenture. For its services under the administration agreement the
administrator may be entitled to receive a monthly administration fee, which
administration fee will be paid by the servicer. The amount of the
administration fee, if any, will be set forth in your prospectus supplement.
AMENDMENT
The parties may, without your consent, correct or supplement any provision
in the transfer and servicing agreements that is ambiguous or inconsistent with
any other provision in the transfer and servicing agreements. In addition, the
parties may amend any transfer and servicing agreement without the consent of
any securityholder to add any provisions to or change in any manner or eliminate
any of the provisions of a transfer and servicing agreement if the indenture
trustee or trustee receives an opinion of counsel that the modification will not
have a material adverse effect on the securityholders.
Any transfer and servicing agreement may also be amended in any respect by
the parties with the consent of the holders of more than 50% of the aggregate
principal amount of the notes or the class or
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classes of the notes described in your prospectus supplement issued by the trust
or, if the trust has no notes outstanding, the holders of more than 50% of the
aggregate certificate balance of the certificates or the class or classes of the
certificates described in your prospectus supplement, except that no amendment:
- that reduces the amount or changes the timing of any collections on any
contracts or payments required to be distributed on any security;
- that changes the interest rate on any security, that adversely affects the
priority of payment of principal or interest to the securityholders; or
- that reduces the percentage of securityholders required to consent to
these amendments or any waiver under the transfer and servicing agreement,
may be effective without the consent of the holder of each security. Also, an
amendment under the foregoing sentence will not be effective unless each rating
agency rating the securities at the request of the depositor confirms that the
amendment will not result in a reduction, qualification or withdrawal of the
ratings on the securities.
LEGAL ASPECTS OF THE CONTRACTS
GENERAL
The transfer of the contracts to the applicable trust, the perfection of the
security interests in the contracts and the enforcement of rights to realize on
the financed vehicles as collateral for the contracts are subject to a number of
federal and state laws. Uniform Commercial Code financing statements will be
filed in the applicable jurisdictions reflecting the transfer of the contracts,
the security interests in the financed vehicles and the related property by the
seller to the depositor and by the depositor to the trust. Another person could
acquire an interest in a contract that is superior to that of the trust because
the servicer will retain possession of the contracts and the contracts will not
be segregated or marked as belonging to the trust. If a person purchases
contracts, or takes a security interest therein, for value in the ordinary
course of its business and obtains possession of the contracts without actual
knowledge of the trust's interest, that person will acquire an interest in the
contracts superior to the interest of the trust.
SECURITY INTERESTS
GENERAL
In states in which the contracts evidence the credit sale of motor vehicles
by originating dealers to obligors, the contracts also constitute personal
property security agreements and include grants of security interests in the
vehicles under the applicable Uniform Commercial Code. Perfection of security
interests in financed motor vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In most states,
a security interest in a motor vehicle is perfected by obtaining possession of
the certificate of title to the motor vehicle or notation of the secured party's
lien on the motor vehicle's certificate of title.
All contracts acquired by the seller from the originating dealers will name
the seller as obligee or assignee and as the secured party. The seller will also
take all actions necessary under the laws of the state in which the related
financed vehicle is located to perfect its security interest in that financed
vehicle, including, where applicable, having a notation of its lien recorded on
the related certificate of title and/or obtaining possession of that certificate
of title. Because Premier Auto Finance, Inc. will continue to service the
contracts as servicer under the sale and servicing agreement or the pooling and
servicing agreement, as applicable, the obligors on the contracts will not be
notified of the sale from the seller to the depositor or the sale from the
depositor to the related trust.
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PERFECTION
The seller will sell and assign its security interest in the financed
vehicles to the depositor and the depositor will assign its security interest in
the financed vehicles to the trust. However, because of the administrative
burden and expense, none of the seller, the depositor or the related trust will
amend any certificate of title to identify that trust as the new secured party
on that certificate of title relating to a financed vehicle. However, UCC
financing statements with respect to the transfer to the depositor of the
seller's security interest in the financed vehicles and the transfer to the
trust of the depositor's security interest in the financed vehicles will be
filed. In addition, the servicer will continue to hold any certificates of title
relating to the financed vehicles in its possession as custodian for that trust.
See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" in this prospectus.
In most states, an assignment is an effective conveyance of a security
interest without amendment of any lien noted on a motor vehicle's certificate of
title. Although re-registration of the motor vehicle is not necessary to convey
a perfected security interest in the financed vehicles to the trust, because the
trust will not be listed as lienholder on the certificates of title, the
security interest of that trust in the vehicle could be defeated through fraud,
forgery, negligence or error. In the absence of fraud or forgery by the motor
vehicle owner or the servicer or administrative error by state or local
agencies, the notation of the seller's lien on the certificates 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. The seller and depositor will each represent and warrant that
the seller had a perfected security interest in each financed vehicle. If there
are any financed vehicles as to which the seller failed to obtain a perfected
security interest, the security interest of the trust would be subordinate to,
among others, subsequent purchasers of the financed vehicles and holders of
perfected security interests in the financed vehicles. To the extent that
failure has a material and adverse effect on the trust's or any securityholder's
interest in the related contract or the collectibility of the contract, however,
it would constitute a breach of the warranties of the seller and the depositor.
Accordingly, the depositor would be required to repurchase the related contract
from the trust and the seller, or performance guarantor in the event of the
seller's nonperformance, would be required to purchase that contract from the
depositor, unless the breach was cured. The depositor will assign to the related
trust its rights to cause the seller to repurchase that contract under the
related purchase agreement. See "DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS" and "RISK FACTORS--INTERESTS OF OTHER PERSONS IN THE CONTRACTS OR
THE FINANCED VEHICLES COULD REDUCE FUNDS AVAILABLE TO MAKE PAYMENTS ON YOUR
SECURITIES" in this prospectus.
CONTINUITY OF PERFECTION
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after the motor vehicle is moved to a state that
is different from the one in which it is initially registered and thereafter
until the owner re-registers the motor vehicle in the new state. A majority of
states generally require surrender of a certificate of title to re-register a
motor vehicle. In those states, such as California, that require a secured party
to hold possession of the certificate of title to maintain perfection, the
secured party would learn of the re-registration through the request from the
obligor under the related contract to surrender possession of the certificate of
title. In the case of motor vehicles registered in states providing for the
notation of a lien on the certificate of title but not possession by the secured
party, such as Texas, the secured party would receive notice of surrender from
the state of re-registration 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.
However, these procedural safeguards will not protect the secured party if
through fraud, forgery or administrative error, the obligor somehow procures a
new certificate of title that does not list the secured party's lien.
Additionally, 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 the contracts, the servicer will take 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
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financed vehicle, the servicer must surrender possession of the certificate of
title or will receive notice as a result of its lien noted on the certificate of
title and accordingly will have an opportunity to require satisfaction of the
related contract before release of the lien. The servicer will be obligated to
take appropriate steps, at the servicer's expense, to maintain perfection of
security interests in the financed vehicles and will be obligated to purchase
the related contract if it fails to do so and that failure has a material and
adverse effect on the trust's or any securityholder's interest in the contract
or the collectibility of the contract.
PRIORITY OF LIENS ARISING BY OPERATION OF LAW
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Internal Revenue Code also grants priority
to specified federal tax liens over the lien of a secured party. The laws of
some states and federal law permit the confiscation of motor vehicles by
governmental authorities under some circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected security
interest in the confiscated vehicle. The seller will represent and warrant to
the depositor and the depositor will represent and warrant to the trust that, to
its knowledge, as of the related closing date, each security interest in a
financed vehicle is prior to all other present liens upon and security interests
in that financed vehicle. However, liens for repairs or taxes could arise, or
the confiscation of a financed vehicle could occur, at any time during the term
of a contract. No notice will be given to related trustee or you in respect of a
given trust if a lien arises or confiscation occurs that would not give rise to
the depositor's or seller's (or performance guarantor's) repurchase obligation.
REPOSSESSION
In the event of default by an obligor, the holder of the related contract
has all the remedies of a secured party under the UCC, except where specifically
limited by other state laws. Among the UCC remedies, the secured party has the
right to perform repossession by self-help means, unless it would constitute a
breach of the peace or is otherwise limited by applicable state law. Unless a
motor vehicle financed by the seller is voluntarily surrendered, self-help
repossession is the method employed by the servicer in most states and is
accomplished simply by retaking possession of the financed vehicle. In cases
where an obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and that vehicle must then be recovered in accordance
with that order. In some jurisdictions, the secured party is required to notify
that obligor of the default and the intent to repossess the collateral and to
give that obligor a time period within which to cure the default prior to
repossession. In some states, an obligor has the right to reinstate its contract
and recover the collateral by paying the delinquent installments or other
amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide an obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. In most states,
an obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation, accrued
interest on the obligation plus reasonable expenses for repossessing, holding
and preparing the collateral for disposition and arranging for its sale, plus,
in some jurisdictions, reasonable attorneys' fees. In some states, an obligor
has the right to redeem the collateral prior to actual sale by payment of
delinquent installments or the unpaid balance.
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DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the motor vehicle generally will be applied first
to the expenses of resale and repossession and then to the satisfaction of the
indebtedness. 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 those judgments. In addition to the notice requirement
described above, the UCC requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable." Generally, courts have held that when a sale is not
"commercially reasonable," the secured party loses its right to a deficiency
judgment. 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 or be
uncollectible. In addition, the UCC permits the obligor or other interested
party to recover for any loss caused by noncompliance with the provisions of the
UCC. Also, prior to a sale, the UCC permits the obligor or other interested
person to prohibit the secured party from disposing of the collateral if it is
established that the secured party is not proceeding in accordance with the
"default" provisions under the UCC.
Occasionally, after resale of a repossessed vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to that vehicle or if no lienholder exists, the UCC requires the
creditor to remit the surplus to the obligor.
BANKRUPTCY CONSIDERATIONS
The depositor has taken steps that are intended to make it unlikely that the
voluntary or involuntary application for relief by the seller under the United
States Bankruptcy Code or similar applicable state laws will result in
consolidation of the assets and liabilities of the depositor with those of the
seller. These steps include the creation of the depositor as a wholly-owned,
limited purpose subsidiary pursuant to articles of incorporation and bylaws
containing restrictions on the nature of the depositor's business and on its
ability to commence a voluntary case or proceeding under any insolvency law
without the unanimous affirmative vote of all of its directors. In addition, to
the extent that the seller granted a security interest in the contracts to the
depositor, and that interest was validly perfected before the bankruptcy or
insolvency of the seller and was not taken or granted in contemplation of
insolvency or with the intent to hinder, delay or defraud the seller or its
creditors, that security interest should not be subject to avoidance, and
payments to the trust with respect to the contracts should not be subject to
recovery by a creditor or trustee in bankruptcy of the seller.
However, delays in payments on the securities and possible reductions in the
amount of those payments could occur if:
1. a court were to conclude that the assets and liabilities of the
depositor should be consolidated with those of the seller in the event of
the application of applicable insolvency laws to the seller, as the case
may be;
2. a filing were made under any insolvency law by or against the depositor;
or
3. an attempt were to be made to litigate any of the foregoing issues.
On each closing date, Winston & Strawn will give an opinion to the effect
that, based on a reasoned analysis of analogous case law, although there is no
precedent based on directly similar facts, and, subject to facts, assumptions
and qualifications specified in the opinion and applying the principles set
forth in the opinion, in the event of a voluntary or involuntary bankruptcy case
in respect of the seller under Title 11 of the United States Bankruptcy Code at
a time when the seller was insolvent, the
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property of the seller would not properly be substantively consolidated with the
assets of the depositor. Among other things, that opinion will assume that each
of the depositor and the seller will follow specified procedures in the conduct
of its affairs, including maintaining records and books of account separate from
those of the other, refraining from commingling its assets with those of the
other, and refraining from holding itself out as having agreed to pay, or being
liable for, the debts of the other. The depositor and the seller intend to
follow these and other procedures related to maintaining their separate
identities. However, there can be no assurance that a court would not conclude
that the assets and liabilities of the depositor should be consolidated with
those of the seller.
The seller will warrant that the sale of the related contracts to the
depositor is a valid sale. Notwithstanding the foregoing, if the seller were to
become a debtor in a bankruptcy case, a court could take the position that the
sale of contracts to the depositor should instead be treated as a pledge of
those contracts to secure a borrowing of the seller. If a court were to reach
such conclusions, or a filing were made under any insolvency law by or against
the depositor, or if an attempt were made to litigate any of the foregoing
issues, delays and possible reduction in payments on the securities could occur.
In addition, if the transfer of contracts to the depositor is treated as a
pledge instead of a sale, a tax or government lien on the property of the seller
arising before the transfer of a contract to the depositor may have priority
over the depositor's interest in that contract.
The seller and the depositor will treat the transactions described in this
prospectus as a sale of the contracts to the depositor, so that the automatic
stay provisions of the United States Bankruptcy Code should not apply to the
contracts if the seller were to become a debtor in a bankruptcy case.
Furthermore, if an originating dealer or the seller became a debtor in a
bankruptcy case, creditors of that party, or that party acting as
debtor-in-possession, may assert that the transfer of the contracts was
ineffective to remove the contracts from that party's estate. In that case, the
distribution of payments on the contracts to the trust might be subject to the
automatic stay provisions of the United States bankruptcy code. This would delay
the distribution of those payments to you for an uncertain period of time.
Furthermore, reductions in payments under the contracts to the trust may result
if the bankruptcy court rules in favor of the creditors or the
debtor-in-possession. In either case, you may experience delays or reductions in
distributions or payments to you. In addition, a bankruptcy trustee would have
the power to sell the contracts if the proceeds of the sale could satisfy the
amount of the debt deemed owed by the originating dealer or the seller, as the
case may be. The bankruptcy trustee could also substitute other collateral in
lieu of the contracts to secure the debt. Additionally, the bankruptcy court
could adjust the debt if the originating dealer or the seller were to file for
reorganization under Chapter 11 of the bankruptcy code. Any of these actions
could result in losses or delays in payments on your securities. Each of these
parties will represent and warrant that the conveyance of the contracts by it is
in each case a valid sale and transfer of the contracts.
Also, cash collections on the contracts may be commingled with general funds
of the servicer and, in the event of a bankruptcy of the servicer, a court may
conclude that the trust does not have a perfected security interest in those
collections.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer Credit Code,
state adoptions of the National Consumer Act and of the Uniform Consumer Credit
Code and state motor vehicle retail installment sales acts and other similar
laws. Also, state laws impose finance charge ceilings and other restrictions
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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 ability to enforce consumer
finance contracts such as the contracts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law in some states,
has the effect of subjecting a seller (and specified creditors and their
assignees) in a consumer credit transaction to all claims and defenses that the
obligor in the transaction could assert against the seller of the goods.
Liability under the FTC Rule is limited to the amounts paid by the obligor under
the contract, and the holder of the contract may also be unable to collect any
balance remaining due under that contract from the obligor.
Most of the contracts will be subject to the requirements of the FTC Rule.
Accordingly, each trust, as holder of the related contracts, will be subject to
any claims or defenses that the purchaser of the applicable financed vehicle may
assert against the seller of the related financed vehicle. As to each obligor,
these claims are limited to a maximum liability equal to the amounts paid by the
obligor on the related contract. 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 the originating
dealer is not properly licensed or if a written odometer disclosure statement
was not provided to the purchaser of the related financed vehicle, an obligor
may be able to assert a defense against the originating dealer. If an obligor
were successful in asserting any of those claims or defenses, that claim or
defense would constitute a breach of the depositor's representations and
warranties under the related sale and servicing agreement or pooling and
servicing agreement and a breach of the seller's warranties under the related
purchase agreement and would, if the breach materially and adversely affects the
collectibility of the contract or the interests of the trust or the
securityholders in the contract, create an obligation of the depositor and the
seller, respectively, to repurchase the contract unless the breach is cured. See
"DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" in this prospectus.
Courts have applied general equitable principles to secured parties pursuing
repossession and litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
The seller and the depositor will represent and warrant that each contract
complies with all requirements of law in all material respects. Accordingly, if
an obligor has a claim against a trust for violation of any law and that claim
materially and adversely affects that trust's or the securityholder's interest
in a contract or the collectibility of the contract, that violation would
constitute a breach of the representations and warranties of the seller and the
depositor would create an obligation of the seller and the depositor to
repurchase the contract unless the breach is cured. See "DESCRIPTION OF THE
TRANSFER AND SERVICING AGREEMENTS" in this prospectus.
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
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ability of a secured party to realize upon collateral or to enforce a deficiency
judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy
law, a court may prevent a creditor from repossessing a vehicle and, as part of
the rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the vehicle at the time of bankruptcy, as determined by the
court, leaving the creditor 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.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940 (the
"Relief Act"), an obligor who enters the military service after the origination
of that obligor's contract (including an obligor who is a member of the National
Guard or is in reserve status at the time of the origination of the obligor's
contract and is later called to active duty) may not be charged interest above
an annual rate of 6% during the period of that obligor's active duty status,
unless a court orders otherwise upon application of the lender. In addition,
some states, including California, allow members of its national guard to extend
payments on any contract obligation if called into active service by the
Governor for a period exceeding 7 days. It is possible that the foregoing could
have an effect on the ability of the servicer to collect the full amount of
interest owing on some of the contracts. In addition, both the Relief Act and
the laws of some states, including California, New York and New Jersey, impose
limitations that would impair the ability of the servicer to repossess the
released financed vehicle during the obligor's period of active duty status.
Thus, if that contract goes into default, there may be delays and losses
occasioned by the inability to exercise the trust's rights with respect to the
contract and the related financed vehicle in a timely fashion.
Any shortfall pursuant to either of the two preceding paragraphs, to the
extent not covered by amounts payable to the securityholders from amounts on
deposit in the related reserve fund or from coverage provided under any other
credit enhancement mechanism, could result in losses to the securityholders.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a discussion of the material United States federal income
tax consequences of the purchase, ownership and disposition of notes or
certificates issued by a trust as described in this prospectus. Winston & Strawn
prepared or reviewed the statements in this prospectus under the heading
"MATERIAL FEDERAL INCOME TAX CONSEQUENCES" and is of the opinion that those
statements are correct in all material respects. The conclusions of law
contained in this discussion constitute the opinion of Winston & Strawn, federal
tax counsel, being rendered for the benefit of investors in the notes or
certificates. In addition to this opinion, Winston & Strawn will separately
provide to the depositor, each trust and certain other parties to each of the
transactions contemplated by this prospectus more limited opinions regarding the
classification of the trust and the characterization of the notes and the
certificates for federal income tax purposes. Those separate opinions are fully
described below with respect to each type of trust.
This discussion is based upon current provisions of the Internal Revenue
Code of 1986, as amended (the "CODE"), existing and proposed Treasury
Regulations, current administrative rulings, judicial decisions and other
applicable authorities in effect as of the date of this prospectus, all of which
are subject to change, possibly with retroactive effect. There are no cases,
regulations, or Internal Revenue Service rulings on comparable transactions or
instruments to those described in this prospectus. As a result, there can be no
assurance that the Internal Revenue Service will not challenge the conclusions
of federal tax counsel reached in this description of Material Federal Income
Tax Consequences, and no ruling from the Internal Revenue Service has been or
will be sought on any of
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the issues discussed below. Furthermore, legislative, judicial or administrative
changes may occur, perhaps with retroactive effect, which could affect the
accuracy of the statements set forth below.
This discussion does not attempt to deal with all aspects of federal income
taxation that may be relevant to all holders of notes and certificates in light
of their personal investment or tax circumstances. Also, this discussion does
not describe tax consequences to certain types of holders who may be subject to
special treatment under the federal income tax laws including, without
limitation, financial institutions, dealers in securities or currencies,
insurance companies, and persons who hold the notes or certificates as part of a
straddle, hedging or conversion transaction.
Investors and preparers of tax returns (including returns filed by any trust
described in this prospectus) should be aware that under applicable Treasury
Regulations a provider of advice on specific issues of law is not considered an
income tax return preparer unless the advice (1) is given with respect to events
that have occurred at the time the advice is rendered and is not given with
respect to the consequences of contemplated actions, and (2) is directly
relevant to the determination of an entry on a tax return. Accordingly,
taxpayers should consult their own tax advisors and tax return preparers
regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed in this prospectus. The depositor
suggests that you consult with your own tax advisors as to the federal, state,
local, foreign and any other tax consequences to you of the purchase, ownership
and disposition of the notes and the certificates.
As mentioned above, the depositor and each trust (as well as certain other
parties to each transaction) will be provided with an opinion of Winston &
Strawn, as federal tax counsel, as described in the related prospectus
supplement, regarding certain specific federal income tax matters as discussed
below regarding the character of each trust and the notes and certificates (if
any) it issues. An opinion of federal tax counsel, however, is not binding on
the Internal Revenue Service or the courts. The form of that opinion will be
filed, together with the final documentation for the respective trust
transaction, with the Securities Exchange Commission under Form 8-K. For
purposes of the following summary, references to the trust, the notes, the
certificates and related terms, parties and documents refer to each trust and
the notes, certificates and related terms, parties and documents applicable to
such trust.
The federal income tax consequences to certificateholders will vary
depending on whether the trust is an owner trust or a grantor trust. As an
alternative to those two types of trusts, a trust could elect to be treated as a
financial asset securitization investment trust, generally referred to as a
FASIT. A summary of the federal income tax consequences pertaining to each type
of trust is set forth below. The prospectus supplement for each series of notes
or certificates will specify the treatment of the trust for federal income tax
purposes. To the extent any given series of notes or certificates differs from
the assumptions or conditions set forth in the following discussion or changes
occur in the relevant tax laws, or in their application, any additional tax
considerations will be disclosed in the applicable prospectus supplement. The
discussion of those additional tax considerations, to the extent they are
conclusions of law, will also constitute the opinion of federal tax counsel
being rendered for the benefit of investors as of the date of the prospectus
supplement. Because it will be later in time than the prospectus, that opinion
of federal tax counsel may modify, clarify, change or otherwise supplement the
opinion represented by the legal conclusions contained in this discussion of
Material Federal Income Tax Consequences.
OWNER TRUSTS
A trust structured as an owner trust will typically issue one or more
classes of notes, intended to be treated as debt for federal income tax
purposes, and certificates, representing equity interests in the trust. The
characterization of the trust for federal income tax purposes depends in part
upon whether the certificates are owned by a single holder, such as the
depositor, or by multiple holders. This summary of material federal income tax
consequences with respect to the issuance of notes or
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certificates by an owner trust is divided into three parts. The first part
describes characterization of the trust as a pass-through entity rather than as
a corporation or other entity subject to tax at the entity level. The second
part describes the taxation of an investor in the notes. The third part
describes taxation of an investor in the certificates.
TAX CHARACTERIZATION OF OWNER TRUSTS
Winston & Strawn, as federal tax counsel to the depositor, will deliver its
opinion that a trust established as an owner trust will not be an association
(or a publicly traded partnership) taxable as a corporation for federal income
tax purposes. This opinion will be based on the assumptions that the terms of
the trust agreement and related documents will be complied with and that the
owner or owners of certificates issued by the trust will take all action
necessary, if any, or refrain from taking any inconsistent action so as to
ensure the trust is, for federal income tax purposes, either disregarded as a
separate entity from the depositor (or other sole certificateholder) or treated
as a partnership. Winston & Strawn's opinion is also based on its conclusions
that (1) the trust will constitute a business entity, (2) the nature of the
income of the trust will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations, and (3) the trust, if a corporation,
would not constitute a regulated investment company under the federal income tax
laws.
If certificates issued by the trust are at all times required to be owned by
a single person, such as the depositor, then, for federal income tax purposes,
the trust may be disregarded as a separate entity from the owner of its
certificates. In this situation, although it is the opinion of Winston & Strawn
that the notes issued by the trust will be characterized as indebtedness for
federal income tax purposes (as discussed below), no assurance can be given that
this characterization of the notes will prevail. If the Internal Revenue Service
successfully asserted that one or more of the notes did not represent debt for
federal income tax purposes, the notes might be treated as equity interests in
the trust. As a result, the trust would be considered to have multiple equity
owners (rather than just the single owner of the trust certificates). In that
case, the trust would be characterized as a partnership for federal income tax
purposes and the tax consequences to holders of notes which were recharacterized
as equity would be similar to those discussed below under "--TAX TREATMENT OF
INVESTORS IN CERTIFICATES".
Rather than having a single owner of certificates issued by the trust, it is
possible that the trust may issue certificates to multiple owners. In that
situation, the certificate owners would be treated as equity owners of the trust
and the trust would be characterized as a partnership for federal income tax
purposes.
In any case where the trust is treated as a partnership for federal income
tax purposes, it is the opinion of Winston & Strawn that it will not constitute
a publicly traded partnership. That opinion will be based upon Winston &
Strawn's assumption that (1) the nature of the income of the trust will exempt
it from publicly traded partnership characterization and/or (2) the trust will
at all times have fewer than 100 owners of its equity interests. If, contrary to
the opinion of Winston & Strawn, the trust were treated as a publicly traded
partnership or were otherwise taxable as a corporation for federal income tax
purposes, it would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the receivables and other
assets owned by the trust, which may be reduced by the interest expense on the
notes issued by the trust to the extent the notes are properly characterized as
debt. Any such corporate income tax could materially reduce cash available to
make payments on the notes and distributions on the certificates. If the trust
were classified as a partnership, other than a publicly traded partnership
taxable as a corporation, the trust itself would not be subject to United States
federal income tax. Instead, holders of equity interests in the partnership
would be required to take into account their allocable share of the trust's
income and deductions as discussed below under "--TAX TREATMENT OF INVESTORS IN
CERTIFICATES."
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TAX TREATMENT OF INVESTORS IN NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The depositor and the owners of the
notes, by their purchase of notes, will agree to treat the notes as debt for
federal income tax purposes. Winston & Strawn, as federal tax counsel, will,
except as otherwise provided in the related prospectus supplement, advise the
trust that the notes will be classified as debt for federal income tax purposes.
The discussion below assumes this characterization of the notes is correct.
INTEREST ON THE NOTES. An investor will be taxed on the amount of payments
of interest on a note as ordinary interest income at the time it accrues or is
received in accordance with the investor's regular method of accounting for
United States federal income tax purposes. This treatment assumes that all
payments on the notes are denominated in U.S. dollars. It also assumes that the
payment of interest on the notes constitutes "QUALIFIED STATED INTEREST" under
Treasury Regulations relating to original issue discount and that an investor
does not acquire its notes as "STRIPPED NOTES"or at an original issue discount
as discussed below. If these assumptions are incorrect with respect to any notes
issued by a trust, additional tax considerations with respect to those notes
will be disclosed in the related prospectus supplement.
A holder of a note that has a fixed maturity date of not more than one year
from the issue date of that note (which will be referred to in this paragraph as
a "SHORT-TERM NOTE") may be subject to special rules. An accrual basis holder of
a short-term note (and some cash method holders, including regulated investment
companies, as set forth in Section 1281 of the Code) generally would be required
to report interest income as interest accrues on a straight-line basis or under
a constant yield method over the term of each interest period. Other cash basis
holders of a short-term note would, in general, be required to report interest
income as interest is paid (or, if earlier, upon the taxable disposition of the
short-term note). However, a cash basis holder of a short-term note reporting
interest income as it is paid may be required to defer a portion of any interest
expense otherwise deductible on indebtedness incurred to purchase or carry the
short-term note until the taxable disposition of the short-term note. A cash
basis taxpayer may elect under Section 1281 to accrue interest income on all
nongovernment debt obligations with a term of one year or less, in which case
the taxpayer would not be subject to the interest expense deferral rule referred
to in the preceding sentence. Special rules apply if a short-term note is
purchased for more or less than its principal amount.
SALE OR OTHER DISPOSITION OF A NOTE. An investor who disposes of a note,
whether by sale, exchange for other property, or payment by the trust, will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale or other disposition, not including any amount attributable
to accrued but unpaid interest which will be taxable as such, and the investor's
adjusted tax basis in the note. In general, an investor's adjusted tax basis in
a note will be equal to the investor's initial purchase price increased by any
accrued original issue discount or market discount previously included in income
by the investor and decreased by the amount of any bond premium previously
amortized and the amount of any payments, other than payments of stated
interest, previously received by the investor with respect to the note. Any gain
or loss recognized upon the sale or other disposition of a note will be capital
gain or loss so long as the note is a "CAPITAL ASSET" in the hands of the
investor. For non-corporate investors, capital gain recognized on the sale or
other disposition of a note held by the investor for more than one year will be
taxed at a maximum rate of 20%. Capital gain for a note held for one year or
less is taxed at the rates applicable to ordinary income, i.e., up to 39.6%.
Taxpayers must aggregate capital gains and losses for each taxable year. In the
event a taxpayer realizes a net capital loss for any year there are limitations
on the amount of these capital losses which can be deducted.
PURCHASE AT A DISCOUNT. An investor who purchases a note as part of the
initial offering by the trust for an issue price that is less than its "STATED
REDEMPTION PRICE AT MATURITY" will generally be considered to have purchased the
note at an original issue discount for United States federal income
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tax purposes. In general, the stated redemption price at maturity for a note is
equal to the principal amount. If a note is acquired with original issue
discount greater than a de minimis amount (one-fourth of one percent, or 0.25%,
of the bond's principal amount or other stated redemption price at maturity
multiplied by the full number of years included in determining the weighted
average maturity of the bonds) the investor will be required to include in
income each year, taxable as ordinary income, a portion of the original issue
discount. For cash basis investors, such as individuals, the requirement that
original issue discount be accrued as income each year means the investor
recognizes taxable income in advance of the receipt of some or all of the cash
corresponding to that income. The amount of original issue discount accrued as
income each year is based upon a formula which looks at the constant yield on
the notes and the term to maturity so as to annually allocate a proportionate
share of original issue discount. Under these rules, investors generally will be
required to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
Generally, an investor that acquires a note that has more than a de minimis
amount of original issuer issue discount must include in gross income the sum of
the "daily portions" of the original issue discount for each day on which it
owns a note, including the date of purchase but excluding the date of
disposition. In the case of an original holder of a note, the daily portions of
original issue discount with respect to the note generally would be determined
as follows. A calculation will be made of the portion of original issue discount
that accrues on the note during each successive monthly accrual period (or
shorter period in respect of the date of original issue or the final payment
date). This will be done, in the case of each full monthly accrual period, by
adding (1) the present value of all remaining payments to be received on the
note under the prepayment assumption used in respect of the contracts and (2)
any payments received during that accrual period, and subtracting from that
total the "adjusted issue price" of the note at the beginning of that accrual
period. The adjusted issue price of a note at the beginning of the first accrual
period is the amount of the purchase price paid by the holder for the note that
is allocable to those contracts. The adjusted issue price of a note at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of
original issue discount allocable to that accrual period and reduced by the
amount of any payment on the note (other than qualified stated interest) made at
the end of or during that accrual period. The original issue discount accruing
during that accrual period will then be divided by the number of days in the
period to determine the daily portion of original issue discount for each day in
the period. With respect to an initial accrual period shorter than a full
monthly accrual period, the daily portions of original issue discount must be
determined according to a reasonable method, provided that the method is
consistent with the method used to determine the yield to maturity of the note.
For purposes of calculating the daily portion of original issue discount to
be accrued as income, the method of determining yield to maturity is not clear,
and in particular it is not clear whether prepayments on the underlying
contracts should be taken into account in determining such yield. In determining
the weighted average maturity of the notes for purposes of calculating original
issue discount, the depositor expects to use a reasonable assumption regarding
prepayment of the contracts owned by the trust. No representation is made as to
the actual prepayments to be made on the contracts. This method of calculating
the accrual of original issue discount will cause the accrual of original issue
discount to either increase or decrease (but never below zero) in any given
accrual period to reflect the fact that prepayments are occurring at a faster or
slower rate than the prepayment assumption used in respect of the contracts.
In determining whether a note has original issue discount, the issue price
of the note may not necessarily equal the investor's purchase price, although
they generally should be the same. The issue price of a note will equal the
initial offering price to the public, not including bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters or
wholesalers, at which price a substantial amount of the notes is sold.
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If an investor acquires a note in a secondary market transaction for a
purchase price which is less than the principal amount or other amount payable
at maturity of the note, the difference is referred to for tax purposes as
market discount. Similarly to original issue discount, an investor must accrue a
portion of the market discount each year. Unlike original issue discount,
however, an investor does not include accrued market discount in ordinary income
each year. Rather, the aggregate amount of accrued market discount is included
in income when an investor sells or otherwise disposes of the note. At that
time, the portion of the amount realized by the investor on the sale or other
disposition of the note equal to accrued market discount is taxed as ordinary
income, which has a maximum tax rate of 39.6%, rather than the long term capital
gain maximum tax rate of 20%. The amount of market discount which accrues
annually will be calculated on a straight-line basis over the remaining term to
maturity of the note unless the investor elects to accrue market discount using
a constant yield method.
An investor may elect to include market discount in income currently as it
accrues rather than being taxed on the aggregate amount of all accrued market
discount when the note is sold or otherwise disposed of. This election would
apply to all of the investor's debt investments acquired with market discount in
or after the taxable year in which the notes are acquired and not just to the
notes issued by the trust.
Limitations imposed by the federal tax laws which are intended to match
deductions with the taxation of income may defer deductions for interest paid by
an investor on indebtedness incurred or continued, or short sale expenses
incurred, to purchase or carry a note with market discount. A noteholder who
elects to include market discount in gross income as it accrues is exempt from
this rule.
Whenever an investor accrues and includes in income an amount of original
issue discount or market discount, the investor's adjusted basis in the
corresponding note is increased by that same amount. As a result, the investor
would recognize a lower capital gain or greater capital loss on the sale or
other disposition of the note.
In general, if the amount of original issue discount or market discount
would be less than one-fourth of one percent (0.25%) of the note's principal or
other stated redemption price at maturity multiplied by the number of full years
included in determining the weighted average maturity of the notes, the investor
can disregard the original issue discount or market discount rules.
PURCHASE AT A PREMIUM. If an investor purchases a note for a price that
exceeds the principal amount or other amount payable at maturity, the investor
will be considered to have an amortizable bond premium. An investor can elect to
accrue a portion of the premium each year as a deduction to offset interest
income on the corresponding note. The amount of premium which can be amortized
and deducted each year is calculated using a constant yield method over the
remaining term to maturity of the note. The deduction is available only to
offset interest income on the corresponding note; it cannot be used as a
deduction to the extent it exceeds taxable note interest. The adjusted tax basis
which an investor has in a note must be reduced by the amount of premium for
which a deduction is claimed. Because the basis is reduced, the investor would
recognize a larger taxable capital gain, or a smaller capital loss, on the sale
or other disposition of the note. If an investor elects to amortize and deduct
premium, the election will apply to all of the investor's debt investments and
not just to the notes.
If an investor purchases in a secondary market transaction a note which was
originally issued with original issue discount for an amount which is less than
the sum of all amounts payable on the note after the purchase date other than
payments of qualified stated interest but in excess of its adjusted issue price,
I.E., the original issue price plus any accrued original issue discount as those
terms are described above, the excess is referred to for tax purposes as
"ACQUISITION PREMIUM." The investor would be permitted to reduce the daily
portions of original issue discount the investor would otherwise include in
income by an amount corresponding to the ratio of (1) the excess of the
investor's purchase price for the note over the adjusted issue price of the note
as of the purchase date to (2) the excess of
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all amounts payable on the note after the purchase date, other than payments of
qualified stated interest, over the note's adjusted issue price.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. An investor may
elect to include in gross income all interest that accrues on a note using the
constant-yield method described above under the heading "PURCHASE AT A DISCOUNT"
with modifications described below. For purposes of this election, interest
includes qualified stated interest, original issue discount, de minimis original
issue discount, market discount, DE MINIMIS market discount, and unstated
interest, as adjusted by any amortizable bond premium or acquisition premium.
In applying the constant-yield method to a note with respect to which this
election has been made, the issue price of the note will equal the electing
investor's adjusted basis in the note immediately after its acquisition. The
issue date of the note will be the date of its acquisition by the electing
investor, and no payments on the note will be treated as payments of qualified
stated interest. This election, if made, may not be revoked without the consent
of the Internal Revenue Service. Investors should consult with their own tax
advisors as to the effect in their circumstances of making this election.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The trust or an agent acting
on its behalf will be required to report annually to the Internal Revenue
Service, and to each non-corporate noteholder, the amount of interest paid on
the notes for each calendar year. Each non-corporate noteholder, other than
noteholders who are not subject to the reporting requirements, will be required
to provide, under penalties of perjury, a certificate, Form W-9, containing the
noteholder's:
(1) name,
(2) address,
(3) correct federal taxpayer identification number, and
(4) a statement that the noteholder is not subject to backup withholding.
Should a non-exempt noteholder fail to provide the required certification, the
trust will be required to withhold or cause to be withheld 31% of the interest
otherwise payable to the noteholder and remit the withheld amounts to the
Internal Revenue Service as a credit against the noteholder's federal income tax
liability.
FOREIGN NOTEHOLDERS. Special tax rules apply to the purchase of notes by
foreign persons. For U.S. tax purposes, foreign investors include any person who
is not
(1) a citizen or resident of the United States,
(2) a corporation, partnership or other entity organized in or under the
laws of the United States or any political subdivision thereof,
(3) an estate the income of which is includible in gross income for U.S.
federal income tax purposes, regardless of its source,
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust, or
(5) a trust that has a valid election in effect under applicable United
States Treasury Regulations to be treated as a United States person.
Interest paid or accrued to a foreign investor that is not effectively
connected with the conduct of a trade or business within the United States by
the investor will generally be considered "portfolio interest" and not be
subject to United States federal income tax or withholding tax as long as the
foreign investor is not actually or constructively a 10 percent shareholder of
the trust or a controlled
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foreign corporation related to the trust through stock ownership. Additionally,
the foreign investor must provide or have a financial institution provide on its
behalf to the trust or paying agent an appropriate statement or Form W-8 (or
successor form), that is signed under penalties of perjury, certifying that the
beneficial owner of the note is a foreign person and providing that foreign
person's name and address. If the information provided in this statement
changes, the foreign investor must provide a new Form W-8 (or successor form)
within 30 days. If the foreign investor fails to satisfy these requirements so
that interest on the investor's notes was not portfolio interest, interest
payments would be subject to United States federal income and withholding tax at
a rate of 30% unless reduced or eliminated under an applicable income tax
treaty. To qualify for any reduction as the result of an income tax treaty, the
foreign investor must provide the paying agent with Form 1001 (or successor
form).
The realization of any capital gain on the sale or other taxable disposition
of a note by a foreign investor will be exempt from United States federal income
and withholding tax, provided that (1) the gain is not effectively connected
with the conduct of a trade or business in the United States by the investor,
and (2) in the case of an individual foreign investor, the investor is not
present in the United States for 183 days or more during the taxable year. If an
individual foreign investor is present in the U.S. for 183 days or more during
the taxable year, the gain on the sale or other disposition of the notes could
be subject to a 30% withholding tax unless reduced by treaty.
If the interest, gain or income on a note held by a foreign investor is
effectively connected with the conduct of a trade or business in the United
States by the investor, the noteholder will be subject to United States federal
income tax on the interest, gain or income at regular federal income tax rates.
At the same time, the noteholder may be exempt from withholding tax if a
Form 4224 (or successor form) is furnished to the paying agent. In addition, if
the foreign investor is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "EFFECTIVELY CONNECTED EARNINGS AND PROFITS" for
the taxable year, as adjusted for certain items, unless it qualifies for a lower
rate under an applicable tax treaty.
Regardless of when a foreign investor acquired a note, recently adopted
Treasury Regulations will become effective for note payments made after
December 31, 2000. The new regulations make certain changes to the withholding,
backup withholding and information reporting rules just described and attempt to
unify certification requirements and modify reliance standards. It is suggested
that prospective investors consult their own tax advisors regarding the new
regulations.
If a foreign investor fails to provide necessary documentation to the trust
or its paying agent regarding the investor's taxpayer identification number or
certification of exempt status, a 31% backup withholding tax may be applied to
note payments to that investor. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against the foreign
investor's U.S. federal income tax liability provided the required information
is furnished to the Internal Revenue Service.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Winston & Strawn, the Internal Revenue Service successfully asserted that one
or more of the notes did not represent debt for federal income tax purposes, the
notes might be treated as equity interests in the trust. If so treated, the
trust might be a publicly traded partnership taxable as a corporation with the
adverse consequences described above (and the resulting taxable corporation
would not be able to reduce its taxable income by deductions for interest
expense on notes recharacterized as equity). See "--OWNER TRUSTS--TAX
CHARACTERIZATION OF OWNER TRUSTS" in this prospectus. Alternatively, it is
possible that the trust might be treated as a partnership that would not be
taxable as a corporation. However, treatment of the notes as equity interests in
a partnership could have adverse tax consequences to certain holders. For
example, income to certain tax-exempt entities (including pension funds) could
constitute "UNRELATED BUSINESS TAXABLE INCOME;" income to foreign holders
generally would be subject to U.S. tax and U.S. tax return filing and
withholding requirements; individual holders might be subject to certain
limitations on their
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ability to deduct their share of trust expenses; and income from the trust's
assets would be taxable to noteholders without regard to whether cash
distributions are actually made from the trust or any particular noteholder's
method of accounting.
TAX TREATMENT OF INVESTORS IN CERTIFICATES
TREATMENT OF TRUST AS A PARTNERSHIP. As mentioned above, in any case where
the trust issues certificates to multiple owners, the trust will be treated by
the depositor as a partnership for federal income tax purposes. The depositor
and the servicer will agree, and each certificateholder will agree by its
purchase of certificates, to treat the trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the trust, the partners of the partnership being the certificateholders, and
the notes being debt of the partnership. The trust, the depositor, and the
certificateholders will take all necessary actions, if any, and refrain from
taking any inconsistent actions, so as to ensure that the trust will be treated
as a partnership under the final Treasury Regulations which allow an entity to
elect status as a partnership.
A variety of alternative characterizations are possible. For example,
because the certificates have certain features characteristic of debt, the
certificates might be considered debt of the depositor or the trust. Any such
characterization should not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership and that all payments on the certificates are denominated in U.S.
dollars.
PARTNERSHIP TAXATION. As a partnership, the trust will not be subject to
federal income tax. Rather, each certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the trust. The trust's income will consist
primarily of interest and finance charges earned on the contracts owned by the
trust (including appropriate adjustments for any market discount, original issue
discount and bond premium), any yield supplement deposits and any gain upon
collection or disposition of the contracts. 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 contracts.
The tax items of a partnership are allocable to the partners in accordance
with the applicable federal income tax laws and the partnership agreement (I.E.,
the trust agreement and related documents). The trust agreement will provide, in
general, that the certificateholders will be allocated taxable income of the
trust for each month equal to the sum of (1) the interest that accrues on the
certificates in accordance with their terms for such month, including interest
accruing at the pass-through rate for such month and interest on amounts
previously due on the certificates but not yet distributed; (2) any trust income
attributable to discount on the contracts that corresponds to any excess of the
principal amount of the certificates over their initial issue price;
(3) monthly prepayment premium payable to the certificateholders; and (4) any
other amounts of income payable to the certificateholders for the month
including, for example, any yield supplement deposits. That allocation of income
will be reduced by any amortization by the trust of premium on contracts that
corresponds to any excess of the issue price of certificates over their
principal amount. All remaining taxable income of the trust will be allocated to
the trust depositor. Based on the economic arrangement of the parties, this
approach for allocating trust income should be permissible under the applicable
Treasury Regulations, although no assurance can be given that the Internal
Revenue Service would not require a greater amount of income to be allocated to
certificateholders.
Certificateholders may be allocated income equal to the entire pass-through
rate plus the other items described above, even though the trust might not have
sufficient cash to make current cash distributions equal to that amount. In that
situation, cash basis holders will in effect be required to
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report income from the certificates on the accrual basis and certificateholders
may become liable for taxes on trust income even if they have not received cash
from the trust to pay such taxes. In addition, because tax allocations and tax
reporting will be done on a uniform basis for all certificateholders, but
certificateholders may be purchasing certificates at different times and at
different prices, certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the trust. See the discussion below under "--ALLOCATIONS BETWEEN TRANSFERORS
AND TRANSFEREES."
Most or all of the taxable income allocated to a certificateholder that is a
tax-exempt entity (including an individual retirement account) will constitute
"UNRELATED BUSINESS TAXABLE INCOME" generally taxable to such a holder for
federal income tax purposes.
With respect to any certificateholder who is an individual, an individual
taxpayer's share of certain expenses of the trust (including fees to the
servicer, but not interest expense) would be miscellaneous itemized deductions.
Such deductions might be disallowed to the individual in whole or in part and
might result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the trust.
The trust will make all tax calculations relating to income and allocations
to certificateholders on an aggregate basis with respect to the entire pool of
contracts owned by the trust. If the Internal Revenue Service were to require
that such calculations be made separately for each contract, the trust might be
required to incur additional expense but it is believed that there would not be
a material adverse effect on certificateholders.
DISCOUNT AND PREMIUM. It is believed that the contracts will not be issued
with original issue discount, and, therefore, the trust should not have income
due to the accrual of original issue discount. However, the purchase price paid
by the trust for contracts may be greater or less than the remaining principal
balance of the contracts at the time of purchase. If so, the contracts will have
been acquired at a premium or market discount as the case may be. As indicated
above, the trust will make this calculation on an aggregate basis with respect
to the entire pool of contracts owned by the trust, but might be required to
recompute it on a contract-by contract basis.
If the trust acquires the contracts at a market discount or premium, it will
elect to include any such discount in income currently as it accrues over the
life of such contracts or to offset any such premium against interest income on
such contracts. See "--TAX TREATMENT OF INVESTORS IN NOTES--PURCHASE AT A
DISCOUNT" and "--PURCHASE AT A PREMIUM" in this prospectus. As indicated above,
a portion of such market discount income or premium deduction may be allocated
to certificateholders.
DISTRIBUTIONS TO CERTIFICATEHOLDERS. Certificateholders generally will not
recognize gain or loss with respect to distributions from the trust. A
certificateholder will recognize gain, however, to the extent that any money
distributed exceeds the certificateholder's adjusted basis in the certificates
(as described below under "--DISPOSITION OF CERTIFICATES") immediately before
the distribution. If a certificateholder is required to recognize an aggregate
amount of income (not including income attributable to disallowed itemized
deductions described above) over the life of the certificates that exceeds the
aggregate cash distributions with respect thereto, the amount of that excess
will generally give rise to a capital loss upon the retirement of the
certificates. Any gain or loss will generally be long-term gain or loss if the
holding period of the certificate is more than one year.
SECTION 708 TERMINATION. Under Section 708 of the Code, if 50% or more of
the outstanding equity interests in the trust are sold or exchanged within any
12-month period, the trust will be deemed to terminate and then be reconstituted
for federal income tax purposes. If such a termination occurs, the assets of the
terminated trust (the "OLD TRUST") are deemed to be constructively contributed
to a reconstituted trust (the "NEW TRUST") in exchange for interests in the new
trust. Such interests would be deemed distributed to the partners, or
certificateholders, of the old trust in liquidation thereof, which
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would not constitute a sale or exchange. Accordingly, if the sale of the trust's
interests terminated the partnership under Section 708 of the Code, the
certificateholder's basis in its ownership interest would not change. The
trust's taxable year would also terminate as a result of a constructive
termination and, if the certificateholder was on a different taxable year than
the trust, the termination could result in the bunching of more than twelve
months of the trust's income or loss in the certificateholder's income tax
return for the year in which the trust was deemed to terminate.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on the sale of certificates, so long as the certificate is a "CAPITAL
ASSET" in the hands of the investor, in an amount equal to the difference
between the amount realized and the holder's tax basis in the certificates sold.
A certificateholder's tax basis in a certificate will generally equal the
holder's cost increased by the holder's share of trust income (that was
includible in the certificateholder's income) and decreased by any distributions
received with respect to such certificate. In addition, both the tax basis in
the certificates and the amount realized on a sale of a certificate would
include the holder's share of the notes and other liabilities of the trust. A
holder acquiring certificates at different prices may be required to maintain a
single aggregate adjusted tax basis in all of the certificates, and, upon sale
or other disposition of some of the certificates, allocate a portion of that
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 contracts owned by the trust would
generally be treated as ordinary income to the holder and would give rise to
special tax reporting requirements. The trust does not expect to have any other
assets that would give rise to such special reporting requirements. Thus, to
avoid those special reporting requirements, the trust will elect to include
market discount in income as it accrues as previously stated.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates owned by them as of the close
of the last day of the month. As a result, a holder purchasing certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the trust might be reallocated among the certificateholders. The depositor
will be authorized to revise the trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
SECTION 754 ELECTION. In the event that a certificateholder sells its
certificates at a profit or loss, the purchasing certificateholder will have a
higher or lower basis in the certificates than the selling certificateholder
had. The tax basis of the trust's assets will not be adjusted to reflect that
higher or lower basis unless the trust were to file an election under
Section 754 of the Code. In order to avoid the administrative complexities that
would be involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the trust will not make such
election. As a result, certificateholders might be allocated a greater or lesser
amount of trust income than would be appropriate based on their own purchase
price for certificates.
ADMINISTRATIVE MATTERS. The trustee is required to keep or have kept
complete and accurate books of the trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the trust will be the calendar year. The trustee will file a partnership
information return (Form 1065) with the Internal Revenue Service for each
taxable year of the trust and will report
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each certificateholder's allocable share of items of trust income and expense to
holders and the Internal Revenue Service on Schedule K-l. The trustee will
provide the Schedule K-1 information to nominees that fail to provide the trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the trust or be subject to penalties unless the
holder notifies the Internal Revenue Service of all such inconsistencies.
Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust with
a statement containing certain information on the nominee, the beneficial owners
and the certificates so held. Such information includes (1) the name, address
and taxpayer identification number of the nominee and (2) as to each beneficial
owner (a) the name, address and identification number of such person,
(b) whether such person is a United States person, a tax-exempt entity, a
foreign government or an international organization, or any wholly owned agency
or instrumentality of either of the foregoing, and (c) certain information on
certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the trust information as
to themselves and their ownership of certificates (a registered clearing agency
is not required to furnish any such information statements to the trust). The
information referred to above for any calendar year must be furnished to the
trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the trust with the information described above
may be subject to penalties.
The trust depositor will be designated as the tax matters partner for the
trust in the trust agreement and, as such, will be responsible for representing
the certificateholders in any dispute with the Internal Revenue Service. The
federal income tax laws provide 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.
BACK-UP WITHHOLDING. Distributions made on the certificates and proceeds
from the sale of the certificates will be subject to a back-up 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 tax law provisions. See "--TAX TREATMENT OF INVESTORS IN
NOTES--INFORMATION REPORTING AND BACKUP WITHHOLDING" in this prospectus.
FOREIGN CERTIFICATEHOLDERS. It is not clear whether the trust would be
considered to be engaged in a trade or business in the United States for
purposes of federal withholding taxes with respect to non-U.S. persons because
there is no clear authority dealing with that issue under facts substantially
similar to those described herein. Nevertheless, the trust will withhold as if
it were so engaged in order to protect the trust from possible adverse
consequences of a failure to withhold. The trust expects to withhold on the
portion of its taxable income that is allocable to foreign certificateholders,
as if such income were effectively connect to a U.S. trade or business, at a
rate of 35% for foreign holders that are taxable as corporations and 39.6% for
all other foreign holders. Subsequent adoption of Treasury Regulations or the
issuance of other administrative pronouncements may require the trust to change
its withholding procedures. In determining a holder's withholding status, the
trust may generally rely on Form W-8, Form W-9 (or successor forms) or the
holder's certification of nonforeign status signed under penalties of perjury.
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Each foreign holder might be required to file a U.S. individual or corporate
income tax return (including, in the case of a corporation, the branch profits
tax) on its share of the trust's income. Each foreign holder must obtain a
taxpayer identification number from the Internal Revenue Service and submit that
number to the trust on Form W-8 (or successor form) in order to assure
appropriate crediting of the taxes withheld. A foreign holder generally would be
entitled to file with the Internal Revenue Service a claim for refund with
respect to taxes withheld by the trust, taking the position that no taxes were
due because the trust was not engaged in a U.S. trade or business (although no
assurance can be given as to the prospects for success of the refund claim).
However, even if such a position is successful, interest payments made (or
accrued) to a certificateholder who is a foreign person may be considered to be
guaranteed payments, but only to the extent such payments are determined without
regard to the income of the trust. It is unclear whether the Internal Revenue
Service would agree with that characterization. If these interest payments are
properly characterized as guaranteed payments, then the interest will not
constitute "PORTFOLIO INTEREST." As a result, certificateholders will be subject
to 30% U.S. withholding tax, unless reduced or eliminated pursuant to an
applicable treaty. In such case, a foreign holder would only be entitled to
claim a refund for that portion of the taxes in excess of the taxes that should
be withheld with respect to the guaranteed payments.
GRANTOR TRUSTS
This summary of material federal income tax consequences with respect to the
issuance of certificates by a grantor trust is divided into two parts. The first
part describes characterization of the trust as a grantor trust. The second part
describes taxation of an investor in certificates issued by a grantor trust.
TAX CHARACTERIZATION OF GRANTOR TRUSTS
Winston & Strawn, as federal tax counsel, will deliver its opinion that a
trust structured as a grantor trust will be classified for federal income tax
purposes as a grantor trust and not as an association (or a publicly traded
partnership) taxable as a corporation and that, subject to the discussion below
under "--STRIPPED BONDS AND STRIPPED COUPONS", each certificateholder will be
treated for federal income tax purposes as the owner of a pro rata undivided
interest in the income and assets of the trust. The opinion of Winston & Strawn
does not foreclose the possibility of a contrary determination by the Internal
Revenue Service or by a court or of a contrary position by the Internal Revenue
Service or the Treasury Department in regulations or rulings issued in the
future.
For federal income tax purposes, the trust will be deemed to have acquired
the following assets: (1) the principal of each contract, plus a portion of the
interest due on each contract (the "TRUST STRIPPED BONDS"); (2) the portion of
the interest due on each contract not allocable to the Trust Stripped Bonds or
retained by the depositor (the "TRUST STRIPPED COUPONS"); (3) the right to
receive any yield supplement deposits; (4) the proceeds of certain insurance
policies on the financed assets; (5) rights under the trust agreement and
(6) rights under the security agreement in favor of the trust securing the
depositor's obligation to purchase subsequent contracts and deliver them to the
trust. Although a grantor trust may have certain rights with respect to a
reserve fund, pre-funding account or interest reserve account, such accounts
would not be assets of the trust.
It is possible, for federal income tax purposes, that the grantor trust may
be viewed as owning a single debt obligation having a principal amount equal to
the total stated principal amount of the entire pool of contracts and an
interest rate equal to the pass-through rate. Accordingly, the owners of
certificates would be viewed as owning an undivided interest in that single debt
obligation. In that case, the tax consequences to the certificate owners would
be the same as owners of notes owned by a trust structured as an owner trust
described above under the heading "--OWNER TRUSTS--TAX TREATMENT OF INVESTORS IN
NOTES."
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The remainder of the discussion in this prospectus assumes that a grantor
trust certificateholder will be treated as owning an interest in each contract,
a portion of the interest payable on each contract, any right to receive yield
supplement deposits, and any other assets of the trust. However, for
administrative convenience, the servicer will report information to investors
and to the Internal Revenue Service on an aggregate basis (as though all of the
contracts and the rights to payments under the yield supplement agreement were a
single obligation). The amount and, in some instances, character, of the income
reported to a grantor trust certificateholder may differ under this method for a
particular period from that which would be reported if income were reported on a
precise asset-by-asset basis.
TAX TREATMENT OF INVESTORS
CHARACTERIZATION OF INVESTMENT. As mentioned above, each grantor trust
certificateholder will be treated as the owner of a pro rata undivided interest
in each of the contracts in the trust, any right to receive yield supplement
deposits, and any other trust property. Any amounts received by a grantor trust
certificateholder in lieu of amounts due with respect to any contract because of
a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
In each case where the interest rate on a contract exceeds the sum of the
certificate pass-through rate plus the servicing fee rate, for federal income
tax purposes, the depositor will be treated as having retained a fixed portion
of the interest due on the contract equal to the difference between (1) the
interest rate on each contract and (2) the sum of the pass-through rate and the
servicing fee rate. The depositor's retained yield with respect to the contracts
will be treated as "STRIPPED COUPONS" within the meaning of Section 1286 of the
Code and the contracts will be treated as "STRIPPED BONDS." See "--STRIPPED
BONDS AND STRIPPED COUPONS" below.
Each grantor trust certificateholder will be required to report on its
federal income tax return in accordance with that certificateholder's method of
accounting its pro rata share of the entire income from the contracts in the
trust represented by certificates, including interest, original issue discount,
prepayment fees, assumption fees, any gain recognized upon an assumption, late
payment charges received by the servicer and any gain recognized upon collection
or disposition of the contracts (but not including any portion of the
depositor's retained yield). A grantor trust certificateholder will also be
required to report under its usual method of accounting any payments received
under any yield supplement agreement to the extent that these payments are
treated as income. Each grantor trust certificateholder will be entitled to
deduct its pro rata share of servicing fees, prepayment fees, assumption fees,
any loss recognized upon an assumption, and late payment charges retained by the
servicer, provided that those amounts are reasonable compensation for services
rendered to the trust. Certificateholders that are individuals, estates or
trusts will be entitled to deduct their share of expenses only to the extent
those expenses exceed two percent of its adjusted gross income. Grantor trust
certificateholders who are individuals may be subject to additional deduction
limitations based on adjusted gross income.
A grantor trust certificateholder using the cash method of accounting must
take into account its pro rata share of income and deductions as and when
collected by or paid to the servicer. A grantor trust certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid, whichever is earlier. Because
(1) interest accrues on the contracts over differing monthly periods and is paid
in arrears and (2) interest collected on a contract generally is paid to
certificateholders in the following month, the amount of interest accruing to a
grantor trust certificateholder during any calendar month will not equal the
interest distributed in that month.
PURCHASE PRICE ALLOCATION. A certificateholder must allocate the cost of
its certificates among its allocable share of each of the separate assets of the
trust, in accordance with the proportion of the
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relative fair market values of the assets as of the date the holder acquired its
certificate, in order to determine its initial tax basis for its pro rata
portion of each asset held by the trust. For this purpose, a certificateholder
may treat the trust's rights in the security interests, the individual insurance
contracts, and other rights the trust may have which provide credit enhancement
as part of the contracts such that no separate allocation of the certificate
cost and determination of basis must be made to these rights.
In addition to the contracts however, the purchase price for certificates
should be allocated to the grantor trust certificateholder's undivided interest
in accrued but unpaid interest, amounts collected at the time of purchase but
not distributed, and, perhaps, rights to receive yield supplement deposits. As a
result, the portion of the purchase price allocable to the grantor trust
certificateholder's undivided interest in the contracts may be decreased. The
allocation of purchase price among the assets is important for purposes of
determining the amount of gain or loss recognized by a certificateholder when
the trust disposes of a contract and for calculating discount or premium with
respect to the contracts, all as discussed below.
STRIPPED BONDS AND STRIPPED COUPONS. Although the tax treatment of stripped
bonds is not entirely clear, based on recent guidance from the Internal Revenue
Service, each purchaser of a grantor trust certificate will be treated as the
purchaser of a stripped bond and coupon, to the extent that the contracts
consist of contracts having an interest rate in excess of the sum of the
pass-through rate plus the servicing fee rate. The stripped bond generally
should be treated as a single debt instrument issued on the day it is purchased
for purposes of calculating any original issue discount. Generally, under
applicable Treasury Regulations, if the discount on a stripped bond is larger
than a DE MINIMIS amount (one-fourth of one percent, or 0.25%, of the bond's
principal amount or other stated redemption price at maturity multiplied by the
full number of years included in determining the weighted average maturity of
the bonds) that stripped bond will be considered to have been issued with
original issue discount. See "--OWNER TRUSTS--TAX TREATMENT OF INVESTORS IN
NOTES--ORIGINAL ISSUE DISCOUNT." Although the matter is not entirely clear, each
certificateholder's share of the interest income on the contracts at the sum of
the pass-through rate and the fee servicing rate will be treated as "QUALIFIED
STATED INTEREST." The trustee will treat each holder's share of the interest
income in this manner for tax information reporting purposes. As a result, the
amount of original issue discount for each certificateholder will equal the
amount, if any, by which the portion of the certificate purchase price allocable
to the contracts is less than the remaining principal balance of those
contracts.
Generally, a certificateholder that acquires an undivided interest in
contracts constituting stripped bonds that have original issue discount
(referred to in this discussion as "stripped contracts") must include in gross
income the sum of the "DAILY PORTIONS" of the original issue discount for each
day on which it owns a certificate, including the date of purchase but excluding
the date of disposition. In the case of an original grantor trust
certificateholder, the daily portions of original issue discount with respect to
the stripped contracts generally would be determined as follows. A calculation
will be made of the portion of original issue discount that accrues on those
contracts during each successive monthly accrual period (or shorter period in
respect of the date of original issue or the final payment date). This will be
done, in the case of each full monthly accrual period, by adding (1) the present
value of all remaining payments to be received on the stripped contracts under
the prepayment assumption used in respect of the contracts and (2) any payments
received during that accrual period, and subtracting from that total the
"ADJUSTED ISSUE PRICE" of the stripped contracts at the beginning of that
accrual period. The adjusted issue price of the stripped contracts at the
beginning of the first accrual period is the amount of the purchase price paid
by the certificateholder for the certificate that is allocable to those
contracts. The adjusted issue price of the stripped contracts at the beginning
of a subsequent accrual period is the adjusted issue price at the beginning of
the immediately preceding accrual period plus the amount of original issue
discount allocable to that accrual period and reduced by the amount of any
payment on the stripped contracts (other than qualified stated interest) made at
the end of or during
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that accrual period. The original issue discount accruing during that accrual
period will then be divided by the number of days in the period to determine the
daily portion of original issue discount for each day in the period. With
respect to an initial accrual period shorter than a full monthly accrual period,
the daily portions of original issue discount must be determined according to a
reasonable method, provided that the method is consistent with the method used
to determine the yield to maturity of the stripped contracts.
For purposes of calculating the daily portion of original issue discount to
be accrued as income, the method of determining yield to maturity is not clear,
and in particular it is not clear whether prepayments on the underlying
contracts should be taken into account in determining such yield. The method of
calculating the accrual of original issue discount as described above will cause
the accrual of original issue discount to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments are
occurring at a faster or slower rate than the prepayment assumption used in
respect of the stripped contracts. Subsequent purchasers that purchase interests
in stripped contracts at more than a de minimis discount should consult their
tax advisors with respect to the proper method to accrue that original issue
discount.
PREMIUM. A certificateholder that acquires an interest in contracts at a
premium over the stated redemption price at maturity of the contracts may elect
to amortize that premium under a constant interest method. A premium would occur
if the purchase price for a certificate exceeded the holder's proportionate
share of the remaining payments due on the contracts Amortizable premium will be
treated as an offset to interest income recognized by the holder on its grantor
trust certificate. However, the holder's tax basis for the grantor trust
certificate will be reduced to the extent that amortizable premium is claimed as
a deduction to offset interest payments. A certificateholder that makes this
election for a grantor trust certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that the certificateholder
holds during the year of the election or thereafter.
It is not clear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable as a deduction. If a premium is not
subject to amortization using a reasonable prepayment assumption, the holder of
a certificate acquired at a premium should recognize a loss if a contract is
prepaid in full, equal to the difference between the portion of the prepaid
principal amount of that contract that is allocable to the grantor trust
certificate and the portion of the adjusted basis of the certificate that is
allocable to that contract. On the other hand, if a reasonable prepayment
assumption is used in calculating the amount of amortizable premium, it appears
that a loss would be available, if at all, only if prepayments occur at a rate
faster than the reasonable assumed prepayment rate. It is not clear whether any
other adjustments would be required to reflect differences between an assumed
prepayment rate and the actual rate of prepayments.
YIELD SUPPLEMENT DEPOSITS. A grantor trust may, under certain
circumstances, receive yield supplement deposits to augment the cash flows from
interest income on the contracts. It is possible that the right to receive
payments under a yield supplement agreement will be treated as a separate asset
purchased by each grantor trust certificateholder. Accordingly, as previously
discussed (see "--ALLOCATION OF PURCHASE PRICE") a portion of each grantor trust
certificateholder's purchase price or other tax basis in the certificate may
have to be allocated to the right to receive payments of yield supplement
deposits based on the fair market value of that right.
However, the sum of the income and deductions properly reportable by a
certificateholder in any taxable year in which the trust receives yield
supplement deposits may not equal the amounts that would be reportable if a
grantor trust certificateholder, instead of holding its undivided interest in
the contracts and the yield supplement deposits, held either (1) a debt
instrument bearing interest at the applicable pass-through rate or (2) an
interest in a trust holding contracts each of which paid interest at a rate at
least equal to the sum of the pass-through rate plus the servicing fee rate.
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The right to receive yield supplement deposits may be treated as a loan made
by a certificateholder to the depositor in an amount equal to the present value,
discounted at a rate equal to the sum of the applicable pass-through rate and
the servicing fee rate, of the projected yield supplement deposits. In that
event, a portion of the yield supplement deposits generally representing a yield
on such discounted value should be treated as interest includible in income as
accrued or received, and the remainder should be treated as a return of the
principal amount of the deemed loan. Alternatively, it is possible that the
entire amount of each yield supplement deposit should be included in income as
accrued or received, in which event a certificateholder should also be entitled
to amortize the portion of its certificate purchase price allocable to its right
to receive yield supplement deposits. The method of calculating that
amortization is unclear, and could result in the inclusion of greater amounts of
income than a certificateholder's actual yield on a contract. In addition, to
the extent that the amounts payable pursuant to a yield supplement agreement
decline during any period by reason of prepayments on the contracts, it is
possible that the Internal Revenue Service might contend that none of the above
methods is appropriate, and that income with respect to the yield supplement
deposits should be reported by a certificateholder in some other manner. It is
suggested that grantor trust certificateholders consult their tax advisors
regarding the appropriate method of accounting for income attributable to yield
supplement deposits.
MARKET DISCOUNT. Generally, all discount on an interest in stripped
contracts will be treated as original issue discount under the stripped bond
rules of the Code, and the rules relating to market discount on bonds will not
apply. However, if the difference between the interest rate on the contracts and
the pass-through rate on the certificates were determined to constitute
reasonable compensation for services rendered to the trust, then the stripped
bond rules described above should not apply. In that event, a certificateholder
will be subject to the market discount rules to the extent that its undivided
interest in a contract is considered to have been purchased at a "MARKET
DISCOUNT." Generally, the amount of market discount is equal to the excess of
the portion of the principal amount of a contract allocable to a holder over
that holder's tax basis (i.e., the portion of the certificate purchase price
allocable to that contract). At the present time there is no express authority
for determining whether market discount exists by reference to the entire pool
of contracts rather than on a contract-by-contract basis. Market discount with
respect to a contract will be considered to be zero if the amount allocable to
the contract is less than one-fourth of one percent (0.25%) of the stated
redemption price at maturity of the contracts multiplied by the weighted average
maturity remaining after the date of purchase.
Any principal payment (whether a scheduled payment or a prepayment) or any
gain on disposition of a market discount instrument is required to be treated as
ordinary income up to the amount of the accrued market discount at that time.
The amount of accrued market discount for purposes of determining the tax
treatment of subsequent principal payments or dispositions of the market
discount debt instrument is reduced by the amount so treated as ordinary income.
Market discount will generally be considered to accrue ratably, unless a
certificateholder elects to accrue on a constant interest method. In addition,
special rules may apply to the determination of the accrual of market discount
where the principal of an instrument is payable in more than one installment.
A holder who acquired a grantor trust certificate at a market discount may
be required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry that
certificate. For these purposes, the de minimis rule referred to above applies.
Any deferred interest expense would not exceed the market discount that accrues
during that taxable year and is, in general, allowed as a deduction not later
than the year in which the market discount is includible in income. A holder may
elect to include market discount in income currently as it accrues, on either a
ratable or constant interest method, in which case the rule described above
regarding deferral of interest deductions will not apply. A holder's election to
include market discount in income currently, once made, applies to all market
discount obligations acquired by the holder on or
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after the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.
Because Treasury Regulations implementing the market discount rules have not
yet been issued, it is suggested that investors consult their own tax advisors
regarding the application of these rules and the advisability of making the
election to accrue market discount.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. The original
issue discount regulations permit a certificateholder to elect to accrue all
interest and discount (including de minimis discount), offset by any premium, in
income as interest based on a constant yield method. If that election were to be
made with respect to a grantor trust certificate with market discount, the
grantor trust certificateholder would be deemed to have made an election to
include in income currently market discount with respect to all other debt
instruments having market discount that the certificateholder acquires during
the year of the election or thereafter. Similarly, a certificateholder that
makes this election for a certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that the certificateholder owns
or acquires. The election to accrue interest, discount and premium on a constant
yield method with respect to a grantor trust certificate is irrevocable except
with the approval of the Internal Revenue Service.
SALE OR EXCHANGE OF A CERTIFICATE. Sale or exchange of a grantor trust
certificate prior to its maturity will result in the recognition by the owner of
gain or loss equal to the difference, if any, between the amount received and
the owner's adjusted basis in the certificate. The adjusted basis generally will
equal the seller's purchase price for the certificate, increased by any accrued
market discount or original issue discount previously included in the seller's
gross income with respect to the certificate and reduced by the amount of any
previously amortized premium and by the amount of any payments on the
certificate, other than payments of qualified stated interest, previously
received by the seller. That gain or loss will be capital gain or loss to an
owner for which a grantor trust certificate is a "CAPITAL ASSET" and will be
long-term or short-term depending on whether the certificate has been owned for
the long-term capital gain holding period (currently more than one year).
FOREIGN CERTIFICATEHOLDERS. Interest or discount income attributable to
contracts which is received by a foreign certificateholder will generally not be
subject to the normal 30% withholding tax imposed with respect to such payments,
provided that (1) the foreign certificateholder does not own, directly or
indirectly, 10% or more of, and is not a controlled foreign corporation related
to, the depositor and (2) the foreign holder fulfills certain certification
requirements. Under those requirements, the holder must certify, under penalty
of perjury, that it is not a "UNITED STATES PERSON" and provide its name and
address on Form W-8 (or successor form). For this purpose, United States person
generally means (a) a citizen or resident of the United States, (b) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (c) an estate
the income of which is subject to United States federal income taxation
regardless of its source, (d) a trust if a court within the United States is
able to exercise primary jurisdiction over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust, or (e) a trust that has a valid election in effect under
applicable United States Treasury Regulations to be treated as a United States
person. Gain realized upon the sale of a certificate by a foreign
certificateholder generally will not be subject to United States withholding
tax. If, however, such interest or gain is effectively connected to the conduct
of a trade or business within the United States by such foreign
certificateholder (or in the case of gain if the certificateholder is an
individual who is present in the United States for a total of 183 days or more
during the taxable year in which such gain is realized), such holder will be
subject to United States federal income tax thereon at the regular rates and, in
addition, an investor that is a foreign corporation may be subject to a branch
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profits tax equal to 30% (or lower applicable treaty rate) of its "effectively
connected earnings and profits" within the meaning of the Code for the taxable
year, as adjusted for certain items.
It is not entirely clear whether amounts received by a foreign
certificateholder that are attributable to payments of yield supplement deposits
received pursuant to any yield supplement agreement would not be subject to
withholding tax. Potential investors who are not United States persons should
consult their own tax advisors regarding the specific tax consequences to them
of owning a certificate issued by a grantor trust.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a grantor trust certificateholder at any time during the
year, the information that is deemed necessary or desirable to assist
certificateholders in preparing their federal income tax returns, or to enable
holders to make that information available to beneficial owners or financial
intermediaries that hold grantor trust certificates as nominees on behalf of
beneficial owners. If a non-exempt holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a non-exempt
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that that person has not reported
all interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments. Any
amounts deducted and withheld from a payment to a recipient would be allowed as
a credit against the recipient's federal income tax liability.
FASITS
GENERAL DESCRIPTION OF FASIT
Pursuant to legislation enacted by Congress in 1996, a new type of entity
was created called a "financial asset securitization investment trust," or
FASIT. On February 7, 2000, the Internal Revenue Service released proposed
regulations regarding FASITs. As stated previously in this section of the
prospectus under the caption "GENERAL", the discussion with respect to FASITs is
based upon existing law, including the proposed FASIT regulations, all of which
are subject to change, possibly with retroactive effect.
Treatment of a trust as a FASIT is elective. The FASIT election will be made
by attaching a statement to the income tax return for the owner of the
"OWNERSHIP INTEREST" in the FASIT (as that interest is described below) for the
taxable year that includes the startup day of the FASIT. The owner of the
ownership interest may be the depositor or it may be an independent third party.
There is no prescribed form for the statement electing FASIT status. If, as is
likely to be the case, an entity is formed to be the FASIT, the election
statement must be signed by the person who would be responsible for signing the
entity's tax return in the absence of FASIT treatment. On the other hand, if
instead of a separate entity the FASIT election is only to apply to a segregated
pool of assets, the election statement must be signed by each person who is the
owner, for federal income tax purposes, of assets in the pool immediately before
the startup day of the FASIT.
If a FASIT election is made for a trust, the accompanying prospectus
supplement will so indicate. For each trust for which one or more FASIT
elections are to be made, Winston & Strawn, as federal tax counsel, is of the
opinion that the trust, or one or more segregated pools of trust assets, will be
treated as a FASIT assuming that there is (1) compliance with the terms of the
pooling agreement (or similar governing documents pertaining to the acquisition
of assets by the trust) and (2) compliance with any changes in the federal
income tax laws pertaining to FASITs, including applicable provisions of the
Code, the proposed FASIT regulations or other treasury regulations, or any
judicial or administrative interpretations of the Code or regulations. The
pooling agreement (or similar governing documents) will require that
substantially all of the trust assets consist only of "PERMITTED ASSETS", as
described below and also contains certain other restrictions necessary for the
trust to be and continue
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to qualify as a FASIT. Based upon those same assumptions, tax counsel is of the
opinion that each trust, or one or more segregated pools of trust assets, for
which a FASIT election is made is organized, operated and will continue to
operate in a manner so as to qualify for FASIT status.
Although the Internal Revenue Service recently published regulations in
proposed form with respect to FASITs, the regulations are only in proposed form
and do not attempt to deal with all aspects of FASIT taxation. Accordingly,
definitive statements cannot be made with respect to many aspects of the tax
treatment of FASITs and the holders of certificates issued by FASITs. Investors
should also note that the following FASIT discussion constitutes only a summary
of the United States federal income tax consequences to FASIT
certificateholders. With respect to each series of FASIT certificates, the
related prospectus supplement will provide a detailed discussion regarding the
federal income tax consequences associated with the particular transaction.
FASIT REQUIREMENTS
A trust fund can qualify to elect FASIT status if it is not a "REGULATED
INVESTMENT COMPANY" as described in Section 851(a) of the Code, it issues only
"REGULAR INTERESTS" and one "OWNERSHIP INTEREST" (as described below), and
substantially all of its assets are "permitted assets." For this purpose,
permitted assets include (1) cash and cash equivalents, (2) any debt instrument
that provides for interest payments which (A) are payable based on a fixed rate
or certain variable rates, or (B) consist of a specified portion of the interest
payments on the trust assets, which portion does not vary during the period such
interest is outstanding, (3) foreclosure property, (4) certain hedging
instruments (i.e., swap contracts, futures contracts, and guarantee
arrangements) intended to hedge against the risks associated with being the
obligor on FASIT regular interests, (5) contract rights to acquire debt
instruments described in (2) above or hedges described in (4) above, and
(6) any regular interest in a real estate mortgage investment conduit, or REMIC,
or in another FASIT. The term "permitted asset" does not, however, include any
debt instrument issued by the holder of the ownership interest or any person
related to such holder.
In order for substantially all of a FASIT's assets to consist of permitted
assets, the aggregate adjusted basis of assets held by the FASIT which are not
permitted assets must be less than 1% of the aggregate adjusted basis of all of
the FASIT's assets. The pooling agreement (or similar governing documents) for
each FASIT will require that substantially all of the FASIT's assets consist of
permitted assets at all times. However, there is the possibility that changes in
the assets owned by the FASIT could adversely affect the ability of the FASIT to
comply with the permitted asset requirement. Failure of the FASIT to comply with
this requirement could cause it to lose FASIT status, however, certain
mitigation provisions exist which may be available.
The Code does not provide comprehensive rules describing the consequences of
a cessation of FASIT status. Under the recently proposed regulations the owner
of the FASIT ownership interest would be deemed to dispose of all of the FASIT's
assets in a "PROHIBITED TRANSACTION" and any gain would be subject to the
prohibited transactions tax. The regular interests will be deemed satisfied for
an amount which could generate cancellation of indebtedness income for the owner
of the FASIT ownership interest. The FASIT which ceased to so qualify would,
under the proposed rules, no longer be treated as a FASIT and would be
prohibited from making a new FASIT election. The trust would then be classified
under general tax principles. In that event, the trust could be treated as an
association or other entity subject to an entity level tax. Under the proposed
rules, the regular interests owned by investors would be deemed to be exchanged
for interests in the reclassified entity, which exchange could result in the
recognition of gain or loss by those investors. Any of the foregoing could
adversely affect investors.
On February 7, 2000, the Clinton Administration submitted to Congress its
budget proposals for fiscal year 2001. The budget proposals include a provision
which would impose on a FASIT secondary
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liability for the payment of federal income tax due from the owner of the
FASIT's single ownership interest. As a result, if the proposal were to be
enacted, the failure of the owner of the ownership interest to pay taxes due
could cause the holders of regular interests to be adversely affected by reduced
available funds for distribution by the FASIT. It is unclear at this time
whether the Clinton budget proposal will be enacted.
TAX TREATMENT OF INVESTORS
FASIT interests will be classified as either FASIT regular interests, which
generally will be treated as debt for federal income tax purposes, or a FASIT
ownership interest, which is not treated as debt for such purposes, but rather
represents the residual equity interest in a FASIT. The tax treatment of each
type of interest is discussed briefly below.
REGULAR INTERESTS. The terms of a FASIT regular interest generally must
satisfy the following requirements: (1) a stated maturity of no greater than
30 years, (2) a specified principal amount, (3) the issue price of the interest
does not exceed 125% of its stated principal amount, (4) the yield to maturity
of the interest is less than the applicable federal rate published by the
Internal Revenue Service for the month of issue plus five percentage points, and
(5) if it pays interest, such interest is payable at either (a) a fixed rate
with respect to the principal amount of the regular interest or (b) certain
permissible variable rates with respect to such principal amount. Regular
interests which do not meet certain of those requirements, referred to as "HIGH
YIELD INTERESTS," may be issued by a FASIT but are permitted to be held by only
certain types of investors such as domestic "C" corporations and other FASITs.
Certain other limitations also apply to high yield interests, such as limits on
the amount of FASIT interest income able to be offset by non-FASIT losses and
deductions otherwise available to the owner of the interest.
FASIT regular interests generally will be subject to the same federal income
tax treatment as applies to debt instruments generally. See "--OWNER TRUSTS--TAX
TREATMENT OF INVESTORS IN NOTES" in this prospectus. One significant difference,
however, is that the holder of a FASIT regular interest must report income from
its interest under the accrual method of accounting, even if it otherwise uses
the cash receipts and disbursement method. The sale or other disposition of a
FASIT regular interest generally will be subject to the same rules as apply to
debt instruments generally.
OWNERSHIP INTEREST. One interest issued by a trust electing to be treated
as a FASIT will be designated as the sole ownership interest in the FASIT. The
ownership interest need not have any particular economic characteristics.
However, the ownership interest must be held directly at all times by an
"ELIGIBLE CORPORATION" which includes a domestic "C" corporation that is subject
to tax and is not a pass-thru entity for tax purposes such as a regulated
investment company, real estate investment trust, real estate mortgage
investment conduit, or cooperative.
Because the ownership interest represents the residual equity interest in a
FASIT, the holder of a FASIT ownership interest determines its taxable income by
taking into account all assets, liabilities, and items of income, gain,
deduction, loss and credit of the related FASIT. In general the character of the
income to the holder of a FASIT ownership interest will be the same as the
character of such income to the FASIT, except that any tax-exempt interest
income taken into account by the holder of a FASIT ownership interest is treated
as ordinary income. In determining that taxable income, the holder of a FASIT
ownership interest must use a constant yield methodology and an accrual method
of accounting and generally will be subject to the same rules of taxation for
original issue discount, market discount, and amortizable premium as apply to
debt instruments generally. See "--OWNER TRUSTS--TAX TREATMENT OF INVESTORS IN
NOTES--PURCHASE AT A DISCOUNT" and "--PURCHASE AT A PREMIUM" in this prospectus.
In addition, a holder of a FASIT ownership interest is subject to the same
limitations on its ability to use non-FASIT losses and deductions to offset
income from the FASIT ownership interest as are holders of FASIT high-yield
regular interests.
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Losses on dispositions of a FASIT ownership interest generally will be
disallowed as a deduction if within six months before or after the disposition,
the seller of the interest acquires any other FASIT ownership interest.
ERISA CONSIDERATIONS
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, as well as individual retirement
accounts and some types of Keogh Plans (each a "BENEFIT PLAN"), from engaging in
transactions involving "PLAN ASSETS" with persons that are "PARTIES IN INTEREST"
under ERISA or "DISQUALIFIED PERSONS" under the Code with respect to that
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
those persons. Certain exemptions from the prohibited transaction rules could be
applicable to the purchase and holding of securities by a Benefit Plan depending
on the type and circumstances of the plan fiduciary making the decision to
acquire the securities. Potentially available exemption would include, without
limitation, Prohibited Transaction Class Exemption ("PTCE") 90-1, which exempts
certain transactions involving insurance company pooled separate accounts; PTCE
95-60, which exempts certain transactions involving insurance company general
accounts; PTCE 91-38, which exempts certain transactions involving bank
collective investment funds; PTCE 84-14, which exempts certain transactions
effected on behalf of a plan by a "QUALIFIED PROFESSIONAL ASSET MANAGER"; and
PTCE 96-23, which exempts certain transactions effected on behalf of a plan by
an "IN-HOUSE ASSET MANAGER." Insurance company general accounts should also
discuss with their legal counsel the availability of exemptive relief under
Section 401(c) of ERISA. A purchaser of securities should be aware, however,
that even if the conditions specified in one or more exemptions are met, the
scope of the relief provided by the applicable exemption or exemptions might not
cover all acts that might be construed as prohibited transactions.
Some transactions involving a trust might be deemed to constitute prohibited
transactions under ERISA and the Code with respect to a Benefit Plan that
purchased notes or certificates if assets of the trust were deemed to be assets
of the Benefit Plan. Under a regulation issued by the United States Department
of Labor (the "PLAN ASSETS REGULATION"), the assets of a trust would be treated
as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if
the Benefit Plan acquired an "EQUITY INTEREST" in the trust and none of the
exceptions contained in the Plan Assets Regulation was applicable. An equity
interest is defined under the Plan Assets Regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and some church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements nor to Section 4975 of the Code.
However, governmental plans may be subject to state or local laws that impose
similar requirements. In addition, governmental plans and church plans that are
"qualified" under Section 401(a) of the Code are subject to restrictions with
respect to prohibited transactions under Section 503(a)(1)(B) of the Code, the
sanction for violation being loss of "QUALIFIED" status.
Due to the complexities of the "PROHIBITED TRANSACTION" rules and the
penalties imposed upon persons involved in prohibited transactions, it is
important that the fiduciary of any Benefit Plan considering the purchase of
securities consult with its tax and/or legal advisors regarding whether the
assets of the related trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
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RATINGS OF THE SECURITIES
No trust will sell securities under this prospectus unless one or more
nationally recognized statistical rating organizations rate the securities in a
rating category that signifies investment grade. Any rating that is made may be
lowered or withdrawn by the assigning rating agency at any time if, in its
judgment, circumstances so warrant. If a rating or ratings of securities is
qualified, reduced or withdrawn, no person or entity will be obligated to
provide any additional credit enhancement with respect to the securities so
qualified, reduced or withdrawn.
The ratings of the securities should be evaluated independently from similar
ratings on other types of securities. A rating is not a recommendation to buy,
sell or hold securities, inasmuch as a rating does not comment as to market
price or suitability for a particular investor. The ratings of the securities do
not address the likelihood of payment of principal on any class of securities
prior to the stated maturity date of the securities, or the possibility of the
imposition of United States withholding tax with respect to non-United States
persons.
PLAN OF DISTRIBUTION
Each trust may sell securities to or through underwriters by a negotiated
firm commitment underwriting and public reoffering by the underwriters, and also
may sell securities directly to other purchasers or through agents. The
depositor intends to offer the notes through these various methods from time to
time and that offerings may be made concurrently through more than one of these
methods or that an offering of a particular series of notes may be made through
a combination of these methods.
The seller, the depositor and certain of its affiliates may agree to
indemnify the underwriters and agents who participate in the distribution of the
securities against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the underwritten
may be required to make.
Funds in cash collateral accounts and the trust accounts may, from time to
time, be invested in certain investments acquired from the underwriters.
LEGAL MATTERS
Winston & Strawn, Chicago, Illinois, will provide a legal opinion relating
to the securities in its capacity as special counsel to the trust, the
depositor, the seller and the servicer. In addition, certain United States
federal income tax matters will be passed upon for the related trust by
Winston & Strawn. Other legal matters for underwriters will be passed upon by
counsel to underwriters.
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WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain information with the
Securities and Exchange Commission, including annual, quarterly and special
reports, proxy statements and other information. You can read and copy these
documents at the public reference facility maintained by the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. You can also read and copy the reports, proxy statements
and other information at the following regional offices of the Securities and
Exchange Commission:
<TABLE>
<S> <C>
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, IL 60661
</TABLE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
more information about the public reference rooms or visit Securities and
Exchange Commission's web site at http://www.sec.gov to access available
filings.
The Securities and Exchange Commission allows offerors of securities to
incorporate by reference some of the information they file with it. This means
that offerors can disclose important information to you by referring you to
those documents. Documents incorporated by reference will be filed under the
depositor's name. The information that the depositor incorporates by reference
is considered to be part of this prospectus, and later information that the
depositor files with the Securities and Exchange Commission will automatically
update and supersede this information.
All documents filed by the servicer, on behalf of a respective trust, under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after
the date of this prospectus and prior to the termination of the offering of the
securities will be incorporated by reference into this prospectus.
If you are a beneficial owner of the securities to whom a prospectus has
been delivered, the depositor will, on request, send you a copy of the
information that has been incorporated by reference in this prospectus. The
depositor will provide this information at no cost to you. Please address
requests to: Dealer Auto Receivables Corp., 230 West Monroe Street, Chicago,
Illinois 60606.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 2,640
Printing and Engraving Expenses............................. $ 80,000
Trustee's Fees and Expenses................................. $ 25,000
Legal Fees and Expenses..................................... $200,000
Blue Sky Fees and Expenses.................................. $ 10,000
Accountants' Fees and Expenses.............................. $ 45,000
Rating Agency Fees.......................................... $ 80,000
Miscellaneous Fees.......................................... $100,000
--------
Total..................................................... $542,640
========
</TABLE>
- ------------------------
* All amounts except the SEC Registration Fee are estimates of expenses
incurred or to be incurred in connection with the issuance and distribution
of the securities in an aggregate principal amount assumed for these
purposes to be equal to $1,000,000 of securities registered hereby.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of Delaware (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers, subject to specified conditions and
exclusions; gives a director or officer who successfully defends an action the
right to be so indemnified; and authorizes said corporation to buy director's
and officers' liability insurance. Such indemnification is not exclusive of any
other right to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or otherwise.
Premier Auto Finance, Inc. has also purchased liability policies which
indemnify the Registrant's officers and directors against loss arising from
claims by reason of their legal liability for acts as officers and directors,
subject to limitations and conditions as set forth in the policies.
Pursuant to agreements which the Registrant may enter into with underwriters
or agents (forms of which will be included as exhibits to this registration
statement), officers and directors of the Registrant, and affiliates thereof,
may be entitled to indemnification by such underwriters or agents against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, arising from information which has been or will be furnished to the
Registrant by such underwriters or agents that appears in the registration
statement or any prospectus.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the depositor (previously
filed)
3.2 Bylaws of the depositor (previously filed)
4.1 Form of Trust Agreement (including form of certificate)
4.2 Form of Indenture (including form of notes)
5.1 Opinion of Winston & Strawn with respect to legality
8.1 Opinion of Winston & Strawn with respect to tax matters
10.1 Form of Transfer and Sale Agreement
10.2 Form of Sale and Servicing Agreement
10.3 Form of Pooling and Servicing Agreement
10.4 Form of Administration Agreement
10.5 Form of Performance Guarantee
10.6 Form of Dealer Agreement
23.1 Consent of Winston & Strawn (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP*
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of indenture trustee*
</TABLE>
- ------------------------
* To be filed by amendment
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; or
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act if 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the
II-2
<PAGE>
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offer therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 14
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 Securities Act of 1933 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.
(d) That, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(e) 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 reasonable grounds to believe
that the security rating requirement set forth in the section captioned "RATINGS
OF SECURITIES" will be met by the time of sale of the securities and has duly
caused this Pre-Effective Amendment No. 1 to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Chicago, State of Illinois, on May 16, 2000.
<TABLE>
<S> <C> <C>
DEALER AUTO RECEIVABLES CORP.
By: /s/ CHARLES BRADFORD WOLFE
--------------------------------------
Name: Charles Bradford Wolfe
Title: EXECUTIVE VICE PRESIDENT, ASSISTANT
TREASURER AND CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Act, this Pre-Effective Amendment No. 1
to the registration statement has been signed by the following persons in the
capacities indicated on May 16, 2000:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
***
- -------------------------------------------- President, Chief Executive Officer and
Name: Gilbert N. Zitin Chairman (Principal Executive Officer)
Executive Vice President, Assistant Treasurer
/s/ CHARLES BRADFORD WOLFE and Chief Financial Officer (Principal
- -------------------------------------------- Financial Officer and Principal Accounting
Name: Charles Bradford Wolfe Officer)
***
- -------------------------------------------- Director
Name: Harvey N. Medvin
***
- -------------------------------------------- Director
Name: Frank B. Bilotta
</TABLE>
***/s/ WILLIAM J. SPARER
- --------------------------------------------
Name: William J. Sparer
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the depositor (previously
filed)
3.2 Bylaws of the depositor (previously filed)
4.1 Form of Trust Agreement (including form of certificate)
4.2 Form of Indenture (including form of notes)
5.1 Opinion of Winston & Strawn with respect to legality
8.1 Opinion of Winston & Strawn with respect to tax matters
10.1 Form of Transfer and Sale Agreement
10.2 Form of Sale and Servicing Agreement
10.3 Form of Pooling and Servicing Agreement
10.4 Form of Administration Agreement
10.5 Form of Performance Guarantee
10.6 Form of Dealer Agreement
23.1 Consent of Winston & Strawn (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP*
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of indenture trustee*
</TABLE>
- ------------------------
* To be filed by amendment
<PAGE>
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
DEALER AUTO RECEIVABLES CORPORATION
(SELLER)
UNDERWRITING AGREEMENT
, 2000
[NAME OF REPRESENTATIVE]
As Representative of the
Several Underwriters named
on Schedule I hereto,
[Address]
Dear Sirs:
Dealer Auto Receivables Corporation, a Delaware corporation
(the "Depositor"), proposes to form an owner trust, Dealer Auto Receivables
Owner Trust 200_-_ (the "Issuer"), pursuant to a Trust Agreement (the "Trust
Agreement") to be dated as of _________, 200_ between the Depositor and
___________, as owner trustee (the "Owner Trustee"), which will issue (i)
$_____________ principal amount of its ___% Class A-1 Asset Backed Notes (the
"Class A-1 Notes"), (ii) $______________ principal amount of its ___% Class
A-2 Asset Backed Notes (the "Class A-2 Notes"), (iii) $____________ principal
amount of its ___ % Class A-3 Asset Backed Notes (the "Class A-3 Notes"),
(iv) $____________ principal amount of its___% Class B Asset Backed Notes
(the "Class B Notes" and together with the Class A-1 Notes, Class A-2 Notes
and Class A-3 Notes, the "Notes") pursuant to an Indenture to be dated as of
the ________, 200_ (the "Indenture") between the Issuer and The Bank of New
York, as trustee (the "Indenture Trustee") and (v) $_____________ principal
amount of its ___% Asset Backed Certificates, representing fractional
undivided interests in the Issuer (the "Certificates"; and together with the
Notes, the "Securities"). The assets of the Issuer will include, among other
things, a pool of retail installment sale contracts secured by new and used
cars and light duty trucks (the "Contracts") originated by Premier Auto
Finance, L.P, an Illinois limited partnership (the "Seller"), certain monies
due or received thereunder on or after _________, 200_ (the "Cutoff Date"),
security interests in the vehicles financed thereby, certain accounts, and
the proceeds thereof, the rights of the Seller against the originating
dealers and other third parties, the proceeds from claims on certain
insurance policies, the rights of the Depositor against the Seller under the
Transfer and Sale Agreement and the rights of the Issuer against Virginia
Surety Company, Inc. (the "Performance Guarantor") under the Performance
Guarantee. The Contracts will be transferred to the Issuer by the Depositor
in exchange for the Securities and the
<PAGE>
2
Contracts will be serviced for the Issuer by Premier Auto Finance, Inc.
("Premier Auto Finance", and in its capacity as servicer, the "Servicer")
pursuant to a Sale and Servicing Agreement (the "Sale and Servicing
Agreement") to be dated as of _________, 2000_ among the Depositor, the
Servicer, the Indenture Trustee and the Issuer. Capitalized terms used and
not otherwise defined herein shall have the meanings given them in the Sale
and Servicing Agreement.
This is to confirm the agreement concerning the purchase of
the Securities from the Depositor by the several Underwriters named in
Schedule 1 hereto (the "Underwriters").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PERFORMANCE GUARANTOR,
PREMIER AUTO FINANCE AND THE DEPOSITOR. The Performance Guarantor, Premier
Auto Finance and the Depositor jointly and severally represent and warrant to
and agree with the several Underwriters that:
(a) A registration statement on Form S-3 (No. 33-32802) has
been filed by the Depositor with the Securities and Exchange Commission
(the "Commission") and has become effective under the Securities Act of
1933, as amended (the "Securities Act"). Such registration statement
may have been amended or supplemented from time to time prior to the
date hereof. Any such amendment or supplement was filed with the
Commission in accordance with the Securities Act and the rules and
regulations of the Commission thereunder (the "Rules and Regulations")
and any such amendment has become effective under the Securities Act.
The Depositor proposes to file with the Commission pursuant to Rule
424(b)of the Rules and Regulations a prospectus supplement (the
"Prospectus Supplement") to the prospectus dated ___________, 200_,
relating to the Securities and the method of distribution thereof.
Copies of such registration statement, any amendment or supplement
thereto, including the Term Sheet dated __________ relating to the
Securities (the "Term Sheet") disseminated by the Underwriters, such
prospectus and the Prospectus Supplement have been delivered to you.
Such registration statement, including exhibits thereto and the Term
Sheet as incorporated by reference therein, and such prospectus, as
amended or supplemented to the date hereof, and as further supplemented
by the Prospectus Supplement, are hereinafter referred to as the
"Registration Statement" and the "Prospectus," respectively. The
conditions to the use of a registration statement on Form S-3 under the
Securities Act have been satisfied. The Depositor filed the Term Sheet
on Form 8-K with the Commission pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), within two business days of
its dissemination by the Underwriters.
(b) The Registration Statement, at the time it became
effective, any post-effective amendment thereto, at the time it became
effective, and the Prospectus, as of the date of the Prospectus
Supplement, complied in all material respects with the applicable
requirements of the Securities Act and the Rules and Regulations and
the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and the rules and regulations of the Commission thereunder and
did not include any untrue statement of a material fact and, in the
case of the Registration Statement and any post-effective amendment
thereto, did not omit to state any material fact required to be stated
therein or necessary to make the statements therein not
<PAGE>
3
misleading and, in the case of the Prospectus, did not omit to state
any material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading; on the Closing Date (as hereinafter defined), the
Registration Statement and the Prospectus, as amended or
supplemented as of the Closing Date, will comply in all material
respects with the applicable requirements of the Securities Act and
the Rules and Regulations and the Trust Indenture Act and the rules
and regulations of the Commission thereunder and neither the
Prospectus nor any amendment or supplement thereto will include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representation and warranty in the preceding sentence does not apply
to (i) that part of the Registration Statement which shall
constitute the Statement of Eligibility and Qualification (Form T-1)
of the Indenture Trustee under the Trust Indenture Act or (ii) that
information contained in or omitted from the Registration Statement
or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with the Underwriters' Information
(as defined herein). The Indenture has been qualified under the
Trust Indenture Act.
(c) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties
and to conduct its business as such properties are presently owned
and such business is presently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own
and sell the Contracts.
(d) The representations and warranties of the Depositor in
Section 3.01 of the Sale and Servicing Agreement will be true and
correct as of the Closing Date.
(e) The representations and warranties of the Seller in
Sections 3.01, 3.02, 3.03 and 3.04 of the Transfer and Sale
Agreement will be true and correct as of the Closing Date.
(f) The representations and warranties of the Servicer in
Section 3.02 of the Sale and Servicing Agreement will be true and
correct as of the Closing Date.
(g) The representations and warranties of the Performance
Guarantor in the Performance Guarantee will be true and correct as
of the Closing Date.
(h) Each of the Depositor, Premier Auto Finance and the
Performance Guarantor has the power and authority to execute and
deliver this Agreement and to carry out the terms of this Agreement
and the execution, delivery and performance by each of the
Depositor, Premier Auto Finance and the Performance Guarantor of
this Agreement have been duly authorized by each of the Depositor,
Premier Auto Finance and the Performance Guarantor by all necessary
corporate action.
(i) This Agreement has been duly executed and delivered by
the Depositor, Premier Auto Finance and the Performance Guarantor.
<PAGE>
4
(j) When authenticated by the Owner Trustee in accordance
with the Trust Agreement and delivered and paid for pursuant to this
Agreement, the Certificates will be duly issued and entitled to the
benefits and security afforded by the Trust Agreement and the Sale
and Servicing Agreement.
(k) When authenticated by the Indenture Trustee in
accordance with the Indenture and delivered and paid for pursuant to
this Agreement, the Notes will be duly issued and constitute legal,
valid and binding obligations of the Issuer enforceable against the
Issuer in accordance with their terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights in
general and by general principles of equity, regardless of whether
such enforcement is considered in a proceeding in equity or at law.
(l) The execution, delivery and performance of this
Agreement and the consummation by each of the Depositor, Premier
Auto Finance and the Performance Guarantor of the transactions
contemplated hereby shall not conflict with, result in any breach of
any of the terms and provisions of or constitute (with or without
notice or lapse of time) a default under, the certificate of
incorporation or by-laws of such party, or any indenture, agreement
or other instrument to which either such party is a party or by
which it is bound, or violate any law or, to either such party's
knowledge, any order, rule or regulation applicable to such party of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction
over such party or any of its properties; and, except for the
registration of the Securities under the Securities Act, the
qualification of the Indenture under the Trust Indenture Act and
such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act, and
applicable state securities laws in connection with the purchase and
distribution of the Securities by the Underwriters, no permit,
consent, approval of, or declaration to or filing with, any
governmental authority is required in connection with the execution,
delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby.
(m) There are no proceedings or investigations pending or,
to the knowledge of any of the Depositor, Premier Auto Finance or
the Performance Guarantor, threatened before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over such party or its
properties asserting the invalidity of this Agreement or any of the
Securities, seeking to prevent the issuance of any of the Securities
or the consummation of any of the transactions contemplated by this
Agreement, seeking any determination or ruling that, if determined
adversely to such party, is reasonably likely to materially and
adversely affect the performance by such party of its obligations
under, or the validity or enforceability of, the Securities or this
Agreement, or that may adversely affect the federal or state income,
excise, franchise or similar tax attributes of the Securities.
<PAGE>
5
(n) There are no contracts or other documents which are
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations and which have not been so described or filed.
(o) The Depositor is not in violation of its certificate of
incorporation or by-laws, is not in default and no event has occurred
which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or
condition contained in any indenture, agreement, mortgage, deed of
trust or other instrument to which the Depositor is a party or by which
the Depositor is bound or to which any of the Depositor's property or
assets is subject or (iii) is not in violation in any respect of any
law, order, rule or regulation applicable to the Depositor or any of
the Depositor's property of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over it or any of its property.
(p) Neither the Issuer nor the Depositor is an "investment
company" or under the "control" of an "investment company" within the
meaning thereof as defined in the Investment Company Act of 1940, as
amended.
(q) None of the Seller, Premier Auto Finance, the Depositor or
anyone acting on its behalf has taken any action that would require
qualification of the Trust Agreement under the Trust Indenture Act.
2. PURCHASE BY THE UNDERWRITERS. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Depositor agrees to cause to be
issued by the Issuer and to sell to each of the Underwriters, severally and not
jointly, and each of the Underwriters, severally and not jointly, agrees to
purchase from the Depositor, the respective principal amount of Securities set
forth opposite the name of such Underwriter in Schedule 1 hereto at a purchase
price equal to with respect to the Class A-1 Notes, ____% of the principal
amount thereof, with respect to the Class A-2 Notes, ____% of the principal
amount thereof, (iii) with respect to the Class A-3 Notes, _____ % of the
principal amount thereof, (iv) with respect to the Class B Notes, ____ % of the
principal amount thereof and (v) with respect to the Certificates, ______% of
the principal amount thereof.
The Depositor shall not be obligated to deliver any of the
Securities except upon payment in full for all the Securities to be purchased as
provided herein.
3. DELIVERY OF AND PAYMENT FOR THE SECURITIES. Delivery of and
payment for the Securities shall be made at the office of Winston & Strawn, or
at such other place as shall be agreed upon by [Name of the Representative], as
representative of the Underwriters (the "Representative") and the Depositor, at
9:00 A.M., Chicago time, on ________, 200_, or at such other date or time, not
later than five full business days thereafter, as shall be agreed upon by the
<PAGE>
6
Representative and the Depositor (such date and time being referred to herein
as the "Closing Date"). On the Closing Date, the Depositor shall deliver or
cause to be delivered to the Representative for the account of each
Underwriter the Securities against payment to or upon the order of the
Depositor of the purchase price in immediately available funds. Time shall be
of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each Underwriter
hereunder. Upon delivery, each class of the Securities shall be represented
by one or more global certificates registered in the name of Cede & Co., as
nominee of The Depository Trust Company ("DTC"). The interest of the
beneficial owners of the Securities will be represented by book-entries on
the records of DTC and participating members thereof. Definitive certificates
representing the Securities will be available only under limited
circumstances.
4. FURTHER AGREEMENTS OF THE DEPOSITOR. The Depositor agrees
with each of the several Underwriters:
(a) To file the Prospectus Supplement with the Commission
pursuant to and in accordance with Rule 424(b) of the Rules and
Regulations within the time period prescribed by such rule and provide
evidence satisfactory to the Representative of such timely filing.
(b) During any period in which a prospectus relating to the
Securities is required to be delivered under the Securities Act: to
advise the Representative promptly of any proposal to amend the
Registration Statement or amend or supplement the Prospectus and not to
effect any such amendment or supplementation without the consent of the
Representative; to advise the Representative promptly of (i) the
effectiveness of any post-effective amendment to the Registration
Statement, (ii) any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional
information, (iii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iv) the
issuance by the Commission of any order preventing or suspending the
use of any prospectus relating to the Securities or the initiation or
threatening of any proceedings for that purpose and (v) the receipt by
the Depositor of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and to
use best efforts to prevent the issuance of any such stop order or of
any order preventing or suspending the use of any prospectus relating
to the Securities or suspending any such qualification and, if any such
stop order or order of suspension is issued, to obtain the lifting
thereof at the earliest possible time.
(c) If, during any period in which a prospectus relating to
the Securities is required to be delivered under the Securities Act,
any event shall have occurred as a result of which the Prospectus, as
then amended or supplemented, would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances when
such Prospectus is delivered to a purchaser, not misleading, or if for
any other reason it shall be necessary at such time to amend or
supplement the Prospectus in order to comply with the Securities Act,
to notify the Representative immediately thereof, and to promptly
prepare and file with the Commission,
<PAGE>
7
subject to paragraph (b) of this Section 4, an amendment or a
supplement to the Prospectus such that the statements in the
Prospectus, as so amended or supplemented will not, in the light of
the circumstances when the Prospectus is delivered to a purchaser,
be misleading, or such that the Prospectus will comply with the
Securities Act.
(d) To furnish promptly to each of the Representative and
counsel for the Underwriters a signed copy of the Registration
Statement as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith; and during the period described in paragraph (c) of
this Section 4, to deliver promptly without charge to the
Representative such number of the following documents as the
Representative may from time to time reasonably request: conformed
copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case excluding exhibits
other than this Agreement and each of the Transaction Documents) and
any preliminary prospectus supplement, the Term Sheet, the Prospectus
and any amendment or supplement thereto.
(e) During any period in which a prospectus relating to the
Securities is required to be delivered under the Securities Act, to
file promptly with the Commission any amendment to the Registration
Statement or the Prospectus or any supplement to the Prospectus that
may, in the judgment of the Depositor or the Representative, be
required by the Securities Act or requested by the Commission.
(f) For so long as any of the Securities are outstanding or
until such time as the Underwriters shall cease to maintain a secondary
market in the Securities, to furnish to the Underwriters (i) copies of
all materials furnished by the Issuer to the Security holders and all
reports and financial statements furnished by the Issuer to the
Commission pursuant to the Exchange Act or any rule or regulation of
the Commission thereunder and (ii) from time to time, such other
information concerning the Depositor and the Issuer as the
Representative may reasonably request.
(g) Promptly from time to time to take such action as the
Representative may reasonably request to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as
the Representative may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Securities; PROVIDED that in connection therewith
the Depositor shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction.
(h) For a period of __ days from the date of the Prospectus,
to not offer for sale, sell, contract to sell or otherwise dispose of,
directly or indirectly, or file a registration statement for, or
announce any offering of, any securities collateralized by, or
evidencing an ownership interest in, a pool of retail installment sale
contracts for new and used cars and light duty trucks without the prior
written consent of the Representative.
<PAGE>
8
(i) For a period from the date of this Agreement until the
retirement of the Securities, to deliver to you the annual statement of
compliance and the annual independent certified public accountants'
report furnished to the Owner Trustee and the Indenture Trustee,
pursuant to the Sale and Servicing Agreement, as soon as such
statements and reports are furnished to the Owner Trustee and the
Indenture Trustee, respectively.
(j) To the extent, if any, that the ratings provided with
respect to the Securities by the Standard & Poor's Ratings Services
("S&P") and Moody's Investors Service Inc. ("Moody's") are conditional
upon the furnishing of documents or the taking of any other actions by
Premier Auto Finance or the Depositor, to furnish such documents and
take any such other actions.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the several Underwriters hereunder are subject to the accuracy,
when made and on the Closing Date, of the representations and warranties of
Premier Auto Finance, the Performance Guarantor and the Depositor contained
herein, to the accuracy of the statements of Premier Auto Finance, the
Performance Guarantor, the Depositor and the Seller made in any certificates
pursuant to the provisions hereof, to the performance by the Depositor of its
obligations hereunder, and to each of the following additional terms and
conditions:
(a) Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied with
to the reasonable satisfaction of the Representative; and the Depositor
shall have filed the Prospectus Supplement with the Commission pursuant
to Rule 424(b) of the Rules and Regulations within the time period
prescribed by such rule.
(b) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the
Securities, each of the Transaction Documents, the Registration
Statement and the Prospectus, and all other legal matters relating to
such agreements and the transactions contemplated hereby and thereby
shall be satisfactory in all material respects to counsel for the
Underwriters, and the Depositor shall have furnished to such counsel
all documents and information that they may reasonably request to
enable them to pass upon such matters.
(c) The Transfer and Sale Agreement shall have been duly
executed and delivered by the Seller and the Depositor.
(d) The Trust Agreement shall have been duly executed and
delivered by the Depositor and the Owner Trustee and the Certificates
shall have been duly executed and delivered by the Owner Trustee on
behalf of the Issuer and duly authenticated by the Owner Trustee.
<PAGE>
9
(e) The Sale and Servicing Agreement shall have been duly
executed and delivered by the Servicer, the Depositor, the Issuer and
the Indenture Trustee.
(f) The Indenture shall have been duly executed and delivered
by the Issuer and the Indenture Trustee and the Notes shall have been
duly executed and delivered by the Issuer and duly authenticated by the
Indenture Trustee.
(g)ab The Performance Guarantee shall have been duly executed
and delivered by the Performance Guarantor.
(h) The Representative shall have received evidence
satisfactory to it and its counsel that on or before the Closing Date,
UCC-1 financing statements required to be filed on or prior to the
Closing Date pursuant to the Transaction Documents have been filed.
(i) ____________, counsel to the Seller, shall have furnished
to the Representative their written opinion, as counsel to the Seller,
addressed to the Underwriters and dated the Closing Date, regarding the
due organization of the Seller, the due authorization, execution and
delivery by the Seller of the Transfer and Sale Agreement, no conflicts
or violations of organizational documents, contracts or law and other
related matters, in form and substance reasonably satisfactory to the
Representative and its counsel.
(j) ____________, counsel to the Performance Guarantor, shall
have furnished to the Representative their written opinion, as counsel
to the Performance Guarantor, addressed to the Underwriters and dated
the Closing Date, regarding the due organization of the Performance
Guarantor, the due authorization, execution and delivery by the
Performance Guarantor of this Agreement and the Performance Guarantee,
no conflicts or violations of organizational documents, contracts or
law and other related matters, in form and substance reasonably
satisfactory to the Representative and its counsel.
(k) ____________, counsel to Premier Auto Finance, shall have
furnished to the Representative their written opinion, as counsel to
Premier Auto Finance, addressed to the Underwriters and dated the
Closing Date, regarding the due incorporation of Premier Auto Finance,
the due authorization, execution and delivery by Premier Auto Finance
of the Transaction Documents to which it is a party, no conflicts or
violations of charter, contracts or law and other related matters, in
form and substance reasonably satisfactory to the Representative and
its counsel.
(l) ____________, counsel to the Depositor, shall have
furnished to the Representative their written opinion, as counsel to
the Depositor, addressed to the Underwriters and dated the Closing
Date, regarding the due incorporation of the Depositor, the due
authorization, execution and delivery by the Depositor of the
Transaction Documents to which it is a party, no conflicts or
violations of charter, contracts or law and other related matters, in
form and substance reasonably satisfactory to the Representative and
its counsel.
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10
(m) ____________, special counsel to the Issuer, shall have
furnished to the Representative their written opinion, as counsel to
the Issuer, addressed to the Underwriters and dated the Closing Date,
regarding (i) the due organization of the Issuer, (ii) other general
Delaware law matters with respect to the Issuer, including, without
limitation, the due authorization, execution and delivery of the
Transaction Documents by the Issuer, and (iii) the perfection and
priority of the security interests created by the Indenture, in each
case, in form and substance reasonably satisfactory to the
Representative and its counsel.
(n) Winston & Strawn shall have furnished to the
Representative their written opinion, addressed to the Underwriters and
dated the Closing Date, regarding (i) the enforceability of the
Transaction Documents, (ii) the validity of the security interests
created thereby, (iii) the perfection and priority of the security
interests created by the Transfer and Sale Agreement and the Sale and
Servicing Agreement, (iv) no violations of law, (v) compliance with
applicable securities laws, (vi) exemption of the Seller, the Servicer,
the Depositor and the Issuer from registration as an investment company
under the Investment Company Act of 1940 (v) the conformity in all
material respects of each of the Transaction Documents to the
description thereof contained in the Registration Statement and the
Prospectus and (vi) negative assurances concerning the Prospectus, in
each case in form and substance reasonably satisfactory to the
Representative and its counsel.
(o) Winston & Strawn shall have furnished to the
Representative their written opinion, addressed to the Underwriters and
dated the Closing Date, regarding the characterization of the transfer
of the Contracts by the Seller to the Depositor pursuant to the
Transfer and Sale Agreement as a "true sale", in form and substance
reasonably satisfactory to the Representative and its counsel.
(p) Winston & Strawn shall have furnished to the
Representative their written opinion, addressed to the Underwriters and
dated the Closing Date, regarding the substantive nonconsolidation of
the assets and liabilities of the Seller or the Servicer with those of
the Depositor, in form and substance reasonably satisfactory to the
Representative and it counsel.
(q) Winston & Strawn shall have furnished to the
Representative their written opinion, addressed to the Underwriters and
dated the Closing Date, to the effect that (i) the Issuer will not be
an association (or a publicly traded partnership) taxable as a
corporation for federal income tax purposes, (ii) the Notes will be
characterized as indebtedness for federal income tax purposes and (iii)
the statements set forth in the Prospectus under the heading "Material
Federal Income Tax Consequences", to the extent that they are
statements of law are true and correct in all material respects, in
form and substance reasonably satisfactory to the Representative and
its counsel.
(r) The Representative shall have received from Simpson
Thacher & Bartlett, counsel for the Underwriters, such opinion or
opinions, dated the Closing Date, with respect to such matters as the
Representative may require, and the Depositor shall have furnished to
such counsel such documents as they reasonably request for enabling
them to pass upon such matters.
<PAGE>
11
(s) ____________, counsel to the Owner Trustee, shall have
furnished to the Representative their written opinion, as counsel to
the Owner Trustee, addressed to the Underwriters and dated the Closing
Date, regarding the due organization of the Owner Trustee, the due
authorization, execution and delivery by the Owner Trustee of the Trust
Agreement, no conflicts or violations of organizational documents,
contracts or law and other related matters, in form and substance
reasonably satisfactory to the Representative and its counsel.
(t) Emmet, Marvin & Martin, special counsel to the Indenture
Trustee, shall have furnished to the Representative their written
opinion, as counsel to the Indenture Trustee, addressed to the
Underwriters and dated the Closing Date, regarding the due organization
of the Indenture Trustee, the due authorization, execution and delivery
by the Indenture Trustee of the Transaction Documents to which it is a
party, no conflicts or violations of organizational documents,
contracts or law and other related matters, in form and substance
reasonably satisfactory to the Representative and its counsel.
(u) The Representative shall have received a letter dated the
date hereof (the "Procedures Letter") from a firm of independent
nationally recognized certified public accountants acceptable to the
Representative verifying the accuracy of such financial and statistical
data contained in the Prospectus as the Representative shall deem
advisable. In addition, if any amendment or supplement to the
Prospectus made after the date hereof contains financial or statistical
data, the Representative shall have received a letter dated the Closing
Date confirming the Procedures Letter and providing additional comfort
on such new data.
(v) The Representative shall have received a certificate,
dated the Closing Date, of any two of the Chairman of the Board, the
President, any Vice President and the chief financial officer of the
Seller stating that the representations and warranties of the Seller
contained in the Transfer and Sale Agreement are true and correct on
and as of the Closing Date, (B) the Seller has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied thereunder at or prior to the Closing Date and (C) since
__________, there has been no material adverse change in the financial
position or results of operations of the Seller or any change, or any
development including a prospective change, in or affecting the
condition (financial or otherwise), results of operations, business or
prospects of the Seller except as set forth in or contemplated by the
Registration Statement and the Prospectus.
(w) The Representative shall have received a certificate,
dated the Closing Date, of any two of the Chairman of the Board, the
President, any Vice President and the chief financial officer of the
Performance Guarantor stating that the representations and warranties
of the Performance Guarantor contained in this Agreement and the
Performance Guarantee are true and correct on and as of the Closing
Date, (B) the Performance Guarantor has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied
hereunder and under the Performance Guarantor at or prior to the
Closing Date and
<PAGE>
12
(C) since __________, there has been no material adverse change in
the financial position or results of operations of the Performance
Guarantor or any change, or any development including a prospective
change, in or affecting the condition (financial or otherwise),
results of operations, business or prospects of the Performance
Guarantor except as set forth in or contemplated by the Registration
Statement and the Prospectus.
(x) The Representative shall have received a certificate,
dated the Closing Date, of any two of the Chairman of the Board, the
President, any Vice President and the chief financial officer of
Premier Auto Finance stating that the representations and warranties of
Premier Auto Finance contained in this Agreement and the Transaction
Documents to which it is a party are true and correct on and as of the
Closing Date, (B) Premier Auto Finance has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied
hereunder and under such agreements at or prior to the Closing Date and
(C) since __________, there has been no material adverse change in the
financial position or results of operations of Premier Auto Finance or
any change, or any development including a prospective change, in or
affecting the condition (financial or otherwise), results of
operations, business or prospects of Premier Auto Finance except as set
forth in or contemplated by the Registration Statement and the
Prospectus.
(y) The Representative shall have received a certificates,
dated the Closing Date, of any two of the Chairman of the Board, the
President, any Vice President and the chief financial officer of the
Depositor stating that the representations and warranties of the
Depositor contained in this Agreement and the Transaction Documents to
which it is a party are true and correct on and as of the Closing Date,
(B) the Depositor has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder and under
such agreements at or prior to the Closing Date, (C) no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to
the best of his or her knowledge, are contemplated by the Commission,
and (D) since __________, there has been no material adverse change in
the financial position or results of operations of the Depositor or the
Issuer or any change, or any development including a prospective
change, in or affecting the condition (financial or otherwise), results
of operations, business or prospects of the Depositor or the Issuer
except as set forth in or contemplated by the Registration Statement
and the Prospectus.
(z) The Representative shall have received a letter from S&P
stating that the Notes have received a rating of "___" from S&P and a
letter from Moody's stating that the Notes have received a rating of
"___" from Moody's.
(aa) The Representative shall have received a letter from S&P
stating that the Certificates have received a rating of "___" from S&P
and a letter from Moody's stating that the Certificates have received a
rating of "___" from Moody's.
(ab) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: trading
in securities generally on the New York Stock
<PAGE>
13
Exchange, the American Stock Exchange or the over-the-counter market
shall have been suspended or limited, or minimum prices shall have
been established on either of such exchanges or such market by the
Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, or trading in securities
of Aon Corporation on any exchange or in the over-the-counter market
shall have been suspended or a general moratorium on commercial
banking activities shall have been declared by Federal or New York
State authorities or an outbreak or escalation of hostilities or a
declaration by the United States of a national emergency or war or
such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such) as to make
it, in the judgment of a majority in interest of the several
Underwriters, impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities on the terms and
in the manner contemplated in the Prospectus.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
6. TERMINATION. The obligations of the Underwriters hereunder
may be terminated by the Representative, in its absolute discretion, by notice
given to and received by the Depositor prior to delivery of and payment for the
Securities if, prior to that time, any of the events described in Section 5(bb)
shall have occurred or any of the conditions described in Section 5(v), 5(w),
5(x) or 5(y) shall not be satisfied.
7. DEFAULTING UNDERWRITERS. If, any one or more of the
Underwriters shall fail to purchase and pay for any of the Securities agreed to
be purchased by such Underwriter hereunder on the Closing Date, and such failure
constitutes a default in the performance of its or their obligations under this
Agreement, the Representative may make arrangements for the purchase of such
Securities by other persons satisfactory to the Depositor and the
Representative, including any of the Underwriters, but if no such arrangements
are made by the Closing Date, then each remaining non-defaulting Underwriter
shall be severally obligated to purchase the Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase on the Closing Date in
the respective proportions which the principal amount of Securities set forth
opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the aggregate principal amount of Securities set forth opposite
the names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
PROVIDED, HOWEVER, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Securities on the Closing Date if the aggregate
principal amount of Securities which the defaulting Underwriter or Underwriters
agreed but
<PAGE>
14
failed to purchase on such date exceeds one-eleventh of the aggregate
principal amount of the Securities to be purchased on the Closing Date, and any
remaining non-defaulting Underwriter shall not be obligated to purchase in total
more than 110% of the principal amount of the Securities which it agreed to
purchase on the Closing Date pursuant to the terms of Section . If the foregoing
maximums are exceeded and the remaining Underwriters or other underwriters
satisfactory to the Representative and the Depositor do not elect to purchase
the Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Depositor, except that the Depositor
will continue to be liable for the payment of expenses to the extent set forth
in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall
not terminate and shall remain in effect. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the context
otherwise requires, any party not listed in Schedule 1 hereto who, pursuant to
this Section , purchases Securities which a defaulting Underwriter agreed but
failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have for damages caused by its default. If
other underwriters are obligated or agree to purchase the Securities of a
defaulting Underwriter, either the Representative or the Depositor may postpone
the Closing Date for up to seven full business days in order to effect any
changes that in the opinion of counsel for the Depositor or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement, and the Depositor agrees to file promptly
any amendment or supplement to the Registration Statement or the Prospectus that
effects any such changes.
8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If notice shall
have been given pursuant to Section terminating the obligations of the
Underwriters hereunder, the Depositor shall fail to tender the Securities for
delivery to the Underwriters for any reason permitted under this Agreement or
the Underwriters shall decline to purchase the Securities for any reason
permitted under this Agreement, Premier Auto Finance shall reimburse the
Underwriters for the fees and expenses of their counsel and for such other
out-of-pocket expenses as shall have been reasonably incurred by them in
connection with this Agreement and the proposed purchase of the Securities, and
upon demand Premier Auto Finance shall pay the full amount thereof to the
Representative. If this Agreement is terminated pursuant to Section by reason of
the default of one or more Underwriters, Premier Auto Finance shall not be
obligated to reimburse any defaulting Underwriter on account of those expenses.
9. INDEMNIFICATION. Premier Auto Finance, the Performance
Guarantor and the Depositor shall, jointly and severally, indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act (collectively referred to
for the purposes of this Section 9 and Section 10 as the Underwriter) against
any loss, claim, damage or liability, joint or several, to which that
Underwriter may become subject, under the Securities Act or otherwise, insofar
as such loss, claim, damage or liability (or any action in respect thereof)
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus supplement, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading, and shall
reimburse each Underwriter for any legal or other expenses reasonably incurred
by that Underwriter directly in connection with investigating or preparing to
defend or defending against or appearing as a third party witness in connection
with any such loss, claim, damage or liability (or any action in respect
thereof) as such expenses are incurred; PROVIDED, HOWEVER, that none of Premier
Auto Finance, the
<PAGE>
15
Performance Guarantor or the Depositor shall be liable in any such case to
the extent that any such loss, claim, damage or liability (or any action in
respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any
preliminary prospectus supplement, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with the Underwriters' Information.
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Depositor, each of its directors, each
officer of the Depositor who signed the Registration Statement and each
person, if any, who controls the Depositor within the meaning of Section 15
of the Securities Act (collectively referred to for the purposes of this
Section 9 and Section 10 as the Depositor), against any loss, claim, damage
or liability, joint or several, to which the Depositor may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or any action in respect thereof) arises out of or is based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus supplement, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
the written information furnished to the Depositor by or on behalf of such
Underwriter specifically for use therein, and shall reimburse the Depositor
for any legal or other expenses reasonably incurred by the Depositor in
connection with investigating or preparing to defend or defending against or
appearing as third party witness in connection with any such loss, claim,
damage or liability (or any action in respect thereof) as such expenses are
incurred. The parties acknowledge and agree that the written information
furnished to the Depositor through the Representative by or on behalf of the
Underwriters (the "Underwriters' Information") consists solely of the
paragraph below the footnotes on the cover page of the Prospectus Supplement
concerning the terms of the offering and the second paragraph of text and the
following table under the caption "Underwriting" in the Prospectus Supplement.
(c) Promptly after receipt by an indemnified party under
this Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 9, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER,
that the failure to notify the indemnifying party shall not relieve it from
any liability which it may have under this Section 9 except to the extent it
has been materially prejudiced (through the forfeiture of substantive rights
or defenses) by such failure; and, PROVIDED, FURTHER, that the failure to
notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party otherwise than under this Section 9. If
any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election
to assume the defense of such claim or action, the indemnifying party shall
not be liable to the indemnified party under this
<PAGE>
16
Section 9 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; PROVIDED, HOWEVER, an indemnified party
shall have the right to employ its own counsel in any such action, but the
fees, expenses and other charges of such counsel for the indemnified party
will be at the expense of such indemnified party unless (1) the employment of
counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based
upon advice of counsel to the indemnified party) that there may be legal
defenses available to it or other indemnified parties that are different from
or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based upon advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which
case the indemnifying party will not have the right to direct the defense of
such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm of
attorneys (in addition to any local counsel) at any one time for all such
indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 9(a) and 9(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of
the indemnified party (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceedings.
The obligations of Premier Auto Finance, the Performance
Guarantor, the Depositor and the Underwriters in this Section 9 and in
Section 10 are in addition to any other liability which Premier Auto Finance,
the Performance Guarantor, the Depositor or the Underwriters, as the case may
be, may otherwise have.
10. CONTRIBUTION. If the indemnification provided for in
Section 9 is unavailable or insufficient to hold harmless an indemnified
party under Section 9(a) or (b), then each indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as shall be appropriate to reflect the relative
benefits received by the Seller and the Depositor on the one hand and the
Underwriters on the other from the offering of the Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such
<PAGE>
17
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of Premier Auto
Finance, the Seller and the Depositor on the one hand and the Underwriters on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Seller and the
Depositor on the one hand and the Underwriters on the other with respect to
such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities purchased under this Agreement
(before deducting expenses) received by the Depositor bear to the total
underwriting discounts and commissions received by the Underwriters with
respect to the Securities purchased under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus Supplement. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supp(i)ablied by Premier Auto Finance, the Seller or the Depositor on the one
hand or the Underwriters on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission.
Premier Auto Finance, the Performance Guarantor, the
Depositor and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 10 were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability referred to above in this Section 10 shall be deemed to include,
subject to the limitations on the fees and expenses of separate counsel set
forth in Section 9, for purposes of this Section 10, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim or any action in respect thereof.
Notwithstanding the provisions of this Section 10, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the
public were offered to the public less the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to indemnify as provided in Section 9 and contribute as provided
in this Section 10 are several in proportion to their respective underwriting
obligations and not joint.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This
Agreement shall inure to the benefit of and be binding upon the Underwriters,
Premier Auto Finance, the Performance Guarantor, the Depositor, and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters, Premier Auto Finance, the Performance Guarantor and
the Depositor and their respective successors and the controlling persons and
officers and directors referred to in Sections 9 and 10 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision contained herein.
<PAGE>
18
12. EXPENSES. The Depositor agrees with the Underwriters to
pay the costs incident to the authorization, issuance, sale, preparation and
delivery of the Securities and any taxes payable in that connection; the
costs incident to the preparation, printing and filing under the Securities
Act of the Registration Statement and any amendments and exhibits thereto;
the costs of distributing the Registration Statement as originally filed and
each amendment thereto and any post-effective amendments thereof (including,
in each case, exhibits), any preliminary prospectus supplement, the
Prospectus and any amendment or supplement to the Prospectus, including,
without limitation, the Prospectus Supplement, all as provided in this
Agreement; the costs of printing, reproducing and distributing this Agreement
and any other underwriting and selling group documents by mail, telex or
other means of communications; the fees and expenses of qualifying the
Securities under the securities laws of the several jurisdictions as provided
in Section and of preparing, printing and distributing Blue Sky Memoranda and
Legal Investment Surveys (including related fees and expenses of counsel to
the Underwriters); any fees charged by S&P and Moody's for rating the
Securities; all fees and expenses of the Owner Trustee and the Indenture
Trustee and their respective counsel; and all other costs and expenses
incident to the performance of the obligations of the Depositor under this
Agreement; PROVIDED that, except as otherwise provided in this Section 12 and
in Section 8, the Underwriters shall pay their own costs and expenses,
including the costs and expenses of their counsel, any transfer taxes on the
Securities which they may sell and the expenses of advertising any offering
of the Securities made by the Underwriters.
13. SURVIVAL. The respective indemnities, rights of
contribution, representations, warranties and agreements of Premier Auto
Finance, the Performance Guarantor, the Depositor and the Underwriters
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Securities and shall remain in full force and effect, regardless of any (i)
termination or cancellation of this Agreement, (ii) any investigation made by
or on behalf of any of them or any person controlling any of them or (iii)
acceptance of and payment for the Securities.
14. NOTICES, ETC. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail
or facsimile transmission and confirmed to _______________,
_______________ Attention: _____________, with a copy to the Legal
Department;
(b) if to the Depositor, shall be delivered or sent by mail or
facsimile transmission and confirmed to the address of the Depositor
set forth in the Registration Statement, Attention: General Counsel,
with a copy to Premier Auto Finance at the address set forth in the
Registration Statement, Attention: General Counsel;
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 9(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representative, which address will be supplied to any other party hereto by
<PAGE>
19
the Representative upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Depositor
shall be entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Underwriters by the Representative.
15. DEFINITIONS OF CERTAIN TERMS. For purposes of this
Agreement, "business day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
17. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to
affect the meaning or interpretation of, this Agreement.
<PAGE>
20
If the foregoing is in accordance with your understanding
of the agreement between Premier Auto Finance, the Performance Guarantor and
the Depositor and the several Underwriters, kindly indicate your acceptance
in the space provided for that purpose below.
Very truly yours,
DEALER AUTO RECEIVABLES CORPORATION
By
----------------------------------
Name:
Title:
PREMIER AUTO FINANCE INC.
By
----------------------------------
Name:
Title:
VIRGINIA SURETY COMPANY, INC.
By
----------------------------------
Name:
Title:
Accepted:
[NAME OF REPRESENTATIVE]
For Itself and as Representative
of the Several Underwriters
By
----------------------------------
AUTHORIZED SIGNATORY
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Principal Principal Principal Principal
Amount of Amount of Amount of Amount of
Class A-1 Class A-2 Class A-3 Class B
Underwriters Notes Notes Notes Notes
- ------------ --------- --------- ---------- ---------
<S> <C> <C> <C> <C>
$ $ $ $
Principal Amount
Underwriters of Certificates
- ------------ ----------------
$
</TABLE>
<PAGE>
================================================================================
TRUST AGREEMENT
by and between
DEALER AUTO RECEIVABLES CORP.
as Depositor,
and
--------------------
as Owner Trustee
Dated as of __________, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE DEFINITIONS..............................................................................1
SECTION 1.01. CAPITALIZED TERMS......................................................................1
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS..........................................................4
SECTION 1.03. USAGE OF TERMS.........................................................................4
SECTION 1.04. SECTION REFERENCES.....................................................................4
SECTION 1.05. ACCOUNTING TERMS.......................................................................4
ARTICLE TWO ORGANIZATION.............................................................................4
SECTION 2.01. NAME...................................................................................4
SECTION 2.02. OFFICE.................................................................................5
SECTION 2.03. PURPOSES AND POWERS....................................................................5
SECTION 2.04. APPOINTMENT OF OWNER TRUSTEE...........................................................6
SECTION 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE.....................................6
SECTION 2.06. DECLARATION OF TRUST...................................................................6
SECTION 2.07. LIABILITY OF DEPOSITOR.................................................................6
SECTION 2.08. TITLE TO TRUST PROPERTY................................................................6
SECTION 2.09. SITUS OF TRUST.........................................................................6
SECTION 2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR........................................7
SECTION 2.11. FEDERAL INCOME TAX ALLOCATIONS.........................................................8
ARTICLE THREE TRUST CERTIFICATES AND TRANSFER OF INTERESTS.............................................9
SECTION 3.01. INITIAL OWNERSHIP......................................................................9
SECTION 3.02. THE TRUST CERTIFICATES.................................................................9
SECTION 3.03. AUTHENTICATION AND DELIVERY OF TRUST CERTIFICATES.....................................10
SECTION 3.04. REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST CERTIFICATES...........................10
SECTION 3.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST CERTIFICATES...............................11
SECTION 3.06. PERSONS DEEMED HOLDERS................................................................11
SECTION 3.07. ACCESS TO LIST OF CERTIFICATEHOLDERS'NAMES AND ADDRESSES..............................11
SECTION 3.08. MAINTENANCE OF OFFICE OR AGENCY.......................................................12
SECTION 3.09. TEMPORARY TRUST CERTIFICATES..........................................................12
SECTION 3.10. APPOINTMENT OF PAYING AGENT...........................................................12
SECTION 3.11. BOOK-ENTRY CERTIFICATES...............................................................13
SECTION 3.12. NOTICES TO CLEARING AGENCY............................................................14
SECTION 3.13. DEFINITIVE TRUST CERTIFICATES.........................................................14
ARTICLE FOUR ACTIONS BY OWNER TRUSTEE................................................................15
SECTION 4.01. PRIOR NOTICE TO HOLDERS WITH RESPECT TO CERTAIN MATTERS...............................15
SECTION 4.02. ACTION BY HOLDERS WITH RESPECT TO CERTAIN MATTERS.....................................16
SECTION 4.03. ACTION BY HOLDERS WITH RESPECT TO BANKRUPTCY..........................................16
SECTION 4.04. RESTRICTIONS ON HOLDERS'POWER.........................................................16
SECTION 4.05. MAJORITY CONTROL......................................................................16
ARTICLE FIVE APPLICATION OF TRUST FUNDS; CERTAIN DUTIES..............................................17
SECTION 5.01. ESTABLISHMENT OF TRUST ACCOUNT........................................................17
SECTION 5.02. APPLICATION OF TRUST FUNDS............................................................17
SECTION 5.03. METHOD OF PAYMENT.....................................................................17
SECTION 5.04. NO SEGREGATION OF MONEYS; NO INTEREST.................................................18
SECTION 5.05. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS, HOLDERS, THE INTERNAL REVENUE
SERVICE AND OTHERS....................................................................18
SECTION 5.06. SIGNATURE ON RETURNS; TAX MATTERS PARTNER.............................................18
ARTICLE SIX AUTHORITY AND DUTIES OF OWNER TRUSTEE...................................................19
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<PAGE>
SECTION 6.01. GENERAL AUTHORITY.....................................................................19
SECTION 6.02. GENERAL DUTIES........................................................................19
SECTION 6.03. ACTION UPON INSTRUCTION...............................................................19
SECTION 6.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN INSTRUCTIONS....................20
SECTION 6.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS............................21
SECTION 6.06. RESTRICTIONS..........................................................................21
ARTICLE SEVEN CONCERNING THE OWNER TRUSTEE............................................................21
SECTION 7.01. ACCEPTANCE OF TRUSTS AND DUTIES.......................................................21
SECTION 7.02. FURNISHING OF DOCUMENTS...............................................................22
SECTION 7.03. REPRESENTATIONS AND WARRANTIES........................................................22
SECTION 7.04. RELIANCE; ADVICE OF COUNSEL...........................................................23
SECTION 7.05. NOT ACTING IN INDIVIDUAL CAPACITY.....................................................24
SECTION 7.06. OWNER TRUSTEE NOT LIABLE FOR TRUST CERTIFICATES, NOTES OR CONTRACTS...................24
SECTION 7.07. OWNER TRUSTEE MAY OWN TRUST CERTIFICATES AND NOTES....................................24
ARTICLE EIGHT COMPENSATION OF OWNER TRUSTEE...........................................................25
SECTION 8.01. OWNER TRUSTEE'S FEES AND EXPENSES.....................................................25
SECTION 8.02. INDEMNIFICATION.......................................................................25
SECTION 8.03. PAYMENTS TO THE OWNER TRUSTEE.........................................................25
ARTICLE NINE TERMINATION OF TRUST AGREEMENT..........................................................25
SECTION 9.01. TERMINATION OF TRUST AGREEMENT........................................................25
ARTICLE TEN SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES..................................27
SECTION 10.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE............................................27
SECTION 10.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE...............................................27
SECTION 10.03. SUCCESSOR OWNER TRUSTEE...............................................................28
SECTION 10.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE..............................................28
SECTION 10.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.........................................28
ARTICLE ELEVEN MISCELLANEOUS...........................................................................30
SECTION 11.01. SUPPLEMENTS AND AMENDMENTS............................................................30
SECTION 11.02. NO LEGAL TITLE TO TRUST ESTATE IN HOLDERS.............................................31
SECTION 11.03. LIMITATIONS ON RIGHTS OF OTHERS.......................................................31
SECTION 11.04. NOTICES...............................................................................31
SECTION 11.05. SEVERABILITY OF PROVISIONS............................................................33
SECTION 11.06. COUNTERPARTS..........................................................................33
SECTION 11.07. SUCCESSORS AND ASSIGNS................................................................33
SECTION 11.08. NO PETITION...........................................................................34
SECTION 11.09. NO RECOURSE...........................................................................34
SECTION 11.10. HEADINGS..............................................................................34
SECTION 11.11. GOVERNING LAW.........................................................................34
SECTION 11.12. TRUST CERTIFICATE TRANSFER RESTRICTIONS...............................................34
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Form of Certificate of Trust......................................................................A-1
Exhibit B - Form of Trust Certificate.........................................................................B-1
</TABLE>
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<PAGE>
This Trust Agreement (the "AGREEMENT") dated as of __________, 2000, is
by and between DEALER AUTO RECEIVABLES CORP., a Delaware corporation, as
Depositor (the "DEPOSITOR"), and _________________, a _________________, as
owner trustee (the "OWNER TRUSTEE").
WHEREAS, in connection herewith, the Depositor is willing to assume
certain obligations pursuant hereto;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. CAPITALIZED TERMS. Except as otherwise provided in this
Agreement, whenever used in this Agreement the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
"ADMINISTRATION AGREEMENT" means the administration agreement, dated as
of the date hereof, among the Trust, the Depositor, the Indenture Trustee and
Premier Auto Finance, Inc., as administrator.
"AGREEMENT" means this Trust Agreement, as the same may be amended and
supplemented from time to time.
"APPLICANT" shall have the meaning set forth in SECTION 3.07.
"BENEFIT PLAN" means (i) an employee benefit plan (as such term is
defined in SECTION 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (ii) a plan described in SECTION 4975(e)(1) of the Code or (iii) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity.
"BOOK-ENTRY TRUST CERTIFICATE" means a beneficial interest in the Trust
Certificates, the ownership of which shall be evidenced by, and transfers of
which shall be made through book entries by a Clearing Agency as described in
SECTION 3.11.
"BUSINESS TRUST STATUTE" means Chapter 38 of Title 12 of the Delaware
Code, 12 DEL. CODE SECTION 3801 ET SEQ., as the same may be amended from time to
time.
"CERTIFICATE DEPOSITORY AGREEMENT" means the agreement dated as of the
Closing Date, by and among the Trust, the Owner Trustee, the Administrator and
DTC, as the initial Clearing Agency, substituting, in the form attached hereto
as EXHIBIT A, relating to the Trust Certificates, as the same may be amended and
supplemented from time to time.
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<PAGE>
"CERTIFICATE DISTRIBUTION ACCOUNT" means the account established and
maintained as such pursuant to SECTION 5.01.
"CERTIFICATE OF TRUST" means the Certificate of Trust filed for the
Trust pursuant to SECTION 3810(a) of the Business Trust Statute, substantially
in the form of EXHIBIT A hereto.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" mean the register
maintained and the registrar (or any successor thereto) appointed pursuant to
SECTION 3.04(a).
"CERTIFICATEHOLDER" or "HOLDER" means with respect to Definitive Trust
Certificates the Person in whose name a Trust Certificate is registered in the
Certificate Register and with respect to a Book-Entry Trust Certificate, the
Person who is the owner of such Book-Entry Trust Certificate, as reflected on
the books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly or as an indirect participant, in
either case, in accordance with the rules of such Clearing Agency), except that,
solely for the purposes of giving any consent, waiver, request or demand
pursuant to this Agreement, the interest evidenced by any Trust Certificate
registered in the name of the Depositor, Premier Auto Finance, Inc. or any of
their respective Affiliates shall not be taken into account in determining
whether the requisite percentage necessary to effect any such consent, waiver,
request or demand in respect of the Trust Certificates shall have been obtained.
"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 on or about _____________, 2000.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DEFINITIVE TRUST CERTIFICATES" shall have the meaning set forth in
SECTION 3.11.
"DEPOSITOR" means Dealer Auto Receivables Corp. in its capacity as
Depositor hereunder, and its successors.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPENSES" shall have the meaning assigned to such term in SECTION
8.02.
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<PAGE>
"INDEMNIFIED PARTIES" shall have the meaning assigned to such term in
SECTION 8.02.
"INDENTURE" means the Indenture dated as of the date hereof between the
Trust and The Bank of New York, as Indenture Trustee.
"INITIAL CERTIFICATE BALANCE" means $______________.
"NOTE DEPOSITORY AGREEMENT" means the Agreement dated as of the Closing
Date among the Trust, the Indenture Trustee, the Administrator and DTC, as the
initial Clearing Agency, relating to the Notes, as the same may be amended and
supplemented from time to time.
"NOTES" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class B Notes, in each case issued pursuant to the Indenture.
"OWNER TRUSTEE" means __________________, a Delaware corporation, not
in its individual capacity but solely as owner trustee under this Agreement, and
any successor Owner Trustee hereunder.
"OWNER TRUSTEE CORPORATE TRUST OFFICE" means the office of the Owner
Trustee at which its corporate trust business shall be administered, which
initially shall be [____________], or such other office at such other address as
the Owner Trustee may designate from time to time by notice to the
Certificateholders, the Servicer, the Depositor and Premier Auto Finance, Inc.
"PAYING AGENT" means any paying agent or co-paying agent appointed
pursuant to SECTION 3.10.
"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.
"RECORD DATE" means, with respect to any Distribution Date, the last
Business Day of the preceding calendar month.
"SALE AND SERVICING AGREEMENT" means the sale and servicing agreement,
dated as of the date hereof, among the Trust, as Issuer, the Depositor, Premier
Auto Finance, Inc., as servicer, and The Bank of New York, as Indenture Trustee
as the same may be amended or supplemented from time to time.
"SECRETARY OF STATE" means the Secretary of State of the State of
Delaware.
"TAX MATTERS PARTNER" shall have the meaning provided in SECTION
5.06(b).
"TREASURY REGULATIONS" means regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary
-3-
<PAGE>
regulations shall include analogous provisions of final Treasury Regulations or
other successor Treasury Regulations.
"TRUST" means the trust established by this Agreement.
"TRUST CERTIFICATES" means the trust certificates evidencing the
beneficial equity interest of a Holder in the Trust, substantially in the form
of EXHIBIT B hereto.
"TRUST ESTATE" means all right, title and interest of the Trust in and
to the property and rights assigned to the Trust pursuant to Article Two 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 Trust pursuant to
the Sale and Servicing Agreement and the Administration Agreement.
"UNDERWRITERS" means Chase Securities Inc. and Aon Capital Markets,
Inc.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS. Capitalized terms used
that are not otherwise defined herein shall have the meanings ascribed thereto
in the Sale and Servicing Agreement or, if not defined therein, in the
Indenture.
SECTION 1.03. USAGE OF TERMS. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "WRITING" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "INCLUDING" means "INCLUDING WITHOUT LIMITATION".
SECTION 1.04. SECTION REFERENCES. All section references, unless
otherwise indicated, shall be to Sections in this Agreement.
SECTION 1.05. ACCOUNTING TERMS. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
ARTICLE TWO
ORGANIZATION
SECTION 2.01. NAME. The Trust created hereby shall be known as "DEALER
AUTO RECEIVABLES OWNER TRUST 2000-1", in which name the Owner Trustee may
conduct the activities
-4-
<PAGE>
of the Trust, make and execute contracts and other instruments on behalf of the
Trust and sue and be sued.
SECTION 2.02. OFFICE. The office of the Trust shall be in care of the
Owner Trustee at the Owner Trustee Corporate Trust Office or at such other
address in Delaware as the Owner Trustee may designate by written notice to the
Holders and the Depositor.
SECTION 2.03. PURPOSES AND POWERS.
(a) The sole purpose of the Trust is to manage the Trust Estate and
collect and disburse the periodic income therefrom for the use and benefit of
the Holders, and in furtherance of such purpose to engage in the following
ministerial activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to exchange the Notes and
the Trust Certificates for the Trust Estate pursuant to the Sale and
Servicing Agreement;
(ii) to acquire the Contracts and other property from the
Depositor pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Holders pursuant to 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
Transaction Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Transaction Documents, to
engage in such other activities as may be required in connection with
conservation of the Trust Estate and the making of distributions to the
Holders and the Noteholders.
The Trust shall not engage in any activities other than in connection with the
foregoing. Nothing contained herein shall be deemed to authorize the Owner
Trustee to engage in any business operations or any activities other than those
set forth in the introductory sentence of this Section. Specifically, the Owner
Trustee shall have no authority to engage in any business operations, or acquire
any assets other than those specifically included in the Trust Estate under
SECTION 1.01, or otherwise vary the assets held by the Trust. Similarly, the
Owner Trustee shall have no discretionary duties other than performing those
ministerial acts set forth above necessary to accomplish the purpose of this
Trust as set forth in the introductory sentence of this Section.
-5-
<PAGE>
SECTION 2.04. APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein, and the
Owner Trustee hereby accepts such appointment.
SECTION 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $_____________. 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 Trust Estate
and shall be deposited in the Reserve Account pursuant to SECTION 7.04 of the
Sale and Servicing Agreement. The Depositor 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.
SECTION 2.06. DECLARATION OF TRUST. The Owner Trustee hereby declares
that it will hold the Trust Estate in trust upon and subject to the conditions
set forth herein for the sole purpose of conserving the Trust Estate and
collecting and disbursing the periodic income therefrom for the use and benefit
of the Holders, subject to the obligations of the Trust under the Transaction
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, with the assets of the partnership
being the Contracts and other assets held by the Trust, the partners of the
partnership being the Certificateholders (including the Depositor) and the Notes
being debt of the partnership. The parties agree that, unless otherwise required
by a final determination to the contrary, 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, the partners of the
partnership being the Certificateholders (including the Depositor) and the Notes
being debt of the 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 in the Business Trust Statute for the sole purpose and to the extent
necessary to accomplish the purpose of this Trust as set forth in the
introductory sentence of SECTION 2.03.
SECTION 2.07. LIABILITY OF DEPOSITOR. No Owner, solely by virtue of its
being the Holder of a Trust Certificate, shall have any personal liability for
any liability or obligation of the Trust.
SECTION 2.08. TITLE TO TRUST PROPERTY. Legal title to the Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Trust
Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee, a co-trustee and/or a separate
trustee, as the case may be.
SECTION 2.09. 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 Illinois or the
State of Delaware. The Trust shall not have any employees
-6-
<PAGE>
in any state other than Delaware; PROVIDED, HOWEVER, that nothing herein shall
restrict or prohibit the Owner Trustee from having employees within or without
the State of Delaware. Payments will be received by the Trust only in Delaware
and payments will be made by the Trust only from Delaware. The only office of
the Trust will be at the Owner Trustee Corporate Trust Office.
SECTION 2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.
The Depositor hereby represents and warrants to the Owner Trustee that:
(i) The Depositor is duly organized and validly existing as a
corporation organized and existing and in good standing under the laws
of the State of Delaware, with power and authority to own its
properties and to conduct its business and had at all relevant times,
and has, power, authority and legal right to acquire and own the
Contracts.
(ii) The Depositor 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 or the conduct of its business requires such
qualifications.
(iii) The Depositor has the 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 as part of the Trust Estate
and has duly authorized such sale and assignment and deposit with the
Trust by all necessary corporate action; and the execution, delivery
and performance of this Agreement have been duly authorized by the
Depositor by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Depositor, or any
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 the properties of the Depositor pursuant to the
terms of any such indenture, agreement or other instrument (other than
pursuant to the Transaction Documents); nor violate any law or 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.
(v) There are no proceedings or investigations pending, or to
the Depositor's best knowledge threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Depositor or
-7-
<PAGE>
its properties: (A) asserting the invalidity of this Agreement, any of
the other Transaction Documents or the Trust Certificates, (B) seeking
to prevent the issuance of the Trust Certificates or the consummation
of any of the transactions contemplated by this Agreement or any of the
other Transaction Documents, (C) seeking any determination or ruling
that might materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability
of, this Agreement, any of the other Transaction Documents or the Trust
Certificates or (D) involving the Depositor and which might adversely
affect the federal income tax or other federal, state or local tax
attributes of the Trust Certificates.
SECTION 2.11. FEDERAL INCOME TAX ALLOCATIONS.
(a) Trust items of income, gain, loss and deduction for any month as
determined for federal income tax purposes shall be allocated as follows:
(i) The Certificateholders, as of the first Record Date
following the end of such month, shall be allocated the following items
in proportion to their ownership of the principal amount of Trust
Certificates on such date: (A) interest equal to the Certificate
Interest Distributable Amount for such month, (B) accrued interest on
the excess, if any, of the Certificate Interest Distributable Amount
for the preceding Distribution Date over the amount in respect of
interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, to the extent permitted by
law, at the Pass-Through Rate from such preceding Distribution Date
through the current Distribution Date, (C) the portion of the market
discount on the Contracts accrued during such quarter that is allocable
to the excess, if any, of the initial aggregate principal amount of the
Trust Certificates over their initial aggregate issue price and (D) any
other items of income and gain payable to the Certificateholders for
such month; such sum to be reduced by any amortization deduction by the
Trust of premium on Contracts that corresponds to any excess of the
issue price of Trust Certificates over their principal amount; and
(ii) to the Depositor to the extent of any remaining items of
income, gain, loss and deduction.
If the items of income or gain of the Trust for any calendar quarter are
insufficient for the allocations described in SECTION 2.11(a)(i), subsequent
items of income or gain shall first be allocated to make up such shortfall
before being allocated as provided in SECTION 2.11(a)(ii).
(b) To the extent that the Depositor would be allocated cumulative
items of loss and deduction in excess of the sum of (A) the cumulative items of
income and gain, if any, allocated to the Depositor, PLUS (B) the cumulative
contributions made by the Depositor to the Trust, PLUS (C) the amount of Trust
liabilities or claims, if any, for which the Depositor is liable pursuant to
SECTION 2.07 or otherwise allocated under Section 752 of the Code, LESS (D) the
cumulative distributions made to the Depositor pursuant to SECTION 5.02, then
such excess items
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of loss and deduction shall instead be allocated among the
Certificateholders (other than the Depositor) as of the first Record Date
following the end of such quarter in proportion to their ownership of the
principal amount of Trust Certificates on such Record Date until the cumulative
items of loss and deduction allocated to such Certificateholders equal the sum
of (I) the cumulative items of income and gain allocated to such
Certificateholders, PLUS (II) the cumulative contributions made by such
Certificateholders to the Trust, PLUS (III) the amount of Trust liabilities
allocated to such Certificateholders under Section 752 of the Code, LESS (IV)
the cumulative distributions made to the Depositor pursuant to SECTION 5.02.
Thereafter, any such excess items of loss and deduction shall be allocated among
the Depositor and the other Certificateholders in accordance with how such
Persons are reasonably expected to bear the economic burden of such items.
(c) The provisions of this Agreement relating to the allocations are
intended to comply with Treasury Regulation Sections 1.704-1 and 1.704-2. The
Depositor and Premier Auto Finance, Inc. are authorized to modify the
allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the Depositor or to the Certificateholders, or as otherwise to cause
such allocations to have substantial economic effect within the meaning of
Regulations Section 1.704-1(b)(2) or to be deemed to be in accordance with the
interests in the Trust under such Treasury Regulations.
ARTICLE THREE
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.01. INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Depositor pursuant to SECTION 2.05 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
SECTION 3.02. THE TRUST CERTIFICATES. The Trust Certificates shall be
substantially in the form of EXHIBIT B hereto. The Trust Certificates shall be
issuable in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof. The Trust Certificates shall be executed by the Owner Trustee on
behalf of the Trust by manual or facsimile signature of an authorized officer of
the Owner Trustee and shall be deemed to have been validly issued when so
executed. Trust Certificates bearing the manual or facsimile signature of
individuals who were, at the time when such signatures were affixed, authorized
to sign on behalf of the Owner Trustee shall be valid and binding obligations of
the Trust, notwithstanding that such individuals or any of them 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 such Trust
Certificates. All Trust Certificates shall be dated the date of their
authentication.
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SECTION 3.03. AUTHENTICATION AND DELIVERY OF TRUST CERTIFICATES. The
Owner Trustee shall cause to be authenticated and delivered upon the order of
the Depositor, in exchange for the Contracts and the other assets of the Trust,
simultaneously with the sale, assignment and transfer to the Trust of the
Contracts and such other assets and the constructive delivery to the Trust of
the Contract Files and the other assets of the Trust, Trust Certificates duly
authenticated by the Owner Trustee, in authorized denominations equaling in the
aggregate the Initial Certificate Balance evidencing the entire ownership of the
Trust and Notes issued by the Trust and authenticated by the Indenture Trustee
in aggregate principal amount of, in the case of (i) Class A-1 Notes, $________,
(ii) Class A-2 Notes, $________, (iii) Class A-3 Notes $________, and (iv) Class
B Notes, $__________. No Trust Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there appears on such
Trust Certificate a certificate of authentication substantially in the form set
forth in the form of Trust Certificate attached hereto as EXHIBIT B, executed by
the Owner Trustee or its authenticating agent, by manual signature, and such
certificate upon any Trust Certificate shall be conclusive evidence, and the
only evidence, that such Trust Certificate has been duly authenticated and
delivered hereunder. Upon issuance, authorization and delivery pursuant to the
terms hereof, the Trust Certificates will be entitled to the benefits of this
Agreement.
SECTION 3.04. REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST
CERTIFICATES.
(a) The Owner Trustee shall cause to be kept at the office or agency to
be maintained pursuant to SECTION 3.08 by a certificate registrar (the
"CERTIFICATE REGISTRAR"), a register (the "CERTIFICATE REGISTER") in which,
subject to such reasonable regulations as it may prescribe, the Certificate
Registrar shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided. The Owner
Trustee is hereby initially appointed Certificate Registrar for the purpose of
registering Trust Certificates and transfers and exchanges of Trust Certificates
as herein provided. In the event that, subsequent to the Closing Date, the Owner
Trustee notifies the Administrator that it is unable to act as Certificate
Registrar, the Administrator shall appoint another bank or trust company, having
an office or agency located in the City of Chicago, Illinois, agreeing to act in
accordance with the provisions of this Agreement applicable to it, and otherwise
acceptable to the Owner Trustee, to act as successor Certificate Registrar
hereunder.
(b) Upon surrender for registration of transfer of any Trust
Certificate at the Owner Trustee Corporate Trust Office, the Owner Trustee shall
execute, authenticate and deliver (or shall cause 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 aggregate principal amount.
(c) At the option of a Certificateholder, Trust Certificates may be
exchanged for other Trust Certificates in authorized denominations of a like
aggregate principal amount, upon surrender of the Trust Certificates to be
exchanged at any such office or agency. Whenever any Trust Certificates are so
surrendered for exchange, the Owner Trustee on behalf of the Trust shall
execute, authenticate and deliver (or shall cause its authenticating agent to
authenticate and
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deliver) the Trust Certificates that the Certificateholder making the exchange
is entitled to receive. 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 Holder thereof or his attorney duly
authorized in writing.
(d) No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Trust Certificates.
(e) All Trust Certificates surrendered for registration of transfer or
exchange shall be canceled and subsequently destroyed by the Owner Trustee.
SECTION 3.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST CERTIFICATES.
If (i) any mutilated Trust Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Trust Certificate, and (ii) there is
delivered to the Certificate Registrar and the Owner Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice that such Trust Certificate has been acquired by a protected
purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner
Trustee or its 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 tenor and fractional undivided
interest. In connection with the issuance of any new Trust Certificate under
this Section, the Owner Trustee may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto. Any duplicate Trust Certificate issued pursuant to this
Section shall constitute complete and indefeasible evidence of ownership in the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Trust Certificate shall be found at any time.
SECTION 3.06. PERSONS DEEMED HOLDERS. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar and any of their respective agents may treat the Person in
whose name any Trust Certificate is registered as the owner of such Trust
Certificate for the purpose of receiving distributions pursuant to SECTION 5.02
and for all other purposes whatsoever, and none of the Owner Trustee, the
Certificate Registrar, any Paying Agent or any of their respective agents shall
be bound by any notice of the contrary.
SECTION 3.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Certificate Registrar shall furnish or cause to be furnished to
the Servicer and the Depositor, within 15 days after receipt by the Certificate
Registrar of a written request therefor from the Servicer or the Depositor, a
list, in such form as the Servicer or the Depositor may reasonably require, of
the names and addresses of the Certificateholders as of the most recent Record
Date. If three or more Certificateholders, or one or more Certificateholders of
Trust Certificates
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evidencing not less than 25% of the percentage interests of the Trust
Certificates (hereinafter referred to as "APPLICANTS"), 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 hereunder
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. Every Certificateholder, by receiving and holding a Trust
Certificate, agrees with the Servicer, the Depositor and the Owner Trustee that
none of the Servicer, the Depositor or the Owner Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders hereunder, regardless of the source from
which such information was derived.
SECTION 3.08. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall
maintain in New York, 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 this Agreement may be served. The Owner Trustee hereby
designates the Owner Trustee Corporate Trust Office as its office for such
purposes. The Owner Trustee shall give prompt written notice to the Depositor,
the Servicer and to Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 3.09. TEMPORARY TRUST CERTIFICATES. Pending the preparation of
Definitive Trust Certificates, the Owner Trustee, on behalf of the Trust, may
execute, authenticate and deliver, temporary Trust Certificates that are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Trust
Certificates in lieu of which they are issued. If temporary Trust Certificates
are issued, the Depositor will cause definitive Trust Certificates to be
prepared without unreasonable delay. After the preparation of definitive Trust
Certificates, the temporary Trust Certificates shall be exchangeable for
definitive Trust Certificates upon surrender of the temporary Trust Certificates
at the office or agency to be maintained as provided in SECTION 3.08, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Trust Certificates, the Owner Trustee shall execute and authenticate
and deliver in exchange therefor a like principal amount of definitive Trust
Certificates in authorized denominations. Until so exchanged, the temporary
Trust Certificates shall in all respects be entitled to the same benefits
hereunder as definitive Trust Certificates.
SECTION 3.10. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to SECTION 5.02(a) and shall report the amounts of such distributions
to the Owner Trustee. Any 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 Paying Agent if the Owner Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Agreement in any
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material respect. The Paying Agent initially shall be
[___________________________], and any co-paying agent chosen by the Paying
Agent that is acceptable to the Owner Trustee. Each Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Owner
Trustee. In the event that [__________________________] shall no longer be the
Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company). The Owner Trustee shall cause such
successor Paying Agent or any additional Paying Agent appointed by the Owner
Trustee to execute and deliver to the Owner Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Owner
Trustee that, as Paying Agent, such successor Paying Agent or additional 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 Paying
Agent shall return all unclaimed funds to the Owner Trustee and upon removal of
a Paying Agent such Paying Agent shall also return all funds in its possession
to the Owner Trustee. The provisions of SECTIONS 7.01, 7.03, 7.04 and 8.01 shall
apply to the Owner Trustee also in its role as Paying Agent, for so long as the
Owner Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
SECTION 3.11. BOOK-ENTRY CERTIFICATES. The Trust Certificates upon
original issuance will be issued in the form of one or more typewritten
certificates representing the Book-Entry Trust Certificates, to be delivered to
DTC, the initial Clearing Agency, by, or on behalf of, the Trust. The
certificate or certificates delivered to DTC evidencing such Trust Certificates
shall initially be registered on the Certificate Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Certificateholder (other
than the Company) will receive a definitive certificate representing such
Certificateholders' interest in the Trust Certificates, except as provided in
SECTION 3.13. Unless and until definitive, fully registered Trust Certificates
(the "DEFINITIVE TRUST CERTIFICATES") have been issued to Certificateholders
pursuant to SECTION 3.13:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Depositor, the Servicer, the Certificate Registrar
and the Owner Trustee, subject to the provisions and limitations of
SECTIONS 2.03 and 2.06, may deal with the Clearing Agency for all
purposes (including the making of distributions on the Trust
Certificates) as the authorized representative of the
Certificateholders;
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(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 Certificateholder shall be exercised only
through the Clearing Agency (or through procedures established by the
Clearing agency) and shall be limited to those established by law and
agreements between the Holder 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 3.13, the Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit distributions of principal and interest on the 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 Certificateholders
evidencing a specified percentage of the percentage interests thereof,
the Clearing Agency shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from
Certificateholders and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in Trust Certificates and has delivered such instructions to
the Owner Trustee.
SECTION 3.12. NOTICES TO CLEARING AGENCY. Whenever notice or other
communication to the Certificateholders is required hereunder, unless and until
Definitive Trust Certificates shall have been issued to Certificateholders
pursuant to SECTION 3.13, the Owner Trustee shall give all such notices and
communications specified herein to be given to Certificateholders to the
Clearing Agency.
SECTION 3.13 DEFINITIVE TRUST CERTIFICATES. If (i)(A) the
Administrator advises the Owner Trustee in writing that the Clearing Agency is
no longer willing or able to properly discharge its responsibilities as
described in the Certificate Depository Agreement and (B) the Owner Trustee or
the Administrator is unable to locate a qualified successor, (ii) the
Administrator, at its option, advises the Owner Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency, or (iii)
after the occurrence of an Event of Default or a Servicer Default,
Certificateholders representing beneficial interests aggregating more than 50%
of the Certificate Balance advise the Owner Trustee and the Clearing Agency
through the Clearing Agency Participants in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the best interests
of the Certificateholders, then the Clearing Agency shall notify all
Certificateholders and the Owner Trustee of the occurrence of any such event and
of the availability of Definitive Trust Certificates to Certificateholders
requesting the same. Upon surrender to the Owner Trustee by the Clearing Agency
of the certificates evidencing the Book-Entry Trust Certificates, accompanied by
registration instructions from the Clearing Agency for registration, the Owner
Trustee shall issue the Definitive Trust Certificates and deliver such
Definitive Trust Certificates in accordance with the instructions of the
Clearing Agency. Neither the Depositor, the Certificate Registrar nor the Owner
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively
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rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Trust Certificates, the Owner Trustee shall recognize the
Certificateholders of the Definitive Trust Certificates as Certificateholders
hereunder. The Owner Trustee shall not be liable if the Owner Trustee or the
Administrator is unable to locate a qualified successor Clearing Agency. The
Definitive Trust Certificates shall be printed, lithographed or engraved or may
be produced in any manner as is reasonably acceptable to the Owner Trustee, as
evidenced by its execution thereof.
ARTICLE FOUR
ACTIONS BY OWNER TRUSTEE
SECTION 4.01. PRIOR NOTICE TO HOLDERS WITH RESPECT TO CERTAIN MATTERS.
Subject to the provisions and limitations of SECTION 4.04, 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 Holders shall not
have notified the Owner Trustee in writing prior to the 30th day after such
notice is given that such Holders have withheld consent or provided alternative
direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Contracts) and the
compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for collection of
the Contracts);
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially and adversely affects the interest of the Holders;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any provision
in a manner or add any provision that would not materially and adversely affect
the interests of the Holders; or
(f) the amendment, change or modification of the Sale and Servicing
Agreement, except any amendment where the consent of any Certificateholder is
not required under the terms of the Sale and Servicing Agreement; or
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(g) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent, Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or the Agreement, as applicable.
SECTION 4.02. ACTION BY HOLDERS WITH RESPECT TO CERTAIN MATTERS.
Subject to the provisions and limitations of SECTION 4.04, the Owner Trustee
shall not have the power, except upon the direction of the Holders, to (a)
remove the Administrator pursuant to SECTION 8 of the Administration Agreement,
(b) appoint a successor Administrator pursuant to SECTION 8 of the
Administration Agreement, (c) remove the Servicer pursuant to SECTION 8.03 of
the Sale and Servicing Agreement, (d) except as expressly provided in the
Transaction Documents, sell the Contracts after the termination of the
Indenture, (e) initiate any claim, suit or proceeding by the Trust or compromise
any claim, suit or proceeding brought by or against the Trust, (f) authorize the
merger or consolidation of the Trust with or into any other business trust or
entity (other than in accordance with SECTION 3.10 of the Indenture) or (g)
amend the Certificate of Trust. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed by
the Holders.
SECTION 4.03. ACTION BY HOLDERS WITH RESPECT TO BANKRUPTCY. The Owner
Trustee shall not have the power to commence a voluntary proceeding in a
bankruptcy relating to the Trust without the unanimous prior approval of all
Holders and the delivery to the Owner Trustee by each such Holder of a
certificate certifying that such Holder reasonably believes that the Trust is
insolvent.
SECTION 4.04. RESTRICTIONS ON HOLDERS' POWER. The Holders shall not
direct the Owner Trustee to take or to 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 Transaction Documents or would be
contrary to the purpose of this Trust as set forth in SECTION 2.03, nor shall
the Owner Trustee be obligated to follow any such direction, if given.
SECTION 4.05. MAJORITY CONTROL. Except as expressly provided herein,
any action that may be taken by the Holders under this Agreement may be taken by
the Holder of Trust Certificates evidencing not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice of
the Holders delivered pursuant to this Agreement shall be effective if signed by
the Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
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ARTICLE FIVE
APPLICATION OF TRUST FUNDS;
CERTAIN DUTIES
SECTION 5.01. ESTABLISHMENT OF TRUST ACCOUNT. The Owner Trustee, for
the benefit of the Certificateholders, shall establish and maintain in the name
of the Trust an Eligible Account (the "CERTIFICATE DISTRIBUTION ACCOUNT"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Certificateholders.
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. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee for the benefit of the Certificateholders. If, at any time,
the Certificate Distribution Account ceases to be an Eligible Account, the Owner
Trustee (or the Depositor on behalf of the Owner Trustee, if the Certificate
Distribution Account is not then held by the Owner Trustee or an Affiliate
thereof) shall within ten Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency may consent) establish a new
Certificate Distribution Account as an Eligible Account and shall transfer any
cash and/or any investments to such new Certificate Distribution Account.
SECTION 5.02. APPLICATION OF TRUST FUNDS.
(a) On each Distribution Date, the Owner Trustee will distribute to
Certificateholders, on a pro rata basis, amounts deposited in the Certificate
Distribution Account pursuant to SECTION 7.03 of the Sale and Servicing
Agreement with respect to such Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to SECTION 9.06 of the Sale and Servicing Agreement with
respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocation 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 Holders 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
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that withholding tax is payable with respect to a distribution, the Owner
Trustee may in its sole discretion withhold such amounts in accordance with this
paragraph (c).
SECTION 5.03. METHOD OF PAYMENT. Subject to SECTION 9.01(c) respecting
the final payment upon retirement of each Certificate, distributions required to
be made to each Certificateholder of record on the related Record Date shall be
made either (a) by wire transfer, in immediately available funds, to the account
of such Certificateholder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to the Distribution Date and such Certificateholder's Certificates in
the aggregate evidence a denomination of not less than $1,000,000 or (b) by
check mailed to such Certificateholder at the address of such Holder appearing
in the Certificate Register; PROVIDED that, unless Definitive Certificates have
been issued pursuant to SECTION 3.13, 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 made by wire
transfer in immediately available funds to the account designated by such
nominee.
SECTION 5.04. NO SEGREGATION OF MONEYS; NO INTEREST. Subject to
SECTIONS 5.01 and 5.02, moneys received by the Owner Trustee hereunder need not
be segregated in any manner except to the extent required by law or the Sale and
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
SECTION 5.05. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS,
HOLDERS, THE INTERNAL REVENUE SERVICE AND OTHERS. The Owner Trustee shall (a)
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis and the accrual method of accounting, (b) deliver to each Holder, as may
be required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1) to enable each Holder to prepare its
federal and state income tax returns, (c) file such tax returns relating to the
Trust (including a partnership information return, IRS Form 1065) and make such
elections as from time to time may be required or appropriate under any
applicable state or federal statute or any rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income tax
purposes, (d) cause such tax returns to be signed in the manner required by law
and (e) collect or cause to be collected any withholding tax as described in and
in accordance with SECTION 5.02(c) with respect to income or distributions to
Holders. 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
Contracts. The Owner Trustee shall not make the election provided under SECTION
754 or SECTION 761 of the Code.
SECTION 5.06. SIGNATURE ON RETURNS; TAX MATTERS PARTNER.
(a) The Depositor shall sign on behalf of the Trust the tax returns of
the Trust.
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(b) The Depositor shall be designated the "TAX MATTERS PARTNER" of the
Trust pursuant to SECTION 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.01. GENERAL AUTHORITY. Subject to the provisions and
limitations of SECTIONS 2.03 and 2.06, the Owner Trustee is authorized and
directed to execute and deliver the Transaction Documents to which the Trust is
to be a party and each certificate or other document attached as an exhibit to
or contemplated by the Transaction Documents to which the Trust is to be a party
and any amendment or other agreement, as evidenced conclusively by the Owner
Trustee's execution thereof. 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 Transaction Documents. The Owner Trustee is further
authorized from time to time to take such action as the Administrator recommends
with respect to the Transaction Documents.
SECTION 6.02. GENERAL DUTIES. Subject to the provisions and limitations
of SECTIONS 2.03 and 2.06, it shall be the duty of the Owner Trustee to
discharge (or cause to be discharged through the Administrator) all of its
responsibilities pursuant to the terms of this Agreement and the Transaction
Documents to which the Trust is a party and to administer the Trust in the
interest of the Holders, subject to the Transaction Documents and in accordance
with the provisions of this Agreement. Without limiting the foregoing, the Owner
Trustee shall on behalf of the Trust file and prove any claim or claims that may
exist against Premier Auto Finance, Inc. in connection with any claims paying
procedure as part of an insolvency or receivership proceeding involving Premier
Auto Finance, Inc. Notwithstanding the foregoing, the Owner Trustee shall be
deemed to have discharged its duties and responsibilities hereunder and under
the Transaction Documents to the extent the Administrator has agreed in the
Administration Agreement to perform any act or to discharge any duty of the
Owner Trustee hereunder or under any Transaction Document, and the Owner Trustee
shall not be held liable for the default or failure of the Administrator to
carry out its obligations under the Administration Agreement.
SECTION 6.03. ACTION UPON INSTRUCTION.
(a) Subject to ARTICLE FOUR, in accordance with the terms of the
Transaction Documents the Holders may by written instruction direct the Owner
Trustee in the management of the Trust.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any other Transaction Document if the Owner Trustee shall
have reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner Trustee or is
contrary to the terms hereof or of any other Transaction Document or is
otherwise contrary to law.
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(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any other Transaction Document, the Owner Trustee shall promptly give notice (in
such form as shall be appropriate under the circumstances) to the Holders
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 Holders 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 and the
other Transaction Documents, as it shall deem to be in the best interests of the
Holders, 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
applicability of any provision of this Agreement or any other Transaction
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 in 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
Holders requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within ten days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action not inconsistent with this Agreement or the other
Transaction Documents, as it shall deem to be in the best interests of the
Holders, and shall have no liability to any Person for such action or inaction.
SECTION 6.04. 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 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 any document or written instruction received by the Owner
Trustee pursuant to SECTION 6.03; and no implied duties or obligations shall be
read into this Agreement or any other Transaction Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any other Transaction 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
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any part of the Trust Estate that result from actions by, or claims against, the
Owner Trustee that are not related to the ownership or the administration of the
Trust Estate.
SECTION 6.05. 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 Trust Estate except (i) in accordance
with the powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (ii) in accordance with the other Transaction
Documents and (iii) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to SECTION 6.03.
SECTION 6.06. RESTRICTIONS. The Owner Trustee shall not take any action
(i) that is inconsistent with the purposes of the Trust set forth in SECTION
2.03 or (ii) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal or state income tax
purposes. The Holders shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.
ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE
SECTION 7.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Trust Estate upon the terms of the Transaction Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder or
under any other Transaction Document under any circumstances, except (i) for its
own willful misconduct or negligence or (ii) in the case of the inaccuracy of
any representation or warranty contained in SECTION 7.03 expressly made by the
Owner Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment
made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Holder;
(c) no provision of this Agreement or any other Transaction 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 Transaction 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;
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(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Transaction 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 Trust Estate, or for or in respect of the validity or
sufficiency of the Transaction 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 any Noteholder or to
any Holder, other than as expressly provided for herein or expressly agreed to
in the Transaction Documents;
(f) the Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Depositor, the Indenture Trustee or the Servicer under
any of the Transaction Documents or otherwise and the Owner Trustee shall have
no obligation or liability to perform the obligations of the Trust under this
Agreement or the other Transaction Documents that are required to be performed
by the Administrator under the Administration Agreement, the Indenture Trustee
under the Indenture or the Servicer or the Depositor 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 the Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any other Transaction Document, at the request, order or direction
of the Holders, unless such Holders 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
other Transaction Document shall not be construed as a duty, and the Owner
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of any such act.
SECTION 7.02. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish
to the Holders 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
Transaction Documents.
SECTION 7.03. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby
represents and warrants to the Depositor and the Holders that:
(a) It is a 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.
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(b) It has taken all corporate action necessary to authorize the
execution an 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 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 bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound or result in the creation or imposition of
any lien, charge or encumbrance on the Trust Estate resulting from actions by or
claims against the Owner Trustee individually which are unrelated to this
Agreement or the other Transaction Documents.
(d) The execution, delivery and performance by the Owner Trustee of
this Agreement does not require the authorization, consent, or approval of, the
giving of notice to, the filing or registration with, or the taking of any other
action in respect of, any governmental authority or agency of the State of
Delaware or the United States of America regulating the corporate trust
activities of the Owner Trustee.
(e) This Agreement has been duly authorized, executed and delivered by
the Owner Trustee and shall constitute the legal, valid, and binding agreement
of the Owner Trustee, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization and other
laws affecting the rights of creditors generally, and by general principles of
equity regardless of whether enforcement is pursuant to proceeding in equity or
at law.
SECTION 7.04. 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 determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the other
Transaction Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to
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agreements entered into by any of them, and the Owner Trustee shall not be
liable for the conduct or misconduct of 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.
SECTION 7.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in
this Article Seven, in accepting the trusts hereby created, _______________ acts
solely as Owner Trustee hereunder and not in its individual capacity, and all
Persons having any claim against the Owner Trustee by reason of the transactions
contemplated by this Agreement or any other Transaction Document shall look only
to the Trust Estate for payment or satisfaction thereof.
SECTION 7.06. OWNER TRUSTEE NOT LIABLE FOR TRUST CERTIFICATES, NOTES OR
CONTRACTS. The recitals contained herein and in the Trust Certificates (other
than the signature and countersignature of the Owner Trustee and the certificate
of authentication 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, any other Transaction Document or the
Trust Certificates (other than the signature and countersignature of the Owner
Trustee and the certificate of authentication on the Trust Certificates) or the
Notes, or of any Contract 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 Contract, or the perfection and priority of
any security interest created by any Contract in any Financed Vehicle or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Trust Estate or its ability to generate the payments to be
distributed to Certificateholders under this Agreement or the Noteholders under
the Indenture, including, without limitation, the existence, condition and
ownership of any Financed Vehicle; the existence and enforceability of any
insurance thereon; the existence and contents of any Contract on any computer or
other record thereof; the validity of the assignment of any Contract to the
Trust or of any intervening assignment; the completeness of any Contract; the
performance or enforcement of any Contract; the compliance by the Depositor or
the Servicer with any warranty or representation made under any Transaction
Document or in any related document or the accuracy of any such warranty or
representation; or any action of the Administrator, the Indenture Trustee or the
Servicer or any subservicer taken in the name of the Owner Trustee.
SECTION 7.07. 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
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
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ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE
SECTION 8.01. 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 and which shall be paid consistent with SECTION 7.03(a)
of the Sale and Servicing Agreement. Additionally, the Owner Trustee shall be
entitled to be reimbursed by the Servicer 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.
SECTION 8.02. INDEMNIFICATION. The Servicer shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its successors, assigns
and servants (collectively, the "INDEMNIFIED PARTIES") from and against, any and
all liabilities, obligations, losses, damages, taxes, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "EXPENSES") which may at any time be imposed on, incurred by or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the other Transaction Documents, the Trust
Estate, the administration of the Trust Estate or the action or inaction of the
Owner Trustee hereunder, except only that the Servicer shall not be liable for
or required to indemnify an Indemnified Party from and against Expenses arising
or resulting from any of the matters described in the third sentence of SECTION
7.01. The indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement or a
Service Transfer pursuant to SECTION 8.03 of the Sale and Servicing Agreement.
In the event of any claim, action or proceeding for which indemnity will be
sought pursuant to this Section, the Owner Trustee's choice of legal counsel
shall be subject to the approval of the Servicer, which approval shall not be
unreasonably withheld.
SECTION 8.03. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the
Owner Trustee pursuant to this Article shall be deemed not to be a part of the
Trust Estate immediately after such payment.
ARTICLE NINE
TERMINATION OF TRUST AGREEMENT
SECTION 9.01. TERMINATION OF TRUST AGREEMENT.
(a) This Agreement (other than Article Eight) and the Trust shall
terminate and be of no further force or effect upon the earlier of (i) final
distribution by the Owner Trustee of all moneys or other property or proceeds of
the Trust Estate in accordance with terms of the
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Indenture, the Sale and Servicing Agreement and Article Five and (ii) the
expiration of 21 years from the death of the survivor of the descendants of
Joseph P. Kennedy, the late Ambassador of the United States to the Court of St.
James's, living on the date hereof. The bankruptcy, liquidation, dissolution,
death or incapacity of any Holder, shall not (i) operate to terminate this
Agreement or the Trust, (ii) entitle such Holder'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 Trust Estate or
(iii) otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Except as provided in SECTION 9.01(a), neither the Depositor nor
any Holder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the 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 10.01 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 Owner Trustee or the 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 Owner Trustee or the Paying Agent therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust Certificates,
the Owner Trustee or the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant to
SECTION 5.02.
(d) 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 by the Owner
Trustee to the Depositor.
(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.
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ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation satisfying the provisions of SECTION
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) a rating of at least Baa3 by Moody's. 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 10.02.
SECTION 10.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator. Upon receiving such
notice of resignation, the Administrator shall promptly appoint a successor
Owner Trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Owner Trustee and one copy to the successor
Owner Trustee. If no successor Owner Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of SECTION 10.01 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or 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 Administrator, may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing
Owner Trustee.
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 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency.
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SECTION 10.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to SECTION 10.02 shall execute, acknowledge and deliver to
the Administrator, 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 Administrator and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
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 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and each Rating
Agency. If the Administrator shall fail to mail such notice within ten days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
SECTION 10.04. 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, 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, that such corporation shall be eligible pursuant to
SECTION 10.01 and, PROVIDED, FURTHER, that the Owner Trustee shall mail notice
of such merger or consolidation to each Rating Agency.
SECTION 10.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or any Financed Vehicle may at the time be located, the
Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
any part of the 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
Administrator and the Owner Trustee may consider necessary or desirable. If the
Administrator shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Owner
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Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor Owner Trustee pursuant to SECTION 10.01 and no notice
of the appointment of any co-trustee or separate trustee shall be required
pursuant to SECTION 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) 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 Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Owner Trustee;
(b) no trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this
Agreement; and
(c) the Administrator 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 trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. SUPPLEMENTS AND AMENDMENTS.
(a) This Agreement may be amended from time to time by the Depositor
and the Owner Trustee, with notice to the Rating Agencies, but without the
consent of the Trustees or any of the Securityholders, to correct manifest
error, to cure any ambiguity, to correct or supplement any provisions herein
which may be ambiguous or inconsistent with any other provisions herein or in
any other Transaction Document, as the case may be, or to add any other
provisions with respect to matters or questions arising under this Agreement
that shall not be inconsistent with the provisions of this Agreement; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel,
materially and adversely affect the interests of any Securityholder.
(b) This Agreement may also be amended from time to time by the
Depositor and the Owner Trustee, with the consent of Noteholders of more than
50% of the aggregate principal amount of the Class A-1 Notes, Class A-2 Notes
and Class A-3 Notes, or, if there are no Class A-1 Notes, Class A-2 Notes or
Class A-3 Notes outstanding, with the consent of Noteholders of more than 50% of
the aggregate principal amount of the Class B Notes, or, if there are no Notes
outstanding, with the consent of Certificateholders of more than 50% 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 Certificateholders;
PROVIDED, HOWEVER, that no such amendment or waiver shall (x) increase or reduce
in any manner the amount of, or accelerate or delay the timing of, collections
of payments on the Contracts or distributions which are required to be made on
any Note or Certificate, (y) change the interest rate on any Notes or
Certificates which such change adversely affects the priority of payment of
principal or interest made to the Noteholders or Certificateholders or (z)
reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the Noteholders and Certificateholders then outstanding;
and PROVIDED, FURTHER, that no such amendment or consent shall be effective
unless each Rating Agency delivers written confirmation that such amendment or
consent will not cause its then-current rating on any class of Notes or the
Certificates to be qualified, reduced or withdrawn.
(c) The consent of any Holder of a Note or Trust Certificate given
pursuant to this Section or pursuant to any other provision of this Agreement
shall be conclusive and binding on such Holders and on all future Holder of such
Note or Trust Certificate, as the case may be, issued upon the transfer thereof
or in exchange thereof or in lieu thereof whether or not notation of such
consent is made thereon
(d) 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,
-30-
<PAGE>
together with a copy thereof, to the Indenture Trustee, the Administrator and
each Rating Agency.
(e) 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. It shall not be necessary for
the consent of Certificateholders, Noteholders or the Indenture 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 Transaction
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.
(f) 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.
(g) Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. NO LEGAL TITLE TO TRUST ESTATE IN HOLDERS. The Holders
shall not have legal title to any part of the Trust Estate. The Holders shall be
entitled to receive distributions with respect to their undivided ownership
interest herein only in accordance with Articles Five and Nine. No transfer, by
operation of law or otherwise, of any right, title or interest of the Holders to
and in their ownership interest in the Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate.
SECTION 11.03. LIMITATIONS ON RIGHTS OF OTHERS. Except for SECTION
2.07, the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Holders, the Administrator and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than SECTION 2.07), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Trust Estate or under or in respect of this Agreement or
any covenants, conditions or provisions contained herein.
SECTION 11.04. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("NOTICES") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an
-31-
<PAGE>
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Premier Auto Finance, Inc.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: (___) _____-_____
(ii) If to the Depositor:
Dealer Auto Receivables Corporation
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: (___) ____-______
(iii) If to the Indenture Trustee:
The Bank of New York
[address]
--------------------------
Attention: _____________________________
Telecopier No.: (___) ____-______
(iv) If to the Owner Trustee:
[address]
--------------------------
Attention: _____________________________
Telecopier No.: (___) ____-______
-32-
<PAGE>
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies
25 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
(vii) If to the Underwriters:
Chase Securities Inc.
[address]
------------------------
Attention: ______________
Telecopier No.: (___) ____-______
Each party hereto may, by notice given in accordance herewith to each
of the other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11.05. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or
of the Trust Certificates or the rights of the Holders thereof.
SECTION 11.06. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 11.07. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor, and the Owner Trustee and their respective successors and permitted
assigns and each Holder and its successors and
-33-
<PAGE>
permitted assigns, all as herein provided. Any request, notice, direction,
consent, waiver or other instrument or action by a Holder shall bind the
successors and assigns of such Holder.
SECTION 11.08. NO PETITION.
(a) The Depositor will not at any time institute against the Trust any
bankruptcy 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 other Transaction
Documents.
(b) The Owner Trustee, by entering into this Agreement, each
Certificateholder, by accepting a Trust Certificate, and the Indenture Trustee
and each Noteholder, by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the
Depositor or the Trust, or join in any institution against the Depositor, or the
Trust of, any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Trust Certificates, the Notes, this Agreement or any of the other Transaction
Documents.
SECTION 11.09. 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 Depositor, the Servicer, the Seller, the Administrator,
the Owner Trustee, the Indenture Trustee or any of the respective Affiliates and
no recourse may be had against such parties or their assets, except as my be
expressly set forth or contemplated in this Agreement, the Trust Certificates or
the other Transaction Documents.
SECTION 11.10. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.11. 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 11.12. TRUST CERTIFICATE TRANSFER RESTRICTIONS. The Trust
Certificates may not be acquired by or for the account of a Benefit Plan. By
accepting and holding a Trust Certificate, the Holder thereof shall be deemed to
have represented and warranted that it is not a Benefit Plan nor will it hold
such Trust Certificate for the account of a Benefit Plan. By accepting and
holding a Trust Certificate, the Holder thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
[signature page follows]
-34-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.
DEALER AUTO RECEIVABLES
CORP.
as Depositor
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
_________________________-, as Owner Trustee
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE OF TRUST OF
Dealer Auto Receivables Owner Trust 2000-1
This Certificate of Trust of Dealer Auto Receivables Owner Trust
2000-1 (the "TRUST"), dated _______, 2000, is being duly executed and filed
by _____________, a _______________________, as Owner Trustee, to form a
business trust under the Delaware Business Trust Act (12 DEL. CODE, Section
3801 ET SEQ.).
1. NAME. The name of the business trust formed hereby is Dealer
Auto Receivables Owner Trust 2000-1.
2. DELAWARE TRUSTEE. The name and business address of the Owner
Trustee of the Trust in the State of Delaware is _________________,
[______________].
IN WITNESS WHEREOF, the undersigned, being the sole Owner Trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.
---------------------------
not in its individual capacity but solely as
Owner Trustee
By:
--------------------------------------
Printed Name:
----------------------------
Title:
-----------------------------------
<PAGE>
EXHIBIT B
FORM OF TRUST CERTIFICATE
[TO BE INSERTED ON CEDE & CO. CERTIFICATE -
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE 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.]
THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE NOTES TO THE
EXTENT DESCRIBED IN THE SALE AND SERVICING AGREEMENT AND INDENTURE REFERRED TO
HEREIN.
THIS TRUST CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
DEALER AUTO RECEIVABLES CORP., PREMIER AUTO FINANCE, INC. OR ANY AFFILIATE
THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE TRUST AGREEMENT.
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1
NO. ___________ Initial Trust Certificate
Principal Balance $______________
Fractional Interest _________%
THIS CERTIFIES THAT __________ is the registered owner of equity
$_____________ nonassessable, fully-paid, fractional undivided interest in the
Dealer Auto Receivables Owner Trust 2000-1 (the "TRUST") formed by Dealer Auto
Receivables Corp., a Delaware corporation (the "DEPOSITOR").
The Trust was created pursuant to a Trust Agreement, dated as of
_________, 2000 (as amended and supplemented from time to time, the "TRUST
AGREEMENT"), between Dealer Auto Receivables Corp. as Depositor (the
"DEPOSITOR") and ________________, as owner trustee (the "OWNER TRUSTEE"), a
summary of certain of the pertinent provisions of which is set forth below. To
the extent not otherwise defined herein, the capitalized terms used herein have
the meanings
<PAGE>
assigned to them in (i) the Trust Agreement, (ii) the Sale and
Servicing Agreement, dated as of ___________, 2000 (the "SALE AND SERVICING
AGREEMENT"), among the Trust, the Depositor, Premier Auto Finance, Inc., as
Servicer (in such capacity, the "SERVICER") and The Bank of New York, as
Indenture Trustee (the "Indenture Trustee") or (iii) the Indenture, dated as of
__________, 2000 (the "INDENTURE"), between the Trust and the Indenture Trustee.
This Trust Certificate is one of the duly authorized Trust Certificates
designated as "___% DEALER AUTO RECEIVABLES ASSET-BACKED CERTIFICATES" (the
"TRUST CERTIFICATES"). Also issued under the Indenture are four classes of notes
designated as "___% DEALER AUTO RECEIVABLES ASSET-BACKED NOTES, CLASS A-1,"
"___% DEALER AUTO RECEIVABLES ASSET-BACKED NOTES, CLASS A-2," "____% DEALER AUTO
RECEIVABLES ASSET-BACKED NOTES, CLASS A-3," and "____% DEALER AUTO RECEIVABLES
ASSET-BACKED NOTES, CLASS B" (collectively, 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 its acceptance hereof assents and by which such Holder is bound.
The property of the Trust includes, among other things, (i) all the right, title
and interest of the Depositor in and to the Contracts listed on the List of
Contracts in effect on the Closing Date (including, without limitation, all
security interests and all rights to receive scheduled payments and prepayments
which are collected pursuant thereto on or after the Cutoff Date, including any
liquidation proceeds therefrom, but excluding any rights to receive scheduled
payments due on or after, but received prior to, the Cutoff Date), (ii) all
security interests in each Financed Vehicle, (iii) all rights of the Depositor
to proceeds from any claims on theft, physical damage, credit life or disability
insurance or other individual insurance policy relating to any such Contract, an
Obligor or a Financed Vehicle securing such Contract, (iv) all documents
contained in the related Contract Files, (v) all rights (but not the
obligations) of the Depositor against any originating dealer or other third
party (i.e. the originators of the Contracts) under any agreements between the
Seller and such originating dealers or other third party, (vi) all rights of the
Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to
the extent they relate to such Contracts, (vii) any rebates of premiums and
other amounts relating to insurance policies, extended service contracts, other
repair agreements or any other items financed under such Contract, (viii) all
rights (but not the obligations) of the Depositor under the Transfer and Sale
Agreement, including but not limited to the Depositor's rights under ARTICLE V
thereof, (ix) all rights of the Depositor under the Performance Guarantee, (x)
the remittances, deposits and payments made into the Trust Accounts from time to
time and amounts in the Trust Accounts (other than the Reserve Fund) from time
to time (and any investments of such amounts), and (xi) all proceeds and
products of the foregoing.
Under the Trust Agreement, there will be distributed on the [ ] day of
each month or if such day is not a Business Day the next succeeding Business Day
commencing [ ], 2000 (each, a "DISTRIBUTION Date") and ending no later than the
Distribution Date in ___ to the person in whose name this Trust Certificate is
registered as of the last Business Day immediately preceding the calendar month
in which such Distribution Date occurs (each, a "RECORD DATE"),
<PAGE>
such Certificateholder's fractional undivided interest in the amount to be
distributed to Certificateholders on such Distribution Date.
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 to the extent described in the
Sale and Servicing Agreement and the Indenture.
It is the intent of the Seller, the Servicer, the Depositor, Owner
Trustee, Indenture Trustee and the Certificateholders that, for purposes of
federal income, state and local income and single business tax and any other
income taxes, the Trust will be treated as a partnership and the
Certificateholders (including the Depositor) will be treated as partners in that
partnership. The Depositor and the other Certificateholders, by acceptance of a
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 and the Certificateholders (including the Depositor) as
partners in that partnership.
Each Certificateholder, by its acceptance of a Trust Certificate or
beneficial interest in a Trust Certificate, covenants and agrees that such
Certificateholder will not at any time institute against the Trust or the
Depositor, or join in any institution against the Trust or the Depositor, or the
Servicer 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 other
Transaction Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee or its Agent by wire transfer or check
mailed to the Certificateholder of record in the 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 that purpose by the Owner Trustee in the City of New York, 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 any other Transaction Document or be valid for any
purpose.
<PAGE>
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.
<PAGE>
[REVERSE OF CERTIFICATE]
The Trust Certificate does not represent an obligation of, or an
interest in the Depositor, Premier Auto Finance, L.P., as the Seller or Premier
Auto Finance, Inc., as the Servicer, the Owner Trustee, the Indenture Trustee or
any of their respective Affiliates and no recourse may be had against such
parties or their assets, except as expressly set forth or contemplated herein or
in the Trust Agreement or the other Transaction 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 and
recoveries with respect to the Contracts and certain other amounts, in each case
as more specifically set forth herein and in the Sale and Servicing Agreement. A
copy of each of the Sale and Servicing Agreement and the Trust Agreement may be
examined by any Certificateholder upon written request during normal business
hours at the principal office of the Depositor and at such other places, if any,
designated by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of Noteholders
of more than 50% of the aggregate principal amount of the Class A-1 Notes, Class
A-2 Notes and Class A-3 Notes, or, if there are no Class A-1 Notes, Class A-2
Notes or Class A-3 Notes outstanding, with the consent of Noteholders of more
than 50% of the aggregate principal amount of the Class B Notes, or, if there
are no Notes outstanding, with the consent of Certificateholders of more than
50% of 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 herefor 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 New York, New York, accompanied by a written instrument
of transfer in form satisfactory to the Owner Trustee and the Certificate
Registrar in Chicago, Illinois executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Trust
Certificates of 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 as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates without coupons in denominations
of $1,000 and in integral multiples of $1,000 in excess thereof. As provided in
the Trust Agreement and subject to certain
<PAGE>
limitations therein set forth, Trust Certificates are exchangeable for new Trust
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any of their
respective agents 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 or 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 deposition of all property held as part
of the Trust Estate. The Seller may at its option purchase the Trust Estate at a
price specified in the Sale and Servicing Agreement, and such purchase of the
Contracts and other property of the Trust will affect early retirement of the
Trust Certificates; however, such right of purchase is exercisable only as of
any Distribution Date on which the unpaid Aggregate Principal Balance is less
than 10% of the Aggregate Principal Balance as of the Cutoff Date.
The Trust Certificates may not be acquired by a Benefit Plan. By
accepting and holding this Trust Certificate, the Holder hereof or, in the case
of Book-Entry Trust Certificate, by accepting a beneficial interest in this
Trust Certificate, the related Certificate Owner, shall be deemed to have
represented and warranted that it is not a Benefit Plan and is not acquiring
this Trust Certificate or an interest therein for the account of such an entity.
<PAGE>
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.
Dated: DEALER AUTO RECEIVABLES OWNER
TRUST 2000-1
By: ____________________, not in its individual
capacity but solely as Owner Trustee
By: ____________________
Authorized Signatory
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 capacity but solely
as Owner Trustee
By:
-------------------------------
Authorized Signatory
<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
- --------------------------------------------------------------------------------
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
------------
Signature Guaranteed:
- --------------------------------------- -----------------------------------
NOTICE: Signature(s) must be guaranteed NOTICE: The signature to this
by an eligible guarantor institution. assignment must correspond with the
name of the registered owner as it
appears on the face of the within
Trust Certificate in every
particular, without alteration or
enlargement or any change whatever.
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1).................................................................................................6.11
(a)(2).................................................................................................6.11
(a)(3).................................................................................................6.10
(a)(4).................................................................................................N.A.
(a)(5).................................................................................................6.11
(b).......................................................................................6.08; 6.11; 11.04
(c)....................................................................................................N.A.
311(a)....................................................................................................6.13
(b)....................................................................................................6.13
(c)....................................................................................................N.A.
312(a)..............................................................................................7.01; 7.02
(b)....................................................................................................7.02
(c)....................................................................................................7.02
313(a)....................................................................................................7.04
(b)....................................................................................................7.04
(c)....................................................................................................7.04
(d)....................................................................................................7.04
314(a)....................................................................................................7.03
(b)....................................................................................................3.06
(c)(1)....................................................................................2.02; 6.02; 11.01
(c)(2)................................................................................................11.01
(c)(3)................................................................................................11.01
(d)...................................................................................................11.01
(e)...................................................................................................11.01
(f)....................................................................................................N.A.
315(a)....................................................................................................6.01
(b)....................................................................................................6.05
(c)....................................................................................................6.01
(d)..............................................................................................5.12; 6.01
(e)....................................................................................................5.14
316(a)(1)(A)..............................................................................................5.12
(a)(1)(B)..............................................................................................5.02
(a)(2).................................................................................................N.A.
(b)....................................................................................................5.08
(c)....................................................................................................N.A.
317(a)..............................................................................................5.03; 5.04
(b)....................................................................................................3.03
318(a)...................................................................................................11.18
</TABLE>
----------
* N.A. means Not Applicable
* This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
i
<PAGE>
<TABLE>
ARTICLE ONE
<S> <C>
DEFINITIONS AND INCORPORATION BY REFERENCE........................................................................2
SECTION 1.01. Definitions...................................................................................2
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.............................................9
SECTION 1.03. Rules of Construction.........................................................................9
ARTICLE TWO
THE NOTES........................................................................................................10
SECTION 2.01. FORM.........................................................................................10
SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY.......................................................10
SECTION 2.03. TEMPORARY NOTES..............................................................................11
SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE..........................................11
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES...................................................12
SECTION 2.06. PERSONS DEEMED OWNER.........................................................................13
SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST........................................13
SECTION 2.08. CANCELLATION.................................................................................14
SECTION 2.09. BOOK-ENTRY NOTES.............................................................................14
SECTION 2.10. NOTICES TO CLEARING AGENCY...................................................................15
SECTION 2.11. DEFINITIVE NOTES.............................................................................15
SECTION 2.12. RELEASE OF COLLATERAL........................................................................16
SECTION 2.13. TAX TREATMENT................................................................................16
ARTICLE THREE
COVENANTS........................................................................................................16
SECTION 3.01. PAYMENT OF PRINCIPAL AND INTEREST............................................................16
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY..............................................................17
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST.......................................................17
SECTION 3.04. EXISTENCE....................................................................................18
SECTION 3.05. PROTECTION OF COLLATERAL.....................................................................19
SECTION 3.06. OPINIONS AS TO COLLATERAL....................................................................19
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF CONTRACTS...........................................20
SECTION 3.08. NEGATIVE COVENANTS...........................................................................20
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE............................................................21
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS...........................................21
SECTION 3.11. SUCCESSOR OR TRANSFEREE......................................................................23
SECTION 3.12. NO OTHER BUSINESS............................................................................23
SECTION 3.13. NO BORROWING.................................................................................24
SECTION 3.14. SERVICER'S OBLIGATIONS.......................................................................24
SECTION 3.15. GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES.............................................24
SECTION 3.16. CAPITAL EXPENDITURES.........................................................................24
<PAGE>
SECTION 3.17. RESTRICTED PAYMENTS..........................................................................24
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT..................................................................24
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS.................................................................24
SECTION 3.20. COMPLIANCE WITH LAWS.........................................................................24
SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST AGREEMENT...............................25
SECTION 3.22. REMOVAL OF ADMINISTRATOR.....................................................................25
ARTICLE FOUR
SATISFACTION AND DISCHARGE.......................................................................................25
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE......................................................25
SECTION 4.02. APPLICATION OF TRUST MONEY...................................................................26
SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT.....................................................26
SECTION 4.04. RELEASE OF COLLATERAL........................................................................26
SECTION 4.05. DURATION OF THE POSITION OF THE INDENTURE TRUSTEE FOR THE BENEFIT OF CERTIFICATEHOLDERS......26
ARTICLE FIVE
REMEDIES.........................................................................................................27
SECTION 5.01. EVENTS OF DEFAULT............................................................................27
SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT.................................................................28
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY INDENTURE TRUSTEE; AUTHORITY OF
INDENTURE TRUSTEE.............................................................................................28
SECTION 5.04. REMEDIES.....................................................................................30
SECTION 5.05. OPTIONAL PRESERVATION OF THE CONTRACTS.......................................................31
SECTION 5.06. PRIORITIES...................................................................................31
SECTION 5.07. LIMITATION OF SUITS..........................................................................31
SECTION 5.08. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST........................32
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES...........................................................32
SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE...............................................................33
SECTION 5.11. DELAY OR OMISSION NOT A WAIVER...............................................................33
SECTION 5.12. CONTROL BY NOTEHOLDERS.......................................................................33
SECTION 5.13. WAIVER OF PAST DEFAULTS......................................................................34
SECTION 5.14. UNDERTAKING FOR COSTS........................................................................34
SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS.............................................................34
SECTION 5.16. ACTION ON NOTES..............................................................................34
SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS...........................................34
ARTICLE SIX
THE INDENTURE TRUSTEE............................................................................................35
SECTION 6.01. DUTIES OF INDENTURE TRUSTEE..................................................................35
SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE..................................................................36
<PAGE>
SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE.......................................................37
SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER...............................................................38
SECTION 6.05. NOTICE OF DEFAULTS...........................................................................38
SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS......................................................38
SECTION 6.07. COMPENSATION AND INDEMNITY...................................................................38
SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE.............................................................39
SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER........................................................40
SECTION 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE TRUSTEE............................40
SECTION 6.11. ELIGIBILITY..................................................................................42
SECTION 6.12. PENNSYLVANIA MOTOR VEHICLE SALES FINANCE ACT LICENSES........................................43
SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.............................................43
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS...................................................................................43
SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS.......................43
SECTION 7.02. PRESERVATION OF INFORMATION: COMMUNICATION TO NOTEHOLDERS....................................43
SECTION 7.03. REPORTS BY ISSUER............................................................................44
SECTION 7.04. REPORTS BY INDENTURE TRUSTEE.................................................................44
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES.............................................................................44
SECTION 8.01. COLLECTION OF MONEY..........................................................................44
SECTION 8.02. TRUST ACCOUNTS...............................................................................45
SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS........................................................47
SECTION 8.04. RELEASE OF COLLATERAL........................................................................47
SECTION 8.05. OPINION OF COUNSEL...........................................................................48
ARTICLE NINE
SUPPLEMENTAL INDENTURES..........................................................................................48
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.......................................48
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS..........................................49
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES.........................................................51
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE.............................................................51
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT..........................................................51
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES................................................51
ARTICLE TEN
MANDATORY PREPAYMENT OF NOTES....................................................................................52
SECTION 10.01. PREPAYMENT...................................................................................52
SECTION 10.02. FORM OF MANDATORY PREPAYMENT NOTICE..........................................................52
<PAGE>
ARTICLE ELEVEN
MISCELLANEOUS....................................................................................................52
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC....................................................52
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE.............................................54
SECTION 11.03. ACTS OF NOTEHOLDERS..........................................................................55
SECTION 11.04. NOTICES......................................................................................55
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER...............................................................57
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS......................................................57
SECTION 11.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS.....................................................57
SECTION 11.08. SUCCESSORS AND ASSIGNS.......................................................................57
SECTION 11.09. SEPARABILITY.................................................................................58
SECTION 11.10. BENEFITS OF INDENTURE........................................................................58
SECTION 11.11. LEGAL HOLIDAYS...............................................................................58
SECTION 11.12. GOVERNING LAW................................................................................58
SECTION 11.13. COUNTERPARTS.................................................................................58
SECTION 11.14. RECORDING OF INDENTURE.......................................................................58
SECTION 11.15. TRUST OBLIGATION.............................................................................58
SECTION 11.16. NO PETITION..................................................................................59
SECTION 11.17. INSPECTION...................................................................................59
SECTION 11.18. CONFLICT WITH TRUST INDENTURE ACT............................................................59
</TABLE>
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exhibit A - Form of Sale and Servicing Agreement...............................................................A-1
Exhibit B - Form of Class A-1 Note.............................................................................B-1
Exhibit C - Form of Class A-2 Note.............................................................................C-1
Exhibit D - Form of Assignment.................................................................................D-1
Exhibit E - Form of Note Depository Agreement .................................................................E-1
</TABLE>
<PAGE>
===============================================================================
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1,
as Issuer,
and
[-------------------------------],
not in its individual capacity but solely in its capacity
as Indenture Trustee
-----------------------------------
INDENTURE
Dated as of _________________, 2000
-----------------------------------
$______________ ____% Dealer Auto Receivables Asset-Backed Notes, Class A-1
$______________ ____% Dealer Auto Receivables Asset-Backed Notes, Class A-2
$______________ ____% Dealer Auto Receivables Asset-Backed Notes, Class A-3
$______________ ____% Dealer Auto Receivables Asset-Backed Notes, Class B
===============================================================================
<PAGE>
Indenture, dated as of _____________, 2000 (this "INDENTURE"), between
Dealer Auto Receivables Owner Trust 2000-1, a Delaware business trust (the
"ISSUER") and [_______________], in its capacity as indenture trustee (the
"INDENTURE TRUSTEE") and not in its individual capacity.
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Issuer's ____% Dealer Auto
Receivables Asset-Backed Notes, Class A-1 (the "CLASS A-1 NOTES"), ____% Dealer
Auto Receivables Asset-Backed Notes, Class A-2 (the "CLASS A-2 NOTES"), ____%
Dealer Auto Receivables Asset-Backed Notes, Class A-3 (the "CLASS A-3 NOTES"),
and ____% Dealer Auto Receivables Asset-Backed Notes, Class B (the "CLASS B
NOTES" and together with the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, the "NOTES"):
GRANTING CLAUSE
The Issuer Grants to the Indenture Trustee on the Closing Date, on behalf
of and for the benefit of the Holders of the Notes, without recourse, all of the
Issuer's right, title and interest (exclusive of the amount, if any, allocable
to any rebatable insurance premium financed by any Contract) in, to and under:
(i) all the right, title and interest of the Issuer in and to the Contracts
listed on the List of Contracts in effect on the Closing Date (including,
without limitation, all security interests and all rights to receive scheduled
payments and prepayments which are collected pursuant thereto on or after the
Cutoff Date, including any liquidation proceeds therefrom, but excluding any
rights to receive scheduled payments due on or after, but received prior to, the
Cutoff Date), (ii) all security interests in each Financed Vehicle, (iii) all
rights of the Issuer to proceeds from any claims on theft, physical damage,
credit life or disability insurance or other individual insurance policy
relating to any such Contract, an Obligor or a Financed Vehicle securing such
Contract, (iv) all documents contained in the related Contract Files, (v) all
rights (but not the obligations) of the Issuer against any originating dealer or
other third party (i.e. the originators of the Contracts) under any agreements
between the Seller and such originating dealers or other third party, (vi) all
rights of the Issuer in the Lockbox, the Lockbox Account and related Lockbox
Agreement to the extent they relate to such Contracts, (vii) any rebates of
premiums and other amounts relating to insurance policies, extended service
contracts, other repair agreements or any other items financed under such
Contract, (viii) all rights (but not the obligations) of the Issuer under the
Transfer and Sale Agreement, including but not limited to the Issuer's rights
under ARTICLE V thereof, (ix) all rights of the Issuer under the Performance
Guarantee, (x) the remittances, deposits and payments made into the Trust
Accounts from time to time and amounts in the Trust Accounts (other than the
Reserve Fund) from time to time (and any investments of such amounts), (xi) all
rights (but not the obligations) of the Issuer under the Sale and Servicing
Agreement, (xii) all present and future claims, demands, causes of and choses in
action in respect of any or all of the foregoing, and (xiii) 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 of 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 (as each such defined term is defined in
SECTION 1.01) (collectively, the "Collateral").
<PAGE>
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 for the
subordination of the Class B Notes provided herein and all other sums owing by
the Issuer hereunder or under any other Transaction Document, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of
the Notes, acknowledges such Grant, accepts the trust 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 ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
(a) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth
below for all purposes of this Indenture.
"ACT" shall have the meaning specified in SECTION 11.03(a).
"ADMINISTRATION AGREEMENT" means the Administration Agreement, dated as
of the date hereof, among the Administrator, the Issuer, the Depositor and the
Indenture Trustee.
"ADMINISTRATOR" means Premier Auto Finance, Inc. or any successor
Administrator under the Administration Agreement.
"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
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.
"AUTHORIZED OFFICER" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
2
<PAGE>
"BOOK ENTRY NOTES" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in SECTION 2.09.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banking institutions in the city of Chicago, Illinois, Wilmington,
Delaware or New York, New York are authorized or obligated by law, executive
order or governmental decree to be closed.
"CERTIFICATE FINAL DISTRIBUTION DATE" means the [INSERT MONTH AND YEAR]
Distribution Date.
"CERTIFICATE OF TRUST" means the Certificate of Trust of the Issuer
substantially in the form of EXHIBIT B to the Trust Agreement.
"CLASS" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"CLASS A-1 FINAL DISTRIBUTION DATE" means the [INSERT MONTH AND YEAR]
Distribution Date.
"CLASS A-1 RATE" means ____% per annum (computed on the basis of a
360-day year of twelve 30-day months).
"CLASS A-1 NOTES" means the Class A-1 Notes, substantially in the form of
EXHIBIT B.
"CLASS A-2 FINAL DISTRIBUTION DATE" means the [INSERT MONTH AND YEAR]
Distribution Date.
"CLASS A-2 RATE" means ____% per annum (computed on the basis of a
360-day year of twelve 30-day months).
"CLASS A-2 NOTES" means the Class A-2 Notes, substantially in the form of
EXHIBIT C.
"CLASS A-3 FINAL DISTRIBUTION DATE" means the [INSERT MONTH AND YEAR]
Distribution Date.
"CLASS A-3 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 Notes, substantially in the form of
EXHIBIT D.
"CLASS B FINAL DISTRIBUTION DATE" means the [INSERT MONTH AND YEAR]
Distribution Date.
"CLASS B RATE" means ____% per annum (computed on the basis of a 360-day
year of twelve 30-day months).
"CLASS B NOTES" means the Class B Notes, substantially in the form of
EXHIBIT E.
3
<PAGE>
"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 ______________, 2000.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Collateral Granted to the Indenture Trustee under
this Indenture, including all proceeds thereof.
"COMMISSION" means the Securities and Exchange Commission.
"CORPORATE TRUST OFFICE" means the principal office of the Indenture
Trustee at which at any particular time its corporate trusts business shall be
administered which office at date of the execution of this Agreement is located
at [__________________________]; or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders 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).
"DEFAULT" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"DEFINITIVE NOTES" shall have the meaning specified in SECTION 2.09.
"DEPOSITOR" shall mean Dealer Auto Receivables Corp., in its capacity as
Depositor under the Sale and Servicing Agreement.
"DISTRIBUTION DATE" means the [________] day of each month or, if such
date shall not be a Business Day, the next succeeding Business Day, commencing
________________, 2000.
"DTC" means The Depository Trust Company, and its successors and assigns.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" shall have the meaning specified in SECTION 5.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"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.
4
<PAGE>
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the 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.
"HOLDER" OR "NOTEHOLDER" or "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) and with respect to a Definitive Note the Person
in whose name a Note is registered on the Note Register.
"INDEBTEDNESS" means, with respect to any Person at any time, (i)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (ii)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (iii) current liabilities of such Person in respect of
unfunded vested benefits under plans covered by Title IV of ERISA; (iv)
obligations issued for or liabilities incurred on the account of such Person;
(v) obligations or liabilities of such Person arising under acceptance
facilities; (vi) obligations of such Person under any guaranties, endorsements
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person or otherwise to assure a creditor against
loss; (vii) obligations of such Person secured by any lien on property or assets
of such Person, whether or not the obligations have been assumed by such Person;
or (viii) obligations of such Person under any interest rate or currency
exchange agreement.
"INDENTURE" means this Indenture, as amended or supplemented from time to
time.
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Noteholder.
"INDENTURE TRUSTEE" means [________________], as Indenture Trustee under
this Indenture, or any successor Indenture Trustee under this Indenture.
"INDEPENDENT" means, when used with respect to any specified Person, that
the Person (i) is in fact independent of the Issuer, any other obligor upon the
Notes, the Depositor, the Seller and any of their respective Affiliates, (ii)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any of their
5
<PAGE>
respective Affiliates, and (iii) 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, underwriters, trustee, partner, director or person
performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of SECTION 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"INTEREST PERIOD" means, with respect to any Distribution Date, and (i)
the Class A-1 Notes, means the period from and including the preceding
Distribution Date (or, in the case of the first Distribution Date, the Closing
Date) to but excluding such Distribution Date; and (ii) in the case of the Class
A-2 Notes, the Class A-3 Notes, the Class B Notes or the Certificates, means the
period from and including the fifteenth day of the month of the Distribution
Date immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but excluding the fifteenth day of the
month of such Distribution Date.
"INTEREST RATE" means the Class A-1 Rate, the Class A-2 Rate, the Class
A-3 Rate and the Class B Rate, as applicable.
"ISSUER" means Dealer Auto Receivables Owner Trust 2000-1 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.
"NOTE" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note or a
Class B Note.
"NOTE DEPOSITORY AGREEMENT" means the agreement dated as of the Closing
Date, among the Issuer, the Administrator, the Indenture Trustee and DTC, as the
initial Clearing Agency, relating to the Notes, substantially in the form of
EXHIBIT E hereto.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings
specified in SECTION 2.04.
"OFFICER'S CERTIFICATE" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of SECTION 11.01, and delivered to,
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"OPINION OF COUNSEL" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee
and which shall comply with any applicable
6
<PAGE>
requirements of SECTION 11.01, and shall be in form and substance satisfactory
to the Indenture Trustee.
"OUTSTANDING" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
for such notice has been made, satisfactory to the Indenture Trustee, has
been made); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes
are held by a protected purchaser, within the meaning of Section 8-303 of
the UCC.
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
Outstanding Amount have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any other Transaction Document,
Notes owned by the Issuer, any other obligor upon the Notes, the Depositor,
Premier Auto Finance, Inc. or any of their respective Affiliates shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
that the Indenture Trustee knows to be so owned shall be so disregarded. Notes
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Issuer, any other obligor upon the Notes, the Depositor, Premier Auto
Finance, Inc. or any of their respective Affiliates.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes of
one Class or of all Classes, as the case may be, Outstanding at the date of
determination.
"OWNER TRUSTEE" means [____________] not in its individual capacity but
solely as Owner Trustee under the Trust Agreement, or any successor trustee
under the Trust Agreement.
"PAYING AGENT" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in SECTION 6.11
and is authorized by the Issuer to make the distributions from the 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, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
7
<PAGE>
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and for the purpose of this definition, any Note
authenticated and delivered under SECTION 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"PROCEEDING" means any suit in equity, action at law or other judicial or
administrative proceeding.
"RATING AGENCY" means each of Moody's and Standard & Poor's.
"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have been given ten days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each Rating
Agency shall have notified the Depositor, the Servicer, the Indenture Trustee
and the Issuer in writing that such action will not result in a qualification,
reduction or withdrawal of its then-current rating of any Class of Notes.
"RATING EVENT" means the qualification, reduction or withdrawal by either
Rating Agency of its then-current rating of any Class of Notes.
"RECORD DATE" means, with respect to any Distribution Date, the last
Business Day of the preceding calendar month.
"REGISTERED HOLDER" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"RESPONSIBLE OFFICER" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office (or any successor group of the
Indenture Trustee), including any Vice President, assistant secretary or other
officer or assistant officer of the Indenture Trustee customarily performing
functions similar to those performed by the people who at such time shall be
officers, respectively, or to whom any corporate trust matter is referred at the
Corporate Trust Office of the Indenture Trustee because of his knowledge of and
familiarity with the particular subject.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement,
dated as of the date hereof, among the Issuer, the Depositor, the Indenture
Trustee and the Servicer, substantially in the form of EXHIBIT A hereto.
"SELLER" means Premier Auto Finance, L.P., in its capacity as Seller
under the Transfer and Sale Agreement, and any successors and assigns.
"SERVICER" means Premier Auto Finance, Inc., in its capacity as Servicer
under the Sale and Servicing Agreement, and any Successor Servicer thereunder.
"STATE" means any one of the 50 states of the United States or any of its
territories, or the District of Columbia.
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"TERMINATION DATE" means the date on which the Indenture Trustee shall
have received payment and performance of all amounts and obligations which the
Issuer may owe to or on behalf of the Indenture Trustee for the benefit of the
Noteholders under this Indenture or the Notes.
"TRUST AGREEMENT" means the Trust Agreement, dated as of the date hereof,
between the Depositor and the Owner Trustee.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939, as
amended.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"UNITED STATES" means the United States of America.
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used herein that are not otherwise defined
shall have the meanings ascribed thereto in the Sale and Servicing Agreement.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"COMMISSION" means the Securities and Exchange Commission.
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Noteholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Indenture
Trustee.
"OBLIGOR" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "OR" is not exclusive;
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(iv) "INCLUDING" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular;
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified or supplemented and includes (in the case of agreements
or instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns; and
(vii) the words "HEREOF," "HEREIN" and "HEREUNDER" and words of
similar import when used in this Indenture shall refer to this Indenture
as a whole and not to any particular provision of this Indenture;
Section, subsection and Schedule references contained in this Indenture
are references to Sections, subsections and Schedules in or to this
Indenture unless otherwise specified.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM. The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes and the Class B Notes, in each case together with the Indenture
Trustee's certificate of authentication, shall be in substantially the forms set
forth as Exhibits to this Indenture with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibits hereto are part of the terms of this Indenture.
SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be
executed on behalf of the Issuer by 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 Indenture Trustee shall, upon receipt of an Issuer Order,
authenticate and deliver for original issue (i) Class A-1 Notes in an aggregate
principal amount of $_________, (ii) Class A-2 Notes in an aggregate principal
amount of $___________, (iii) Class A-3 Notes in an aggregate principal amount
of $___________, and (iv) Class B Notes in an aggregate principal amount of
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$______________. The aggregate principal amount of Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class B Notes Outstanding at any time may not exceed
such respective amounts, except as otherwise provided in SECTION 2.05.
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 of $1,000 in excess thereof.
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 by the Indenture
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. TEMPORARY NOTES. Pending the preparation of Book-Entry
Notes or Definitive Notes, the Issuer may execute, and upon receipt of an Issuer
Order the Indenture Trustee shall authenticate and deliver, temporary Notes that
are printed, lithographed, typewritten, mimeographed or otherwise produced, of
the tenor of the definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
If temporary Notes are issued, the Issuer will cause Book-Entry Notes or
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Book-Entry Notes or Definitive Notes, the temporary Notes shall
be exchangeable for Book-Entry Notes or Definitive Notes upon surrender of the
temporary Notes at the office or agency of the Issuer to be maintained as
provided in SECTION 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute and
the Indenture Trustee shall authenticate and deliver in exchange therefor a like
tenor and principal amount of definitive Notes of authorized denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as Book-Entry Notes or Definitive Notes.
SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Note Registrar shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and
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addresses of the Holders of the Notes and the principal amounts and the 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 3.02, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, the Notes which the Noteholder making the exchange
is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located in the city in which the Corporate Trust Office is
located, or by a member firm of a national securities exchange, and such other
documents as the Indenture Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to SECTION 2.03 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 any Note for a period of 15 days preceding the due date for any
payment in full with respect to the Notes of that Class.
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by them to hold the Issuer and the Indenture
Trustee harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a
protected purchaser, within the meaning of Section 8-303 of the UCC, the Issuer
shall execute and upon its request the Indenture Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a replacement Note of the same Class and denomination;
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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,
instead of issuing a replacement Note, the Issuer may pay such destroyed, lost
or stolen Note when so due or payable without surrender thereof. If, after the
delivery of such replacement Note or payment of a destroyed, lost or stolen Note
pursuant to the proviso to the preceding sentence, a protected purchaser, within
the meaning of Section 8-303 of the UCC, of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, the
Issuer, and the Indenture Trustee shall be entitled to recover such replacement
Note (or such payment) from the Person to whom it was delivered or any Person
taking such replacement Note from such Person to whom such replacement Note was
delivered or any assignee of such Person, except a protected purchaser, within
the meaning of Section 8-303 of the UCC, and shall be entitled to recover upon
the security or indemnity provided therefor to the extent of any loss, damage,
cost or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
or the Indenture Trustee may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee or the Note Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost of 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 2.06. PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee, and any
of their respective agents may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Indenture Trustee nor any of their respective agents
shall be bound by notice to the contrary.
SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST.
(a) Each Class of Notes shall accrue interest at the related
Interest Rate, 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 2.11,
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with respect to the 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, except for the final installment of
principal payable with respect to such Note on a Distribution Date or on the
related Final Distribution Date, as the case may be, which shall be payable as
provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with SECTION 3.03.
(b) The principal of each Note shall be payable on each
Distribution Date to the extent provided in the form of the related Note set
forth as an Exhibit hereto. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which the maturity of the Notes has been accelerated in the
manner provided in SECTION 5.02. All principal payments on each Class of Notes
shall be made pro rata to the Noteholders of such Class entitled thereto. The
Indenture Trustee shall notify the Person in whose name a Note is registered at
the close of business on the Record Date preceding the 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 as provided in SECTION
10.02 not later than three Business Days after such Record 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 mandatory prepayments of Notes shall be mailed to Noteholders as provided
in SECTION 10.02.
SECTION 2.08. CANCELLATION. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Issuer shall direct by an Issuer Order that
they be destroyed or returned to it, provided that such Issuer Order is timely
and the Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.09. BOOK-ENTRY NOTES. The Notes, upon original issuance, will
be issued in the form of a typewritten Note or Notes representing the Book-Entry
Notes, to be delivered to DTC, the initial Depository, by, or on behalf of, the
Issuer. 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
Noteholder will receive a Definitive Note representing such Noteholder's
interest in such Note, except as provided in SECTION 2.11. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Noteholders pursuant to SECTION 2.11:
(i) the provisions of this Section shall be in full force and
effect;
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(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the giving
of instructions or directions hereunder) as the sole holder of the Notes, and
shall have no obligation to the Noteholders;
(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 Noteholders shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Noteholders and the Clearing Agency and/or the Clearing
Agency Participants, and all references in this Indenture to actions by the
Noteholders shall refer to actions taken by the Clearing Agency upon
instructions from the Clearing Agency Participants, and all references in this
Indenture to distributions, notices, reports and statements to the Noteholders
shall refer to distributions, notices, reports and statements to the Clearing
Agency, as registered holder of the Notes, as the case may be, for distribution
to the Noteholders in accordance with the procedures of the Clearing Agency.
Pursuant to the Note Depository Agreement, unless and until Definitive Notes are
issued pursuant to SECTION 2.11, the Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
payments of principal of and interest on the Notes to such Clearing Agency
Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Noteholders evidencing a
specified percentage of the Outstanding Amount, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Noteholders and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the Indenture
Trustee; and
(vi) without the consent of the Issuer and the Indenture Trustee,
no such Note may be transferred by the Clearing Agency except to a successor
Clearing Agency that agrees to hold such Note for the account of the Owners or
except upon the election of the Owner thereof or a subsequent transferee to hold
such Note in physical form.
Neither the Indenture Trustee nor the Note Registrar shall have any
responsibility to monitor or restrict the transfer of beneficial ownership in
any Note an interest in which is transferable through the facilities of the
Clearing Agency.
SECTION 2.10. NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Noteholders pursuant to SECTION
2.11, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders of the Notes to the Clearing Agency,
and shall have no obligation to the Noteholders.
SECTION 2.11. DEFINITIVE NOTES. If (i)(A) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities as described in the Note
Depository Agreement, and (B) Indenture Trustee or the Administrator is unable
to locate a qualified successor, (ii) the Administrator at its option advises
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the Indenture Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency, or (iii) after the occurrence of an Event of
Default or Servicer Default, the Noteholders representing not less than 50% of
the Outstanding Amount of such Class of Notes advises the Indenture Trustee and
the Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the related Noteholders, then the Indenture Trustee shall
notify all Noteholders of the related Class of Notes, through the Clearing
Agency, of the occurrence of any such event and of the availability of
Definitive Notes of the related Class of Notes to Noteholders requesting the
same. Upon surrender to the Indenture Trustee of the Note or Notes representing
the Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes of a Class, the Indenture Trustee shall
recognize the Noteholders of the Definitive Notes as Noteholders hereunder.
The Indenture Trustee shall not be liable if the Indenture Trustee or the
Administrator is unable to locate a qualified successor Clearing Agency. The
Definitive Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
SECTION 2.12. RELEASE OF COLLATERAL. Subject to SECTIONS 4.04, 8.04 and
11.01 and the terms of the Transaction Documents, the Indenture Trustee shall
release property from the lien of this Indenture only upon receipt of an Issuer
Request accompanied by an Officer's Certificate.
SECTION 2.13. TAX TREATMENT. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness of the Issuer secured by the Collateral. The Issuer, by entering
into this Indenture, and each Noteholder, by its acceptance of its Note agree to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
ARTICLE THREE
COVENANTS
SECTION 3.01. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
subject to SECTION 8.02(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-1 Notes, to the Class A-1 Noteholders, (ii) for the benefit of the Class
A-2 Notes, to the Class A-2 Noteholders, (iii) for the benefit of the Class A-3
Notes, to the Class A-3 Noteholders, and (iv) for the benefit of the Class B
Notes, to the Class B Noteholders. Amounts properly
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withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
in [NEW YORK, NEW YORK], an office or agency where Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
SECTION 8.02, 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 8.02(b) shall be made on behalf of
the Issuer by the Indenture 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 the Business Day immediately preceding each Distribution
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, such
sum to be held in trust for the benefit of the Persons entitled thereto and
(unless the Paying Agent is the Indenture Trustee) shall promptly notify the
Indenture Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer (or any other obligor upon the Notes) in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
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(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it ceases to meet the standards required to be met
by a Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and upon receipt of an Issuer Request shall be paid to the Issuer; and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof, and all liability of the Indenture
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; PROVIDED, HOWEVER, the Indenture Trustee or such Paying Agent, before
being required to make any such repayment, may 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 or for the account of the Issuer. The Indenture Trustee may also adopt
and employ, at the expense of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but not have not been
surrendered for payment or whose right to or interest in moneys due and payable
but not claimed is determinable from the records of the Indenture Trustee or of
any Paying Agent, at the last address of record for each such Holder).
SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Collateral.
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SECTION 3.05. PROTECTION OF COLLATERAL. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Indenture Trustee on
behalf of the Noteholders to be prior to all other liens in respect of the
Collateral, and the Issuer shall take all actions necessary to obtain and
maintain, for the benefit of the Indenture Trustee on behalf of the Noteholders,
a first lien on and a first priority, perfected security interest in the
Collateral. The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
all as prepared by the Servicer and delivered to the Issuer, and will take such
other action necessary or advisable to:
(i) grant more effectively all or any portion of the Collateral;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) created by this Indenture or carry out more effectively
the purposes hereof;
(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 Collateral and the rights of
the Indenture Trustee and the Noteholders in such Collateral against the
claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Collateral when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute all financing statements, continuation statements or
other instruments required to be executed pursuant to this Section.
SECTION 3.06. OPINIONS AS TO COLLATERAL.
(a) On the Closing Date, the Issuer shall furnish to the
Indenture Trustee an Opinion of Counsel to the effect that, in the opinion of
such counsel, either (i) all financing statements and continuation statements
have been executed and filed that are necessary to create and continue the
Indenture Trustee's first priority perfected security interest in the Collateral
for the benefit of the Noteholders, and reciting the details of such filings or
(ii) no such action shall be necessary to perfect such security interest; and
(b) Within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Cut-Off Date, the Issuer shall furnish to the Indenture Trustee an Opinion
of Counsel, dated as of a date during such 90-day period, to the effect that, in
the opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary to
create and continue the Indenture Trustee's first priority perfected security
interest in the Collateral for the benefit of the Noteholders, and reciting the
details of such filings or referring to prior Opinions of Counsel
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in which such details are given, or (ii) no such action shall be necessary to
perfect such security interest.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF CONTRACTS.
(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 such Person's material covenants or obligations under any
instrument or agreement included in the Collateral or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
expressly provided in the Transaction Documents or such other instrument or
agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties and obligations under this Indenture, and any performance
of such duties by a Person identified to the Indenture Trustee in an Officer's
Certificate shall be deemed to be action taken by the Issuer. The Indenture
Trustee shall not be responsible for the action or inaction of the Servicer or
the Administrator. Initially, the Issuer has contracted with the Servicer and
the Administrator to assist the Issuer in performing its duties under this
Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Transaction
Documents and in the instruments and agreements included in the Collateral,
including but not limited to filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture and the 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 Transaction Document or any provision thereof without the consent
of the Indenture Trustee or the Holders of at least a majority of the
Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, voting as a single class, or if there are no Class A-1 Notes, Class A-2
Notes or Class A-3 Notes outstanding, the Holders of at least a majority of the
Outstanding Amount of the Class B Notes; PROVIDED that no such amendment shall
(i) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, distributions that are required to be made for the benefit of the
Noteholders, or (ii) reduce the aforesaid percentage of the Notes which are
required to consent to any such amendment, without the consent of the Holders of
all the Outstanding Notes.
(d) If the Issuer shall have knowledge of the occurrence of a
Servicer Default, the Issuer shall promptly notify the Indenture Trustee and
each Rating Agency thereof. Upon any termination of the Servicer's rights and
powers pursuant to the Sale and Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee. As soon as a successor Servicer is appointed, the
Issuer shall notify the Indenture Trustee and the Rating Agencies of such
appointment, specifying in such notice the name and address of such successor
Servicer.
SECTION 3.08. NEGATIVE COVENANTS. Until the Termination Date, the Issuer
shall not:
(i) except as expressly permitted by the Transaction Documents,
sell, transfer, exchange or otherwise dispose of any of the properties or
assets of the Issuer, including those included in the Collateral, unless
directed to do so by the Indenture Trustee;
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(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 Collateral; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien created by this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit
any Person to be released from any covenant; 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
Collateral 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) or
(C) permit the lien created by this Indenture not to constitute a valid
first priority (other than with respect to any such tax, mechanics' or
other lien) security interest in the Collateral; or
(iv) dissolve or liquidate in whole or in part.
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Indenture Trustee, on or before 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year ended December 31, 2000), 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 or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to
the Indenture Trustee, in form and substance satisfactory to the
Indenture Trustee, the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and
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covenant of this Indenture and each other Transaction Document 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 which
shall be delivered to and shall be satisfactory to the Indenture Trustee
to the effect that such transaction will not have any material adverse
tax consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (v) above or that no such actions
will be taken) each stating that such consolidation or merger and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction
have been compiled with (including any filing required by the Exchange
Act); and
(vii) 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 Collateral, to
any Person (except as expressly permitted by the Transaction Documents), unless:
(i) the Person that acquires by conveyance to transfer the
properties and assets of the Issuer shall (A) be a United States citizen
or a Person organized and existing under the laws of the United States or
any State, (B) expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form and substance
satisfactory to the Indenture Trustee, the due and punctual payment of
the principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture and each
other Transaction Document on the part of the Issuer to be performed or
observed, all as provided herein, (C) expressly agree by means of such
supplemental indenture that all right, title and interest so conveyed or
transferred shall be subject and subordinate to the rights of 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
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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 which
shall be delivered to and shall be satisfactory to the Indenture Trustee
to the effect that such transaction will not have any material adverse
tax consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (v) above or that no such actions
will be taken) each stating that such conveyance or transfer and such
supplemental indenture comply with this ARTICLE THREE and that all
conditions precedent herein provided for relating to such transaction
have been complied with (including any filings required by Exchange Act);
and
(vii) the Issuer has a net worth, immediately after such
conveyance or transfer, that is (A) greater than zero and (B) not less
than the net worth of the Issuer immediately prior to giving effect to
such conveyance or transfer.
SECTION 3.11. SUCCESSOR 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 same
effect as if such Person has been named as the Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all the
assets or properties of the Issuer pursuant to SECTION 3.10(b), the Issuer will
be released from every covenant and agreement of this Indenture to be observed
or performed on the part of the Issuer with respect to the Notes immediately
upon the delivery of written notice to the Indenture Trustee from the Person
acquiring such assets and properties stating that the Issuer is to be so
released.
SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Indenture and the other Transaction
Documents and activities incidental thereto.
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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 and (ii) any other Indebtedness permitted
by or arising under the other Transaction Documents.
SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause the Servicer
to comply with its obligations under the Sale and Servicing Agreement.
SECTION 3.15. GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES. Except as
otherwise contemplated by the Transaction Documents, the Issuer shall not make
any loan or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuming 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, 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. RESTRICTED PAYMENTS. Except as permitted by the Transaction
Documents, the Issuer shall not, directly or indirectly, (i) pay any dividend or
make any distribution (by reduction of capital or otherwise), whether in cash,
property, securities or a combination thereof, to the Owner Trustee or any owner
of a beneficial interest in the Issuer or otherwise with respect to any
ownership or equity interest or security in or of the Issuer or to the Servicer,
(ii) redeem, purchase, retire or otherwise acquire for value any such ownership
or equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; provided, however, that the Issuer may make, or
cause to be made, (A) distributions to the Servicer, the Depositor, the Owner
Trustee and the Certificateholders as contemplated by, and to the extent funds
are available for such purpose under, the Sale and Servicing Agreement or the
Trust Agreement and (B) payments to the Indenture Trustee and the Owner Trustee
pursuant to SECTION 1(a)(ii) of the Administration Agreement. The Issuer will
not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Indenture and the other
Transaction Documents.
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the
Indenture Trustee and each Rating Agency prompt written notice of each Event of
Default hereunder and each Servicer Default under the Sale and Servicing
Agreement.
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the Indenture
Trustee, 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 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
other Transaction Document.
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SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST
AGREEMENT. The Issuer shall not agree to any amendment to SECTION 11.01 of the
Trust Agreement to eliminate the requirements thereunder that the Indenture
Trustee or the Holders of the Notes consent to amendments thereto as provided
therein.
SECTION 3.22. REMOVAL OF ADMINISTRATOR. So long as any Notes are issued
and outstanding, the Issuer shall not remove the Administrator without cause
unless the Rating Agency Condition shall have been satisfied in connection with
such removal.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) SECTIONS 3.01, 3.02, 3.03, 3.04,
3.05, 3.07, 3.08, 3.10, 3.11, 3.12, 3.13, 3.20 and 3.21, (v) the rights,
obligations and immunities of the Indenture Trustee hereunder (including the
rights of the Indenture Trustee under SECTION 6.07 and the obligations of the
Indenture Trustee under SECTION 4.02) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them, and the Indenture Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, when
(A) either
(1) all Notes therefore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that
have been replaced or paid as provided in SECTION 2.05 and (ii)
Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Issuer and
thereafter repaid to the Issuer or discharged from such trust, as
provided in SECTION 3.03) have been delivered to the Indenture
Trustee for cancellation;
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the their
respective final Distribution Dates within one year, or
(iii) are subject to mandatory prepayment within
one year under arrangements satisfactory to the Indenture Trustee
for the giving of notice of prepayment by the Indenture 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 Trustee cash or
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direct obligations of or obligations guaranteed by the United
States (which will mature prior to the date such amounts are
payable), in trust in an Eligible Account for such purpose, in an
amount sufficient to pay and discharge the entire unpaid
principal and accrued interest on such Note not theretofore
delivered to the Indenture Trustee for cancellation when due on
their respective final scheduled Distribution Date (if Notes
shall be subject to mandatory prepayment pursuant to SECTION
10.01(a)), as the case maybe;
(B) the Issuer has paid or performed or caused to be paid or
performed all amounts and obligations which the Issuer may owe to or on behalf
of the Indenture Trustee for the benefit of the Noteholders under this Indenture
or the Notes; and
(C) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel and (if required by the TIA or
the Indenture Trustee) an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of SECTION 11.01(A)
and, subject to SECTION 11.02, stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with and the Rating Agency Condition has been satisfied.
SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited with the
Indenture Trustee pursuant to SECTION 4.01 shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Indenture Trustee
may determine, to the Holders of the particular Notes for the payment of which
such moneys have been deposited with the Indenture 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 4.03. 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 Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to SECTION 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
SECTION 4.04. RELEASE OF COLLATERAL. Subject to SECTION 11.01 and the
terms of the Transaction Documents, the Indenture Trustee shall release property
from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate and an Opinion of Counsel and
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or
an Opinion of Counsel in lieu of such Independent Certificates to the effect
that the TIA does not require any such Independent Certificates.
SECTION 4.05. DURATION OF THE POSITION OF THE INDENTURE TRUSTEE FOR THE
BENEFIT OF CERTIFICATEHOLDERS. Notwithstanding (i) the earlier payment in full
of all principal and interest due to the Noteholders under the terms of the
Notes of each Class, (ii) the cancellation of the Notes pursuant to SECTION 2.08
and (iii) the discharge of the Indenture Trustee's duties hereunder with respect
to the Notes, the Indenture Trustee shall continue to act in the capacity of the
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Indenture Trustee hereunder for the benefit of the Certificateholders, and the
Indenture Trustee, for the benefit of the Certificateholders, shall comply with
its obligations under the Sale and Servicing Agreement, as appropriate, until
such time as all distributions in respect of the Certificate Balance and
interest due to the Certificateholders have been paid in full.
ARTICLE FIVE
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(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;
(ii) default in the payment of the unpaid amount of any Class of
Notes on the final Distribution Date for such Class;
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere in
this Section specifically dealt with) which default has a material adverse
effect on the Noteholders, 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 60 days after there shall have
been given, by registered or certified mail, to the Indenture Trustee by the
Holders of at least 25% of the Outstanding Amount of the Class A-1 Notes, the
Class A-2 Notes and the Class A-3 Notes, taken together as a single class, or,
if there are no Class A-1 Notes, Class A-2 Notes or Class A-3 Notes Outstanding,
by the Holders of at least 25% of the Outstanding Amount of the Class B 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;
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial part of
the Collateral 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 Collateral, 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
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(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by the Issuer to the entry of an order for
relief in an involuntary case under any such law, or the consent by the Issuer
to the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for any
substantial part of the Collateral, 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 Indenture Trustee within five
days after obtaining knowledge of the occurrence thereof, written notice in the
form of an Officer's Certificate of any event which with the giving of notice
and the lapse of time would become an Event of Default under clause (iii) above,
its status and what action the Issuer is taking or proposes to take with respect
thereto.
SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT. If an Event of Default shall
have occurred and be continuing, other than an Event of Default described in
SECTION 5.01(iv) or (v) above, the Indenture Trustee or Holders holding Class
A-1 Notes, Class A-2 Notes or Class A-3 Notes representing not less than 50% of
the aggregate Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes or, if there are no Class A-1 Notes, Class A-2 Notes or
Class A-3 Notes Outstanding, Holders holding Class B Notes representing not less
than 50% of the Outstanding Amount of the Class B Notes may declare the
principal amount of the Notes immediately due and payable at par. 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
Indenture Trustee as hereinafter in this ARTICLE 5, PROVIDED, Holders holding
Class A-1 Notes, Class A-2 Notes or Class A-3 Notes representing not less than
50% of the aggregate Outstanding Amount of the Class A-1 Notes, the Class A-2
Notes and the Class A-3 Notes or, if there are no Class A-1 Notes, Class A-2
Notes or Class A-3 Notes Outstanding, Holders holding Class B Notes representing
not less than 50% of the Outstanding Amount of the Class B Notes may rescind
such declaration if (i) the Issuer has made all payments of principal of and
interest on all Notes when the same becomes due and payable and (ii) the Issuer
has paid all amounts due and payable to the Indenture Trustee. If an Event of
Default described in SECTION 5.01(iv) or (v) shall have occurred and be
continuing, the principal amount of the Notes shall become immediately due and
payable.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE; AUTHORITY OF INDENTURE TRUSTEE.
(a) The Issuer covenants that if the Notes are accelerated
following the occurrence of an Event of Default, the Issuer will, upon demand of
the Indenture Trustee, pay to 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 costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents and counsel.
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(b) The Indenture Trustee following the occurrence of an Event of
Default, shall have 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 Collateral.
(c) If an Event of Default occurs and is continuing, the
Indenture Trustee may in its discretion, proceed to protect and enforce its
rights and the rights of the Noteholders, by such appropriate Proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Collateral, Proceedings under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel,
and for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the 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 Indenture
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
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and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this
Indenture or under any of the Notes, may be enforced by the Indenture Trustee
without the possession of any of the Notes or the production thereof in any
trial or other Proceedings relative thereto, and any such action or Proceedings
instituted by the Indenture Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee
(including any Proceedings involving the interpretation of any provision of this
Indenture), the Indenture Trustee shall be held to represent all of the Holders
of the Notes, and it shall not be necessary to make any Noteholder a party to
any such proceedings.
SECTION 5.04. REMEDIES. If an Event of Default shall have occurred and be
continuing, the Indenture Trustee (subject to SECTION 5.05) may do one or more
of the following:
(i) institute Proceedings in its own name and as or on behalf of
a trustee of an express trust for the collection of all amounts then payable on
the Notes or under this Indenture with respect thereto, whether by declaration
or otherwise, enforce any judgment obtained, and collect from the Issuer and any
other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and
any other remedy available to the Indenture Trustee and take any other
appropriate action to protect and enforce the rights and remedies of the
Indenture Trustee on behalf of the Noteholders under this Indenture or the
Notes; and
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(iv) sell the Collateral 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 the Indenture Trustee may
not sell or otherwise liquidate the Collateral following an Event of Default,
unless (A) the Holders of 100% of the Outstanding Amount of the Notes, consent
thereto, (B) 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 (C) there has been an Event of
Default described in SECTION 5.01(i) or (ii) and the Indenture Trustee
determines that the Collateral 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 Indenture
Trustee obtains the consent of Holders representing not less than 66-2/3% of the
Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clauses (B) and (C), the Indenture Trustee may,
but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Collateral for such purpose.
SECTION 5.05. OPTIONAL PRESERVATION OF THE CONTRACTS. Following an Event
of Default and such Event of Default has not been rescinded and annulled, the
Indenture Trustee may, but need not, elect to maintain possession of the
Collateral. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal and interest
on the Notes, and the Indenture Trustee shall take such desire into account when
determining whether or not to maintain possession of the Collateral. In
determining whether to maintain possession of the Collateral, the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Collateral
for such purpose.
SECTION 5.06. PRIORITIES.
(a) If the Indenture Trustee collects any money or property
pursuant to this ARTICLE FIVE, it shall pay out the money or property in the
following order and priority:
(i) amounts due and owing to the Indenture Trustee pursuant to
SECTION 6.07; and
(ii) to the Collection Account for distribution pursuant to the
priorities described in SECTION 7.03(a) 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.
SECTION 5.07. LIMITATION OF SUITS. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
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(ii) the Holders of not less than 25% of the Outstanding Amount
of the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes or, if there
are no Class A-1 Notes, Class A-2 Notes or Class A-3 Notes Outstanding, Holders
of not less than 25% of the Outstanding Amount of the Class B Notes have made
written request to the Indenture Trustee to institute such Proceeding in respect
of such Event of Default in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such Proceedings;
and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes
and the Class A-3 Notes, voting together as a single class, or, if there are no
Class A-1 Notes, Class A-2 Notes or Class A-3 Notes Outstanding, Holders of a
majority of the Outstanding Amount of the Class B Notes.
It is 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 Indenture 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 Class
A-1 Notes, the Class A-2 Notes and the Class A-3 Notes or the Class B Notes, as
the case may be, the Indenture Trustee in its sole discretion may determine that
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
SECTION 5.08. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in the Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Indenture Trustee
and the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights
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and remedies of the Indenture Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.
SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee 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
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default of Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this ARTICLE FIVE or by
law to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.12. CONTROL BY NOTEHOLDERS. The Holders representing more than
50% of the Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes, or, if there are no Class A-1 Notes, Class A-2 Notes or
Class A-3 Notes Outstanding, Holders representing more than 50% of the
Outstanding Amount of the Class B Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the terms of SECTION 5.04, any direction to the
Indenture Trustee to sell or liquidate the Collateral 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 5.05 have been
satisfied and the Indenture Trustee elects to retain the Collateral pursuant to
such Section, then any direction to the Indenture Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to sell or
liquidate the Collateral shall be of no force and effect;
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such direction;
and
(v) such direction shall be in writing.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
SECTION 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially and adversely affect the
rights of any Noteholders not consenting to such action.
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SECTION 5.13. WAIVER OF PAST DEFAULTS. In the case of any waiver of an
Event of Default, the Issuer, the Indenture 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, 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 Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (i) any suit instituted by the
Indenture Trustee, (ii) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, or, if there are no Class A-1 Notes, Class A-2 Notes or Class A-3 Notes
Outstanding, any Noteholder or group of Noteholders holding in the aggregate 10%
of the Outstanding Amount of the Class B Notes or (iii) any suit instituted by
any Noteholder for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such Note and in this
Indenture.
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 advantages of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Indenture Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
SECTION 5.16. ACTION ON NOTES. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Collateral or upon any of
the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with SECTION 5.06.
SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
(a) Promptly following a request from the Indenture Trustee to do
so and at the Administrator's expense, the Issuer shall take all such lawful
action as the Indenture Trustee
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may request to compel or secure the performance and observance by the Depositor
and the Servicer, as applicable, of each of their respective 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 Indenture Trustee, including the transmission of notices of default on
the part of the Depositor or the Servicer thereunder and the institution of
legal of administrative actions or proceedings to compel or secure performance
by the Depositor or the Servicer of each of their respective obligations under
the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in
writing, including facsimile) of the Holders representing not less than 66-2/3%
of the Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes, voting together as a single class, or, if there are no Class
A-1 Notes, Class A-2 Notes or Class A-3 Notes Outstanding, Holders representing
not less than 66 2/3% of the Outstanding Amount of the Class B Notes shall,
foreclose upon its security interest in the Issuer's rights under the Sale and
Servicing Agreement and exercise all rights, remedies, powers, privileges and
claims of the Issuer against the Depositor 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
Depositor 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.
ARTICLE SIX
THE INDENTURE TRUSTEE
SECTION 6.01. DUTIES OF INDENTURE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and the Sale and Servicing Agreement and in the same degree of care
and skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture or the Sale and Servicing Agreement and no implied covenants or
obligations shall be read into this Indenture or the Sale and Servicing
Agreement against the Indenture Trustee; and
(ii) in the absence of bad faith or manifest error on its
part, the Indenture Trustee may conclusively rely, as to the truth of the
statements and the
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correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture and the other Transaction
Documents to which the Indenture Trustee is a party.
(c) The Indenture Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of SECTION
6.01(b);
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to SECTION 5.12.
(d) Every provision of this Indenture that in any way relates to
the Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Issuer.
(f) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms of
this Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable grounds to believe that
repayments of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(h) The Indenture Trustee shall have no discretionary duties
other than performing those ministerial acts set forth above necessary to
accomplish the purpose of this Trust as set forth in this Indenture.
(i) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this section and to the provisions of the
TIA.
SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE.
(a) The Indenture Trustee may rely on any document believed by it
to be genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
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(b) Before the Indenture Trustee acts or refrains from acting, it
may require an Officer's Certificate (with respect to factual matters) or an
Opinion of Counsel, as applicable. The Indenture Trustee shall not be liable for
any action it takes or omits to take in good faith in reliance on the Officer's
Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that the Indenture Trustee's
conduct does not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Indenture Trustee shall be under no obligation to
institute, conduct or defend any litigation under this Indenture or in relation
to this Indenture or exercise any remedy under SECTION 5.05(i) through (iv) at
the request, order or direction of any of the Holders of Notes, pursuant to the
provisions of this Indenture, unless such Holders of Notes shall have offered to
the Indenture Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby; provided,
however, that the Indenture 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 in a manner consistent with SECTION 6.01.
(g) The Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless so requested by the Holders of
Notes evidencing not less than 25% of the Outstanding Amount of the Notes;
provided, however, that if the payment within a reasonable time to the Indenture
Trustee of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Indenture Trustee, not
reasonably assured to the Indenture Trustee by the security afforded to it by
the terms of this Indenture or the Sale and Servicing Agreement, the Indenture
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
Indenture Trustee, shall be reimbursed by the Person making such request upon
demand.
SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture
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Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may
do the same with like rights. However, the Indenture Trustee is required to
comply with SECTION 6.11.
SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Collateral or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuer in this Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication.
SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing
and if it is known or written notice of the existence thereof has been delivered
to a Responsible Officer of the Indenture Trustee, the Indenture 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, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS. Within the
prescribed period of time for tax reporting purposes after the end of each
calendar year during the term of this Indenture, the Indenture Trustee shall
deliver to each Noteholder such information, including without limitation, IRS
Form 1099, as may be required to enable such holder to prepare its federal and
state income tax returns.
SECTION 6.07. COMPENSATION AND INDEMNITY. The Issuer shall pay or shall
cause the Servicer to pay to the Indenture Trustee from time to time reasonable
compensation for its services. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall or shall cause the Servicer to reimburse the Indenture Trustee for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer shall indemnify or shall cause the Servicer to indemnify the
Indenture Trustee against any and all loss, liability or expense (including
attorneys' fees) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder. The Indenture Trustee shall
notify the Issuer and the Servicer promptly of any claim for which it may seek
indemnity. Failure by the Indenture Trustee to so notify the Issuer and the
Servicer shall not relieve the Issuer or the Servicer of its obligations
hereunder. The Issuer shall defend or shall cause the Servicer to defend any
such claim, and the Indenture Trustee may have separate counsel and the Issuer
shall pay 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 Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Servicer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of an Event of Default specified in
SECTION 5.01(iv) or (v) with respect to the Issuer,
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the expenses are intended to constitute expenses of administration under Title
11 of the United States Code or any other applicable federal or state
bankruptcy, insolvency or similar law.
SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE. The Indenture Trustee may
resign at any time by so notifying the Issuer and the Servicer. The Holders of a
majority of the Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes
and the Class A-3 Notes, voting as a single class, or, if there are no Class A-1
Notes, Class A-2 Notes or Class A-3 Notes Outstanding, Holders of a majority of
the Outstanding Amount of the Class B Notes may remove the Indenture Trustee by
so notifying the Indenture Trustee and may appoint a successor Indenture
Trustee. The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with SECTION 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Indenture Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, shall
have entered a decree or order granting relief or appointing a receiver,
liquidator, assignee, custodian, trustee, conservator, sequestrator (or similar
official) for the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or ordering the winding-up or liquidation of the Indenture
Trustee's affairs, provided any such decree or order shall have continued
unstayed and in effect for a period of 30 consecutive days;
(iii) the Indenture Trustee commences a voluntary case under any
federal or state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other similar
law, or consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, conservator, sequestrator or other
similar official for the Indenture Trustee or for any substantial part of the
Indenture Trustee's property, or makes any assignment for the benefit of
creditors or fails generally to pay its debts as such debts become due or takes
any corporate action in furtherance of any of the foregoing; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee gives notice of its intent to resign or is
removed or if a vacancy exists in the office of the Indenture Trustee for any
reason (the Indenture Trustee in such event being referred to herein as the
retiring Indenture Trustee), the Issuer shall promptly appoint a successor
Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The Issuer or the successor
Indenture Trustee shall mail a notice of its succession to Noteholders. The
retiring Indenture Trustee shall promptly transfer all property held by it as
Indenture Trustee to the successor Indenture Trustee.
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If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture 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 Indenture Trustee.
If the Indenture Trustee fails to comply with SECTION 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to this Section and payment of all fees and expenses
owed to the outgoing Indenture Trustee. Notwithstanding the replacement of the
Indenture Trustee pursuant to this Section, the retiring Indenture Trustee shall
be entitled to payment or reimbursement of such amounts as such Person is
entitled pursuant to SECTION 6.07.
SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under SECTION 6.11. The Indenture Trustee shall provide each Rating
Agency prompt notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture, any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor Indenture Trustee, and deliver such Notes
so authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE
TRUSTEE.
(a) Notwithstanding any other provision of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Collateral may at the time be located, the Indenture
Trustee and the Administrator acting jointly shall have the power and may
execute and deliver all instruments to appoint one or more Persons to act as a
co-Indenture Trustee or co-Indenture Trustees, jointly with the Indenture
Trustee, or separate Indenture Trustee or separate Indenture Trustees, of all or
any part of the Issuer, and to vest in such Person or Persons, in such capacity
and for the benefit of the Noteholders, such title to the Collateral, or any
part hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee and the
Administrator may consider necessary or desirable. If the Administrator shall
not have joined in such appointment within 15
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days after the receipt by it of a request so to do, the Indenture Trustee alone
shall have the power to make such appointment. No co-Indenture Trustee or
separate Indenture Trustee hereunder shall be required to meet the terms of
eligibility of a successor Indenture Trustee under SECTION 6.11 and no notice to
Noteholders of the appointment of any co-Indenture Trustee or separate Indenture
Trustee shall be required under SECTION 6.08.
(b) Every separate Indenture Trustee and co-Indenture Trustee
shall, to the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
Indenture Trustee or co-Indenture Trustee jointly (it being understood
that such separate Indenture Trustee or co-Indenture Trustee is not
authorized to act separately without the Indenture Trustee joining in
such act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed the Indenture
Trustee shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and obligations (including the
holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
Indenture Trustee or co-Indenture Trustee, but solely at the direction of
the Indenture Trustee;
(ii) no Indenture Trustee hereunder shall be personally
liable by reason of any act or omission of any other Indenture Trustee
hereunder; and
(iii) the Indenture Trustee and the Administrator may at
any time accept the resignation of or remove any separate Indenture
Trustee or co-Indenture Trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate
Indenture Trustees and co-Indenture Trustees, as effectively as if given to each
of them. Every instrument appointing any separate Indenture Trustee or
co-Indenture Trustee shall refer to this Agreement and the conditions of this
Article. Each separate Indenture Trustee and co-Indenture Trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of co-appointment, either jointly with the Indenture
Trustee or separately, as may be provided therein, subject to all the provisions
of this Indenture, specifically including every provision of this Indenture
relating to the conduct of, affecting the liability of or affording protection
to, the Indenture Trustee. Every such instrument shall be filed with the
Indenture Trustee and a copy thereof given to the Administrator.
(d) Any separate Indenture Trustee or co-Indenture Trustee may at
any time constitute the Indenture Trustee, its agent or attorney-in-fact with
full power and authority, to the extent not prohibited by law, to do any lawful
act under or in respect of this Agreement on its behalf and in its name. If any
separate Indenture Trustee or co-Indenture Trustee shall die, become incapable
of acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Indenture Trustee, to
the extent permitted by law, without the appointment of a new or successor
Indenture Trustee. Notwithstanding anything to
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the contrary in this Indenture, the appointment of any separate Indenture
Trustee or co-Indenture Trustee shall not relieve the Indenture Trustee of its
obligations and duties under this Indenture.
SECTION 6.11. ELIGIBILITY. (a) The Indenture Trustee shall at all times
satisfy the requirements of TIA Section 310(a). The Indenture Trustee hereunder
shall at all times be a financial institution organized and doing business under
the laws of the United States of America or any state, authorized under such
laws to exercise corporate trust powers, whose long term unsecured debt is rated
at least Baa3 by Moody's and shall have a combined capital and surplus of at
least $50,000,000 or shall be a member of a bank holding system the aggregate
combined capital and surplus of which is $50,000,000 and subject to supervision
or examination by federal or state authority, provided that the Indenture
Trustee's separate capital and surplus shall at all times be at least the amount
required by SECTION 310(a)(2) of the TIA. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of a
supervising or examining authority, then for the purposes of this SECTION 6.11,
the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.
(b) If a Default occurs and is continuing and the Indenture
Trustee is deemed to have a conflicting interest as a result of acting as
trustee for both the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes and the Class B Notes, the Issuer shall appoint a successor Indenture
Trustee for the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes or
a successor for the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
and a successor for the Class B Notes so that there will be separate Indenture
Trustees for the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
and for the Class B Notes. No such event shall alter the voting rights of the
Noteholders under this Indenture or under any of the other Transaction
Documents.
(c) In the case of an appointment hereunder of a successor
Indenture Trustee with respect to any Class of Notes, the retiring Indenture
Trustee and the successor Indenture Trustee with respect to such Class of Notes
shall execute and deliver an indenture supplement hereto wherein the successor
Indenture Trustee shall accept such appointment and which (i) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, the successor Indenture Trustee all rights, powers, trusts and duties
of the retiring Indenture Trustee with respect to the Notes of such Class as to
which the appointment of such Indenture Trustee relates, (ii) if the retiring
Indenture Trustee is not retiring with respect to all Classes of Notes, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Indenture Trustee
with respect to the Notes of each Class as to which the retiring Indenture
Trustee is not retiring shall continue to be vested in the retiring Indenture
Trustee and (iii) shall add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Indenture Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Indenture
Trustees co-trustees of the same trust and that each such Indenture Trustee
shall be trustee of a trust or trusts hereunder separate and apart from any
trust or trusts hereunder administered by any other such Indenture Trustee; and
upon execution and delivery of such supplemental indenture the resignation or
removal of the retiring Indenture Trustee shall become effective to the extent
provided therein.
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In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this SECTION 6.11, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
SECTION 6.08. The Indenture Trustee shall comply with TIA Section 310(b);
provided, however, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities of
the Issuer are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 6.12. PENNSYLVANIA MOTOR VEHICLE SALES FINANCE ACT LICENSES. The
Indenture Trustee shall use its best efforts to maintain the effectiveness of
all licenses required under the Pennsylvania Motor Vehicle Sales Finance Act in
connection with this Indenture and the transactions contemplated hereby until
the lien and security interest of this Indenture shall no longer be in effect in
accordance with the terms hereof.
SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (i) not more than five days after the earlier of (a) each Record Date
and (b) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Noteholders as of such Record Date and (ii) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
ten days prior to the time such list is furnished; provided, however, that so
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished.
SECTION 7.02. PRESERVATION OF INFORMATION: COMMUNICATION TO NOTEHOLDERS.
(a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders contained
in the most recent list furnished to the Indenture Trustee as provided in
SECTION 7.01 and the names and addresses of Noteholders received by the
Indenture Trustee in its capacity as Note Registrar and shall otherwise comply
with TIA Section 312(a). The Indenture Trustee may destroy any list furnished to
it as provided in such SECTION 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
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SECTION 7.03. REPORTS BY ISSUER.
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after
the Issuer is required (if at all) to file the same with the Commission,
copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) that
the Issuer may be required to file with the Commission pursuant to
SECTION 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with 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;
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and reports
required to be filed by the issuer pursuant to clauses (i) and (ii) of
this SECTION 7.03(a) and by rules and regulations prescribed from time to
time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of
the Issuer shall end on December 31 of each year.
SECTION 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA Section
313(a), within 60 days after January 31 beginning with January 31, 2001, the
Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
On each Distribution Date, the Indenture Trustee shall include with each
payment to each Noteholder a copy of the statement for the related Collection
Period provided to the Indenture Trustee pursuant to SECTION 9.06 of the Sale
and Servicing Agreement.
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other
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property payable to or receivable by the Indenture Trustee pursuant to this
Indenture. The Indenture Trustee shall apply all such money received by it as
provided in this Indenture and the Sale and Servicing Agreement. Except as
otherwise expressly provided in this Indenture, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Collateral, the Indenture Trustee may take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in ARTICLE FIVE.
SECTION 8.02. TRUST ACCOUNTS.
(a) On or prior to the Closing Date, the Indenture Trustee, for
the benefit of the Noteholders and the Certificateholders, shall establish and
maintain the Trust Accounts as provided in SECTION 5.05 of the Sale and
Servicing Agreement.
(b) All Available Amounts with respect to each Due Period will be
deposited in the Collection Account as provided in SECTION 5.05 of the Sale and
Servicing Agreement. On or before each Distribution Date, all amounts required
to be deposited in the Note Distribution Account with respect to the preceding
Due Period pursuant to SECTION 7.04 of the Sale and Servicing Agreement will be
transferred from the Collection Account and/or the Reserve Account to the Note
Distribution Account.
(c) On each Distribution Date, the Indenture 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 order of priority:
(i) to the Class A-1 Noteholders, accrued and unpaid interest on
the outstanding principal amount of the Class A-1 Notes, to the Class A-2
Noteholders, accrued and unpaid interest on the outstanding principal
amount of the Class A-2 Notes and to the Class A-3 Noteholders, accrued
and unpaid interest on the outstanding principal amount of the Class A-3
Notes; PROVIDED, HOWEVER, that if there are insufficient funds on deposit
in the Note Distribution Account to pay the entire amount of accrued and
unpaid interest then due on the Class A-1 Notes, Class A-2 Notes and
Class A-3 Notes, the amount in the Note Distribution Account shall be
applied to the payment of interest on the Class A-1 Notes, the Class A-2
Notes and the Class A-3 Notes pro rata on the basis of the respective
aggregate amounts of interest due and unpaid on the Class A-1 Notes,
Class A-2 Notes and Class A-3 Notes, respectively;
(ii) unless otherwise provided in clause (iv) below, to the Class
B Noteholders, accrued and unpaid interest on the outstanding principal
amount of the Class B Notes;
(iii) unless otherwise provided in clause (iv) or (v) below, the
Note Principal Distributable Amount with respect to such Distribution
Date shall be applied as follows:
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(A) to the Class A-1 Noteholders in reduction of the
Outstanding Amount of the Class A-1 Notes until the Outstanding Amount
of the Class A-1 Notes is reduced to zero;
(B) to the Class A-2 Noteholders in reduction of the
Outstanding Amount of the Class A-2 Notes until the Outstanding Amount
of the Class A-2 Notes is reduced to zero;
(C) to the Class A-3 Noteholders in reduction of the
Outstanding Amount of the Class A-3 Notes until the Outstanding Amount
of the Class A-3 Notes is reduced to zero; and
(D) to the Class B Noteholders in reduction of the
Outstanding Amount of the Class B Notes until the Outstanding Amount
of the Class B Notes is reduced to zero.
(iv) if the Notes have been declared immediately due and payable
as provided in SECTION 5.02 following the occurrence of an Event of
Default in SECTION 5.01(I) or (II) until such time as the Notes have been
paid in full, any funds remaining in the Note Distribution Account after
the application described in SECTIONS 8.02(C)(I) shall be applied in the
following order of priority:
(A) to the Class A-1 Noteholders, the Class A-2
Noteholders and the Class A-3 Noteholders in reduction of the
Outstanding Amounts of the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes pro rata on the basis of the Outstanding Amounts
of the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes;
(B) to the Class B Noteholders, accrued and unpaid
interest on the outstanding principal amount of the Class B Notes; and
(C) to the Class B Noteholders in reduction of the
Outstanding Amount of the Class B Notes;
(v) if the Notes have been declared immediately due and payable
as provided in SECTION 5.02 following the occurrence of an Event of
Default in SECTION 5.01(III), (IV) or (V) until such time as the Notes
have been paid in full, any funds remaining in the Note Distribution
Account after the applications described in SECTIONS 8.02(C)(I) and (II)
shall be applied in the following order of priority:
(A) to the Class A-1 Noteholders, the Class A-2
Noteholders and the Class A-3 Noteholders in reduction of the
Outstanding Amounts of the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes pro rata on the basis of the Outstanding Amounts
of the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes;
and
(B) to the Class B Noteholders in reduction of the
Outstanding Amount of the Class B Notes.
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SECTION 8.03. 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 Indenture Trustee upon
receipt of an order signed in the name of the Servicer by any one of its
Authorized Officers and delivered to the Indenture Trustee,, subject to the
provisions of SECTION 5.05 of the Sale and Servicing Agreement. Except as
otherwise provided in SECTION 5.05 of the Sale and Servicing Agreement, all
income or other gain from investments of moneys deposited in such Trust Accounts
shall be deposited by the Indenture Trustee in the Collection Account, and any
loss resulting from such investments shall be charged to the related Trust
Account. The Servicer will not direct the Indenture Trustee to make any
investment of any funds or to sell any investment held in any of the Trust
Accounts unless the security interest granted and perfected in such account will
continue to be perfected in such investment or the proceeds of such sale, in
either case without any further action by any Person, and, in connection with
any direction to the Indenture Trustee to make any such investment or sale, if
requested by the Indenture Trustee, the Servicer shall deliver to the Indenture
Trustee an Opinion of Counsel, acceptable to the Indenture Trustee, to such
effect.
(b) Subject to SECTION 6.01(c), the Indenture Trustee shall not
in any way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as Indenture Trustee, in
accordance with their terms.
(c) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Indenture
Trustee by 11:00 a.m., New York City time (or such other time as may be agreed
by the Issuer and Indenture 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
5.02 or (iii) if such Notes shall have been declared due and payable following
an Event of Default, amounts collected or receivable from the Collateral are
being applied in accordance with SECTION 5.05 as if there had not been such a
declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments.
SECTION 8.04. RELEASE OF COLLATERAL.
(a) Subject to the payment of its fees and expenses pursuant to
SECTION 6.07, the Indenture Trustee may, and when required by the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article shall be bound to ascertain the Indenture
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any moneys.
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(b) The Indenture Trustee shall, at such time as there are no
Notes Outstanding and all sums due the Indenture Trustee pursuant to SECTION
6.07 have been paid, release any remaining portion of the Collateral that
secured the Notes from the lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds then on deposit in the Trust
Accounts. The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this SECTION 8.04(b) only upon receipt of an Issuer
Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA as so stated in the Opinion of Counsel) Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(1) meeting the
applicable requirements of SECTION 11.01.
SECTION 8.05. OPINION OF COUNSEL. The Indenture Trustee shall receive at
least seven days notice when requested by the Issuer to take any action pursuant
to SECTION 8.04(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form and substance satisfactory to the Indenture Trustee, 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 for this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Collateral. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
(a) Without the consent of the Holders of any Notes and with
prior notice to each Rating Agency, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, and the other parties hereto at any time from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the TIA as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee, for any of
the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required
to be subjected to the lien created by this Indenture, or to subject
additional property to the lien created by this Indenture;
(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;
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(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 Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with
any other provision herein or in any supplemental indenture or the
Transaction Documents;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor Indenture 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 Indenture Trustee, pursuant to the
requirements of Article Six;
(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; and
(viii) to elect into the FASIT provisions of the Code, provided
an Opinion of Counsel to the effect that such election will not adversely
affect the Noteholders, is delivered to the Issuer and Indenture Trustee.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an
Issuer Order, may, also without the consent of any of the Holders of the Notes
and with prior notice to each Rating Agency, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
or of modifying in any manner the rights of the 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 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to each Rating Agency, and with the consent of the Holders of
not less than 50% of the Outstanding Amount of the Class A-1 Notes, the Class
A-2 Notes and the Class A-3 Notes, voting together as a single class, or, if
there are no Class A-1 Notes, Class A-2 Notes or Class A-3 Notes Outstanding,
with the consent of the Holders of not less than 50% of the Outstanding Amount
of the Class B Notes, by Act of such Holders delivered to the Issuer and the
Indenture Trustee, enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture;
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provided, however, that 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, change the provisions of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the Collateral to
payment of principal of or interest on the Notes, or change any place of payment
where, or the coin or currency in which, any Note or the interest thereon is
payable, or impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds available
therefor, as provided in ARTICLE FIVE, to the payment of any such amount due on
the Notes on or after the respective due dates thereof;
(ii) 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;
(iii) modify or alter the provisions of the second proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to sell or liquidate the Collateral
pursuant to SECTION 5.04 or amend the provisions of this Article which specify
the percentage of the Outstanding Amount of the Notes required to amend this
Indenture or the other Transaction Documents;
(v) 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 other Transaction Documents cannot be modified or waived
without the consent of the Holder of each Outstanding Note affected thereby;
(vi) 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
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien created by this Indenture with respect to any part of the
Collateral or, except as otherwise permitted or contemplated herein, terminate
the lien created by this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien created by
this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of the Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
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It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the parties hereto of any supplemental
indenture pursuant to this Section, the Indenture Trustee shall mail to the
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 Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Indenture Trustee shall be entitled to receive, and subject
to SECTIONS 6.01 and 6.02 shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
parties hereto and the 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 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act as then in
effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE TEN
MANDATORY PREPAYMENT OF NOTES
SECTION 10.01. PREPAYMENT. In the event that the Seller pursuant to
SECTION 7.07 of the Sale and Servicing Agreement purchases the corpus of the
Trust, the Notes are subject to mandatory prepayment in whole, but not in part,
on the Distribution Date on which such repurchase occurs, in an amount equal to
the outstanding principal amount thereof, and accrued interest on the Notes;
PROVIDED, HOWEVER, that the Issuer has available funds sufficient to pay such
amounts. The Seller, the Servicer or the Issuer shall furnish each Rating Agency
notice of such prepayment. If the Notes are to be prepaid pursuant to this
SECTION 10.01, the Servicer or the Issuer shall furnish notice of such election
to the Indenture Trustee not later than 20 days prior to the Distribution Date
and the Issuer shall deposit with the Indenture Trustee in the Note Distribution
Account an amount equal to the Outstanding Amount of the Notes plus all accrued
and unpaid interest on the Notes whereupon all such Notes shall be due and
payable on the Distribution Date upon the furnishing of a notice complying with
SECTION 10.02 to each Holder of the Notes.
SECTION 10.02. FORM OF MANDATORY PREPAYMENT NOTICE. Notice of mandatory
prepayment under SECTION 10.01 shall be given by the Indenture Trustee by
first-class mail, postage prepaid, mailed not less than five days prior to the
applicable Distribution Date to each Holder of Notes, as of the close of
business on the Record Date preceding the applicable Distribution Date, at such
Holder's address appearing in the Note Register.
All notices of mandatory prepayment shall state:
(i) the Distribution Date on which the Notes will be prepaid; and
(ii) the place where such Notes are to be surrendered for payment
in full (which shall be the office or agency of the Issuer to be maintained as
provided in SECTION 3.02).
Notice of mandatory prepayment of the Notes shall be given by the
Indenture Trustee in the name and at the expense of the Issuer. Failure to give
notice of mandatory prepayment, or any defect therein, to any Holder of any Note
shall not impair or affect the validity of the mandatory prepayment of any other
Note.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC.
(a) Upon any application or request by the Issuer to the
Indenture Trustee to take any action under any provision of this Indenture, the
Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have
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been complied with, and (iii) (if required by the TIA as so stated in the
Opinion of Counsel) an Independent Certificate from a firm of certified public
accountants meeting the applicable requirements of this Section and TIA Section
314(c), 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 Trustee that is to be made the basis for
authentication and delivery of the Notes or the release of any property subject
to the lien created by this Indenture, the Issuer shall, in addition to any
obligation imposed in SECTION 11.01(a) or elsewhere in this Indenture, furnish
to the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of the signer thereof 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
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (i) above, the Issuer shall also
deliver to the Indenture Trustee an Independent Certificate as to the named
matters, if the fair value to the Issuer of the property to be so deposited and
of all other such property made the basis of any such withdrawal or release
since the commencement of the then-current fiscal year of the Issuer, as set
forth in the 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 property so deposited, if
the fair value thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the Outstanding
Amount of the Notes.
(iii) Other than with respect to any release described in clause
(A) or (B) of SECTION 11.01(b)(v), whenever any property or securities are to be
released from the lien created by
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this Indenture, the Issuer shall also furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of such release) of the
property or securities proposed to be released and stating that in the opinion
of such person the proposed release will not impair the security created by this
Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (iii) above, the Issuer shall also
furnish to the Indenture Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and of all other
property or securities (other than property described in clauses (A) or (B) of
SECTION 11.01(b)(v)) released from the lien created by this Indenture since the
commencement of the then current fiscal 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
one percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the
Issuer may, without compliance with the other provisions of this Section, (A)
collect, liquidate, sell or otherwise dispose of the Contracts and the Financed
Vehicles as and to the extent permitted or required by the Transaction Documents
and (B) make cash payments out of the Trust Accounts as and to the extent
permitted or required by the Transaction Documents.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Person as to other matters, and any such Person may certify or given an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Servicer, the
Seller or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller or the Issuer, unless
such 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, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.
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Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article Six.
SECTION 11.03. ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to SECTION 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(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 of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered to
be done by the Indenture Trustee or the Issuer in reliance thereon, whether or
not notation of such action is made upon such Note.
SECTION 11.04. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Premier Auto Finance, Inc.
230 West Monroe Street
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Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: ______________
(ii) If to the Depositor:
Dealer Auto Receivables Corp.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: _______________
(iii) If to the Indenture Trustee:
[ ]
[address]
Attention: ____________________
Telecopier No.: ________________
(iv) If to the Owner Trustee or the Issuer:
Attention:
Telecopier No.:
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-1350
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, A
Division of The McGraw Hill Companies
55 Water Street
New York, New York 10041
Telecopier No.: (212) 428-2657
(vii) If to the Underwriters:
Chase Securities Inc.
[address]
Attention: General Counsel
Telecopier No.: ____________
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Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event of Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding
any provisions of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
SECTION 11.07. 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 11.08. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-Indenture Trustees and agents.
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SECTION 11.09. 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 11.10. BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 11.11. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. COUNTERPARTS. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 11.14. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or for the enforcement of
any right or remedy granted to the Indenture Trustee under this Indenture.
SECTION 11.15. TRUST OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficiary interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner
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Trustee shall be subject to, and entitled to the benefits of, the terms and
provisions of Article Six, Seven and Eight of the Trust Agreement.
SECTION 11.16. NO PETITION. The parties hereto, by entering into this
Indenture, and each Noteholder, by accepting a Note or a beneficial interest in
a Note, hereby covenant and agree that they will not at any time institute
against the Depositor or the Issuer, or join in any institution against the
Depositor or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the other
Transaction Documents.
SECTION 11.17. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested, the Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
SECTION 11.18. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered as of the day and year first above written.
DEALER AUTO RECEIVABLES OWNER
TRUST 2000-1
By: [_______________________________], not in
its individual capacity but solely on behalf of the
Issuer as Owner Trustee under the Trust Agreement
By: _________________________________
Printed Name: ___________________________
Title: __________________________________
[_____________], not in its individual capacity but
solely as Indenture Trustee
By:_______________________________________
Printed Name:_____________________________
Title: ___________________________________
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STATE OF ILLINOIS )
) ss
COUNTY OF COOK )
On___________________________________________________________________
[insert date]
before me,_______________________________________________________________,
[Here insert name and title of notary]
personally appeared______________________________________________________,
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature [Seal]
---------------------------------
<PAGE>
STATE OF DELAWARE )
)
COUNTY OF NEW CASTLE )
On___________________________________________________________________
[insert date]
before me,_______________________________________________________________,
[Here insert name and title of notary]
personally appeared______________________________________________________,
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature [Seal]
---------------------------------
<PAGE>
EXHIBIT A
FORM OF SALE AND SERVICING AGREEMENT
A-1
<PAGE>
EXHIBIT B
FORM OF CLASS A-1 NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST 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 FULL ON THE DATE 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.
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1
___% Dealer Auto Receivables Asset-Backed Note, CLASS A-1
REGISTERED
No. R- CUSIP No.
Dealer Auto Receivables Owner Trust 2000-1, 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 [________], or
registered assigns, the principal sum of ___________ ($_____) payable on
_______, ____ (the "Class A-1 Final Distribution Date").
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution 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 Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained on SECTION 3.01 of the Indenture. Interest on this Note will accrue
for each Distribution Date from the most recent Distribution Date on which
interest has been paid to but excluding such Distribution Date or, if no
interest has yet been paid, from the Closing Date. Interest will be computed on
the basis of a 360-day year based on the actual number of days elapsed. Such
principal of and interest on this Note shall be paid 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
B-1
<PAGE>
interest due and payable on this Note as provided above and then to the unpaid
principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
B-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as of the date set forth
below.
Date: ____________ DEALER AUTO RECEIVABLES
OWNER TRUST 2000-1
By: [_____________________], not in its
individual capacity but solely on
behalf of the Issuer as Owner
Trustee, under the Trust Agreement
By:
------------------------------
Printed Name:
--------------------
Title:
---------------------------
B-3
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
[___________________]
not in its individual capacity but solely
as Indenture Trustee
By:
------------------------------------
Authorized Signatory
B-4
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its ___% Dealer Auto Receivables Asset-Backed Notes, Class A-1
(the "Class A-1 Notes"), all issued under an Indenture, dated as of _________,
2000 (the "Indenture"), among the Issuer and [_______________], as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class A-1 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, the Class A-3 Notes and the Class
B Notes (collectively, the "Notes") are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture
subject to the subordination of the Class B Notes under certain circumstances.
Principal of the Class A-1 Notes will be payable on the Class A-1 Final
Distribution Date. Notwithstanding the foregoing, the entire unpaid principal
amount of the Class A-1 Notes shall be due and payable on the date following the
occurrence of an Event of Default on which the maturity of the Notes shall have
been accelerated in the manner provided in 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
shall be made by check to the Person whose name appears as the Registered 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) affected 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 Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
not later than three Business Days after such Record Date and the amount then
due and payable shall be payable only upon presentation and surrender of this
Note at the Corporate Trust Office of the Indenture Trustee or at the office of
the Indenture Trustee's agent appointed for such purposes located in [NEW YORK,
NEW YORK].
The Issuer shall pay interest on overdue installments of interest on this
Note at the Class A-1 Rate to the extent lawful.
B-5
<PAGE>
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture 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 by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed 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, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the Indenture and such
Note that such Noteholder will not at any time institute against the Depositor
or the Issuer, or join in any institution against the Depositor or the Issuer
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. Each Noteholder, by acceptance of a Note (and each
Noteholder by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for the federal, state and local income, single business and franchise
tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer and the Indenture Trustee and any agent of the Issuer and the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this
B-6
<PAGE>
Note be overdue, and neither the Issuer, the Indenture 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 Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing not less than 50% of the
Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, voting together as a single class, or, if there are no Class A-1 Notes,
Class A-2 Notes or Class A-3 Notes Outstanding, with the consent of the
Noteholders representing not less than 50% of the Outstanding Amount of the
Class B Notes. The Indenture also contains provisions permitting the Noteholders
representing specified percentages of the Outstanding Amount of the Notes, on
behalf of the Noteholders, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Noteholder (or any one of
more Predecessor Notes) shall be conclusive and binding upon such Holders and
upon all future Noteholders 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
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of Noteholders issued thereunder.
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 Illinois, 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.
B-7
<PAGE>
EXHIBIT C
FORM OF CLASS A-2 NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST 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 FULL ON THE DATE 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.
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1
___% Dealer Auto Receivables Asset-Backed Note, CLASS A-2
REGISTERED $
No. R- CUSIP No. ___________
Dealer Auto Receivables Owner Trust 2000-1, 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 [___________], or
registered assigns, the principal sum of ___________ ($__________) payable on
_______, ____ (the "Class A-2 Final Distribution Date"). No payments of
principal of the Class A-2 Notes shall be made until the principal on the Class
A-1 Notes have been paid in full.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution 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 Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in the Indenture. Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from the Closing Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to
C-1
<PAGE>
interest due and payable on this Note as provided above and then to the unpaid
principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
C-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as of the date set forth
below.
Date: ____________ DEALER AUTO RECEIVABLES
OWNER TRUST 2000-1
By: [__________________________],
not in its individual capacity but solely
on behalf of the Issuer as Owner
Trustee, under the Trust Agreement
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
C-3
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
[______________________]
not in its individual capacity but solely
as Indenture Trustee
By:
----------------------------------------
Authorized Signatory
C-4
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer, designated
as its ___% Dealer Auto Receivables Asset-Backed Notes, Class A-2 (the "Class
A-2 Notes"), all issued under an Indenture, dated as of _________, 2000 (the
"Indenture"), among the Issuer and [_______________], as Indenture Trustee (the
"Indenture Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the 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, the Class A-3 Notes and the Class B
Notes (collectively, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture subject
to no payment of principal on the Class A-2 Notes until all principal has been
paid on the Class A-1 Notes and the subordination of the Class B Notes.
Principal of the Class A-2 Notes will be payable on the Class A-2 Final
Distribution Date. Notwithstanding the foregoing, the entire unpaid principal
amount of the Class A-2 Notes shall be due and payable on the date following the
occurrence of an Event of Default on which the maturity of the Notes shall have
been accelerated in the manner provided in 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
shall be made by check mailed to the Person whose name appears as the Registered
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 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) affected 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 Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
not later than three Business Days after such Record Date and the amount then
due and payable shall be payable only upon presentation and surrender of this
Note at the Indenture Trustee's principal Corporate Trust Office or at the
office of the Indenture Trustee's agent appointed for such purposes located in
the City of [NEW YORK, NEW YORK].
C-5
<PAGE>
The Issuer shall pay interest on overdue installments of interest on this Note
at the Class A-2 Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new Class A-2
Notes of authorized denomination 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, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in their individual capacities, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in their
individual capacities, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in their individual capacities, except as
any such Person may have expressly agreed 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, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the Indenture and such
Note that such Noteholder will not at any time institute against the Depositor
or the Issuer, or join in any institution against the Depositor or the Issuer of
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. Each Noteholder, by acceptance of a Note or of a
beneficial interest in a Note, agrees to treat the Notes for the federal, state
and local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue,
C-6
<PAGE>
and neither the Issuer, the Indenture 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 Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing not less than 50% of the
Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, voting together as a single class, or, if there are no Class A-1 Notes,
Class A-2 Notes or Class A-3 Notes Outstanding, with the consent of the
Noteholders representing not less than 50% of the Outstanding Amount of the
Class B 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 Holders 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
Indenture 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 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 Illinois, 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.
C-7
<PAGE>
EXHIBIT D
FORM OF CLASS A-3 NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST 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 FULL ON THE DATE 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.
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1
___% Dealer Auto Receivables Asset-Backed Note, CLASS A-3
REGISTERED $
No. R- CUSIP No. ___________
Dealer Auto Receivables Owner Trust 2000-1, 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 [___________], or
registered assigns, the principal sum of ___________ ($__________) payable on
_______, ____ (the "Class A-3 Final Distribution Date"). No payments of
principal of the Class A-3 Notes shall be made until the principal on the Class
A-1 Notes and the Class A-2 Notes have been paid in full.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution 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 Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in the Indenture. Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from the Closing Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to
D-1
<PAGE>
interest due and payable on this Note as provided above and then to the unpaid
principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
D-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as of the date set forth
below.
Date: ____________ DEALER AUTO RECEIVABLES
OWNER TRUST 2000-1
By: [_________________________],
not in its individual capacity but
solely on behalf of the Issuer as
Owner Trustee, under the Trust
Agreement
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
D-3
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
[_________________]
not in its individual capacity but
solely as Indenture Trustee
By:
--------------------------------------
Authorized Signatory
D-4
<PAGE>
[REVERSE OF CLASS A-3 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer, designated
as its ___% Dealer Auto Receivables Asset-Backed Notes, Class A-3 (the "Class
A-3 Notes"), all issued under an Indenture, dated as of _________, 2000 (the
"Indenture"), among the Issuer and [_______________], as Indenture Trustee (the
"Indenture Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the 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, the Class A-3 Notes and the Class B
Notes (collectively, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture subject
to no payment of principal on the Class A-3 Notes until all principal has been
paid on the Class A-1 Notes and the Class A-2 Notes.
Principal of the Class A-3 Notes will be payable on the Class A-3 Final
Distribution Date. Notwithstanding the foregoing, the entire unpaid principal
amount of the Class A-2 Notes shall be due and payable on the date following the
occurrence of an Event of Default on which the maturity of the Notes shall have
been accelerated in the manner provided in 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
shall be made by check mailed to the Person whose name appears as the Registered
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 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) affected 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 Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
not later than three Business Days after such Record Date and the amount then
due and payable shall be payable only upon presentation and surrender of this
Note at the Indenture Trustee's principal Corporate Trust Office or at the
office of the Indenture Trustee's agent appointed for such purposes located in
the City of [NEW YORK, NEW YORK].
The Issuer shall pay interest on overdue installments of interest on this Note
at the Class A-3 Rate to the extent lawful.
D-5
<PAGE>
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new Class A-3
Notes of authorized denomination 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, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in their individual capacities, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in their
individual capacities, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in their individual capacities, except as
any such Person may have expressly agreed 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, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the Indenture and such
Note that such Noteholder will not at any time institute against the Depositor
or the Issuer, or join in any institution against the Depositor or the Issuer of
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. Each Noteholder, by acceptance of a Note or of a
beneficial interest in a Note, agrees to treat the Notes for the federal, state
and local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
D-6
<PAGE>
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 Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing not less than 50% of the
Outstanding Amount of Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, voting together as a single class, or, if there are no Class A-1 Notes,
Class A-2 Notes or Class A-3 Notes Outstanding, with the consent of the
Noteholders representing not less than 50% of the Outstanding Amount of the
Class B 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 Holders 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
Indenture 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 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 Illinois, 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.
D-7
<PAGE>
EXHIBIT E
FORM OF CLASS B NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST 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 FULL ON THE DATE 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.
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1
___% Dealer Auto Receivables Asset-Backed Note, CLASS B
REGISTERED $
No. R- CUSIP No. ________
Dealer Auto Receivables Owner Trust 2000-1, 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 [___________], or
registered assigns, the principal sum of ___________ ($__________) payable on
_______, ____ (the "Class B Final Distribution Date"). No payments of principal
of the Class B Notes shall be made until the principal on the Class A-1 Notes,
the Class A-2 Notes and the Class A-3 Notes have been paid in full.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution 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 Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in the Indenture. Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from the Closing Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months. The payment of interest on this Note is
subordinated to the payment of interest on and, under certain circumstances, of
principal of, the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes,
to the extent set forth in the Indenture. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
E-1
<PAGE>
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
E-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as of the date set forth
below.
Date: ____________ DEALER AUTO RECEIVABLES
OWNER TRUST 2000-1
By:[______________________________],
not in its individual capacity but
solely on behalf of the Issuer as
Owner Trustee, under the Trust
Agreement
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
E-3
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
[___________________]
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------------
Authorized Signatory
E-4
<PAGE>
[REVERSE OF CLASS B NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer, designated
as its ___% Dealer Auto Receivables Asset-Backed Notes, Class B (the "Class B
Notes"), all issued under an Indenture, dated as of _________, 2000 (the
"Indenture"), among the Issuer and [_______________], as Indenture Trustee (the
"Indenture Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the 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, the Class A-3 Notes and the Class B
Notes (collectively, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture subject
to no payment of principal on the Class B Notes until all principal has been
paid on the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes and the
subordination of this Note.
Principal of the Class B Notes will be payable on the Class B Final Distribution
Date. Notwithstanding the foregoing, the entire unpaid principal amount of the
Class B Notes shall be due and payable on the date following the occurrence of
an Event of Default on which the maturity of the Notes shall have been
accelerated in the manner provided in the Indenture. All principal payments on
the Class B Notes shall be made pro rata to the Class B Noteholders entitled
thereto.
Payments of interest on this Note due and payable on each Distribution Date
shall be made by check mailed to the Person whose name appears as the Registered
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 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) affected 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 Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
not later than three Business Days after such Record Date and the amount then
due and payable shall be payable only upon presentation and surrender of this
Note at the Indenture Trustee's principal Corporate Trust Office or at the
office of the Indenture Trustee's agent appointed for such purposes located in
the City of [NEW YORK, NEW YORK].
E-5
<PAGE>
The Issuer shall pay interest on overdue installments of interest on this Note
at the Class B Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new Class B
Notes of authorized denomination 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, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in their individual capacities, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in their
individual capacities, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in their individual capacities, except as
any such Person may have expressly agreed 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, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the Indenture and such
Note that such Noteholder will not at any time institute against the Depositor
or the Issuer, or join in any institution against the Depositor or the Issuer of
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. Each Noteholder, by acceptance of a Note or of a
beneficial interest in a Note, agrees to treat the Notes for the federal, state
and local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue,
E-6
<PAGE>
and neither the Issuer, the Indenture 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 Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing not less than 50% of the
Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, voting together as a single class, or, if there are no Class A-1 Notes,
Class A-2 Notes or Class A-3 Notes Outstanding, with the consent of the
Noteholders representing not less than 50% of the Outstanding Amount of the
Class B 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 Holders 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
Indenture 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 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 Illinois, 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.
E-7
<PAGE>
EXHIBIT F
FORM OF 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 Note, and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
to transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated:
---------------------------
Signature Guaranteed:
- ----------------------------------- -----------------------------------
Notice: Signature must be (Authorized Officer)
guaranteed by an eligible Notice: the signature to this
guarantor institution which is a assignment must correspond with
participant in the Securities the name of the registered owner
Transfer Agent's Medallion as it appears on the face of and
Program (STAMP) or similar within the trust Certificate in
signature guarantee program. every particular, without
alteration or enlargement or any
change whatsoever.
F-1
<PAGE>
EXHIBIT G
FORM OF NOTE DEPOSITORY AGREEMENT
G-1
<PAGE>
Exhibit 5.1
____________, 2000
Dealer Auto Receivables Corp., as Depositor
230 West Monroe Street
Chicago, Illinois 60606
Re: Asset-Backed Notes and Asset-backed Certificates
Registration Statement on Form S-3 (Registration No. 333-32802)
---------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Dealer Auto Receivables
Corp. (the "COMPANY"), as depositor of the trusts (each, a "TRUST") to be
created to issue asset-backed notes (the "NOTES") and asset-backed certificates
(the "CERTIFICATES", and together with the Notes, the "SECURITIES"), in
connection with the filing of the Registration Statement on Form S-3
(Registration No. 333-32802) (such registration statement, together with the
exhibits and any amendments thereto, the "REGISTRATION STATEMENT"), registering
the Notes and Certificates. The Registration Statement has been filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "SECURITIES ACT"). As described in the Registration Statement, the Notes
and Certificates will be issued under and pursuant to the terms of one or more
Pooling and Servicing Agreements, Sale and Servicing Agreements, Trust
Agreements and Indentures (collectively, the "AGREEMENTS" and each,
individually, an "AGREEMENT"). Capitalized terms used but not defined herein
have the meanings given to them in the Registration Statement.
This opinion letter is being delivered to you pursuant to the
requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.
We are familiar with the proceedings to date with respect to
the proposed issuance and delivery of the Securities and have examined copies of
the Certificate of Incorporation and by-laws of the Company, the Registration
Statement and the prospectus and prospectus supplements included therein, the
form of each Agreement and such other documents, records
<PAGE>
and questions of law, and satisfied ourselves as to such matters of fact, as we
have considered relevant and necessary as a basis for this opinion letter.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents that will be executed in connection with the issuance
of the Securities, we have assumed that the parties to such documents will have
at the time of execution of such documents, the power, corporate or other, to
enter into and perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents and the validity and binding effect
of such documents. As to any facts material to the opinions expressed herein
which we did not independently establish or verify, we have relied upon oral and
written statements and representations of officers and other representatives of
the Company and others. In addition, we have also relied upon the accuracy and
completeness of all certificates and other statements, representations,
documents, records, financial statements and papers reviewed by us, and the
accuracy and completeness of all representations, warranties, schedules and
exhibits contained in such documents, with respect to the factual matters set
forth therein.
Based on the foregoing, we are of the opinion that when (i)
the Registration Statement, as finally amended, has become effective under the
Securities Act, (ii) the terms, price and interest rate of the Securities have
been duly approved by Board of Directors, (iii) the applicable Agreements
relating to such Securities have been duly executed and delivered by the parties
thereto in substantially the forms filed as exhibits to the Registration
Statement, (iv) with respect to each Trust which will issue the Securities, the
Certificate of Trust for such Trust has been duly executed and filed by the
Owner Trustee with the Secretary of State of the State of Delaware, (v) the
Indenture pursuant to which the Notes will be issued has been qualified under
the Trust Indenture Act of 1939, as amended, (vi) the purchasers of the
Securities shall have paid the purchase price therefor and the Securities have
been duly executed and authenticated in accordance with the applicable
Agreements pertaining to them, the Securities will be legally issued, fully paid
and non-assessable and will be legally valid and binding obligations of the
issuing Trust as issuer of such Securities enforceable in accordance with their
terms, and entitled to the benefits of the applicable Agreements (subject to the
effect of bankruptcy, fraudulent conveyance or transfer, insolvency,
reorganization, arrangement, liquidation, conservatorship and moratorium laws
and subject to the limitations imposed by other laws and judicial decisions
relating to or affecting the rights of creditors generally, to general
principles of equity, regardless of whether enforcement is considered in
proceedings in equity or at law, and to an implied covenant of good faith and
fair dealing).
We do not find it necessary for the purposes of this opinion
letter to cover, and accordingly we express no opinion as to, the application of
the securities or blue sky laws of the various states to the offering of the
Securities.
This opinion letter is limited to the laws of the United
States of America and the States of Illinois, New York and Delaware, and we
express no opinion with respect to the laws of any other state or jurisdiction.
- 2 -
<PAGE>
Our opinions set forth in this letter are based on the facts
in existence and the laws in effect on the date hereof and we expressly disclaim
any obligation to update our opinions herein, regardless of whether changes in
such facts or laws come to our attention after the delivery hereof.
We hereby consent to the filing of this opinion letter as an
Exhibit to the Registration Statement and to all references to our firm included
in or made a part of the Registration Statement. In giving such consent, we do
not concede that we are experts within the meaning of the Securities Act or the
rules and regulations thereunder or that this consent is required by Section 7
of the Securities Act.
Very truly yours,
/s/ Winston & Strawn
- 3 -
<PAGE>
Exhibit 8.1
Form of Opinion of Winston & Strawn
with respect to Tax Matters
________, 2000
Re: Dealer Auto Receivables Corp.
Registration Statement On Form S-3 (Reg. No. 333-32802)
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as special federal tax counsel to Dealer Auto
Receivables Corp., a Delaware corporation (the "REGISTRANT"), in connection with
the proposed issuance and sale of its Dealer Auto Receivables Asset-Backed
Notes, Class A-1, Dealer Auto Receivables Asset-Backed Notes, Class A-2, Dealer
Auto Receivables Asset-Backed Notes, Class A-3 and Dealer Auto Receivables
Asset-Backed Notes, Class B (collectively, the "NOTES") and Dealer Auto
Receivables Asset-Backed Certificates (the "CERTIFICATES") to be issued from the
Dealer Auto Receivables Owner Trust 2000-1, a limited purpose Delaware business
trust (the "TRUST"). The property of the Trust will include retail installment
contracts relating to the purchase of new or used automobiles. The Notes will be
issued pursuant to an indenture (the "INDENTURE") between the Trust and an
indenture trustee.
As special tax counsel to Registrant, we have expressed our
opinion regarding the material United States federal income tax consequences of
the proposed issuance of the Notes and Certificates to the holders thereof. Our
opinion is contained in the sections titled "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" in the prospectus and prospectus supplement relating to the Notes
and Certificates (the "PROSPECTUS"), which is a part of the Registration
Statement on Form S-3 (the "REGISTRATION STATEMENT") filed with the Securities
and Exchange Commission (the "COMMISSION") initially on March 20, 2000, under
the Securities Act of 1933, as amended (the "ACT"), for the registration of the
Notes and Certificates under the Act. We hereby adopt and confirm as our opinion
that the statements contained in the section of the Prospectus titled "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES", to the extent that they concern matters of
United States federal income tax law, are correct in all material respects.
Our opinion is based upon the current provisions of the Code,
Treasury Regulations promulgated thereunder, current administrative rulings,
judicial decisions, and other applicable authorities, all as in effect on the
date of such opinions. All of the foregoing authorities are subject to change or
new interpretation, both prospectively and retroactively, and such changes or
interpretation, as well as the changes in the facts as they have been
represented to us or assumed by us, could affect our opinions. Our opinion does
not foreclose the possibility of a contrary determination by the Internal
Revenue Service (the "IRS") or by a court of competent jurisdiction, or of a
contrary position by the IRS or Treasury Department in regulations or rulings
issued in the future. Furthermore, our opinion assumes that all the transactions
contemplated by the Prospectus will be consummated in accordance with the terms
<PAGE>
of the Prospectus, including without limitation, that holders of Notes will
treat such Notes as indebtedness.
We hereby consent to the filing of this letter as an exhibit to
the Registration Statement and to a reference to this firm (as counsel to the
Registrant) under the heading "Material Federal Income Tax Consequences" and
"Legal Matters" in the Prospectus forming a part of the Registration Statement,
without implying or admitting that we are "experts" within the meaning of the
Act or the rules and regulations of the Commission issued thereunder, with
respect to any part of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Winston & Strawn
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<PAGE>
TRANSFER AND SALE AGREEMENT
by and between
PREMIER AUTO FINANCE, L.P.,
as Seller
and
DEALER AUTO RECEIVABLES CORP.,
as Purchaser
Dated as of _________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS............................................................................................3
Section 1.01. General.......................................................................................3
ARTICLE II TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT.........................................................3
Section 2.01. Closing.......................................................................................3
Section 2.02. Conditions to the Closing.....................................................................4
Section 2.03. Assignment of Agreement.......................................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................................5
Section 3.01. Representations and Warranties Regarding the Seller...........................................5
Section 3.02. Representations and Warranties Regarding Each Contract........................................7
Section 3.03. Representations and Warranties Regarding the Contracts in the Aggregate......................10
Section 3.04. Representations and Warranties Regarding the Contract Files..................................11
ARTICLE IV PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS...........................................11
Section 4.01. Custody of Contracts.........................................................................11
Section 4.02. Filing.......................................................................................11
Section 4.03. Name Change or Relocation....................................................................11
Section 4.04. Chief Executive Office.......................................................................12
Section 4.05. Costs and Expenses...........................................................................12
Section 4.06. Sale Treatment...............................................................................12
ARTICLE V REMEDIES UPON MISREPRESENTATION........................................................................12
Section 5.01. Repurchases of Contracts for Breach of Representations and Warranties........................12
Section 5.02. Seller's Repurchase Option...................................................................12
ARTICLE VI INDEMNITIES...........................................................................................13
Section 6.01. Seller Indemnification.......................................................................13
Section 6.02. Liabilities to Obligors......................................................................13
Section 6.03. Tax Indemnification..........................................................................13
Section 6.04. Operation of Indemnities.....................................................................14
ARTICLE VII MISCELLANEOUS........................................................................................14
Section 7.01. Prohibited Transactions with Respect to the Trust............................................14
Section 7.02. Merger or Consolidation......................................................................14
Section 7.03. Termination..................................................................................14
Section 7.04. Assignment or Delegation by the Seller.......................................................15
Section 7.05. Amendment....................................................................................15
Section 7.06. Notices......................................................................................16
Section 7.07. Merger and Integration.......................................................................17
Section 7.08. Headings.....................................................................................17
Section 7.09. Governing Law................................................................................17
</TABLE>
<PAGE>
EXHIBITS
Exhibit A Form of Assignment
Exhibit B Form of Officer's Certificate
<PAGE>
THIS AGREEMENT, dated as of _____________, 2000, is made by and between
Premier Auto Finance, L.P., an Illinois limited partnership, as seller hereunder
(together with its successors and assigns the "SELLER"), and Dealer Auto
Receivables Corp., a Delaware corporation and wholly-owned subsidiary of Premier
Auto Finance, Inc. (together with its successors and assigns, the "DEPOSITOR"),
as purchaser hereunder.
WHEREAS, in the regular course of its business, the Seller purchases
motor vehicle installment sale contracts from retailers of new and used
automobiles and light-duty trucks, each of which contracts provides for
installment payment obligations by or on behalf of the retailer's
customer/purchaser and grants a security interest in a new or used automobile or
light-duty truck in order to secure such obligations;
WHEREAS, the Seller and the Depositor wish to set forth the terms and
conditions pursuant to which the Depositor will acquire the "CONTRACT ASSETS,"
as hereinafter defined; and
WHEREAS, the Depositor intends concurrently with its purchases of
Contract Assets hereunder to convey all right, title and interest in such
Contract Assets to Dealer Auto Receivables Trust 2000-1 (the "TRUST") pursuant
to the Sale and Servicing Agreement dated as of ____________, 2000 by and among
the Depositor, Premier Auto Finance, Inc., as Servicer, the Trust, as issuer
(the "ISSUER") and The Bank of New York, as indenture trustee. (as amended,
supplemented or otherwise modified from time to time, the "SALE AND SERVICING
AGREEMENT"), executed concurrently herewith;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the Seller and the Depositor agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL. Unless otherwise defined in this Agreement,
capitalized terms used herein (including in the preamble above) shall have the
meanings assigned to them in the Sale and Servicing Agreement.
ARTICLE II
TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT
SECTION 2.01. CLOSING. Subject to and upon the terms and conditions
set forth in this Agreement, the Seller hereby sells, transfers, assigns, sets
over and otherwise conveys to the Depositor, in consideration of the Depositor's
payment of $________________ in cash [and the issuance of a subordinated note in
an aggregate amount of $__________] as the Purchase Price therefor, (i) all the
right, title and interest of the Seller in and to the Contracts listed on the
List of Contracts in effect on the Closing Date (including, without limitation,
all security interests and all rights to receive scheduled payments and
prepayments which are collected pursuant thereto on or after the Cutoff Date,
including any liquidation proceeds therefrom, but excluding any rights to
receive scheduled payments due on or after, but received prior to, the Cutoff
Date), (ii) all security interests in each Financed Vehicle, (iii) all rights of
the Seller to proceeds from
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any claims on theft, physical damage, credit life or disability insurance or
other individual insurance policy relating to any such Contract, an Obligor or a
Financed Vehicle securing such Contract, (iv) all documents contained in the
related Contract Files (v) all rights (but not the obligations) of the Seller
against any originating dealer or other third party (i.e. the originators of the
Contracts) under any agreements between the Seller and such originating dealers
or third party, (vi) all rights of the Seller in the Lockbox, the Lockbox
Account and related Lockbox Agreement to the extent they relate to such
Contracts (vii) any rebates of premiums and other amounts relating to insurance
policies, extended service contracts, other repair agreements or any other items
financed under such Contract and (viii) all proceeds and products of the
foregoing (items (i) - (viii) being collectively referred to herein as the
"CONTRACT ASSETS"). Although the Seller and the Depositor agree that any such
transfer is intended to be a sale of ownership in the Contract Assets, rather
than the mere granting of a security interest to secure a borrowing, in the
event such transfer is deemed to be of a mere security interest to secure
indebtedness, the Seller shall be deemed to have granted the Depositor a first
priority security interest in such Contract Assets and this Agreement shall
constitute a security agreement under applicable law. If such transfer is deemed
to be the mere granting of a security interest to secure a borrowing, the
Depositor may, to secure the Depositor's own borrowing under the Sale and
Servicing Agreement (to the extent that the transfer of the Contract Assets
thereunder is deemed to be a mere granting of a security interest to secure a
borrowing) repledge and reassign (i) all or a portion of the Contract Assets
pledged to the Depositor and not released from the security interest of this
Agreement at the time of such pledge and assignment, and (ii) all proceeds
thereof. Such repledge and reassignment may be made by the Depositor with or
without a repledge and reassignment by the Depositor of its rights under this
Agreement, and without further notice to or acknowledgment from the Seller. The
Seller waives, to the extent permitted by applicable law, all claims, causes of
action and remedies, whether legal or equitable (including any right of setoff),
against the Depositor or any assignee of the Depositor relating to such action
by the Depositor in connection with the transactions contemplated by the Sale
and Servicing Agreement.
SECTION 2.02. CONDITIONS TO THE CLOSING. On or before the Closing Date,
the Seller shall deliver or cause to be delivered to the Depositor each of the
documents, certificates and other items as follows:
(a) The List of Contracts, certified by the President or any
Vice President or other authorized officer of the general partner of
the Seller together with an Assignment substantially in the form
attached as EXHIBIT A hereto.
(b) A certificate of an officer of the general partner of the
Seller substantially in the form of EXHIBIT B hereto.
(c) An opinion of counsel for the Seller substantially in the
form of EXHIBIT D to the Sale and Servicing Agreement.
(d) A letter or letters from Ernst & Young LLP, or another
nationally recognized accounting firm, addressed to the Depositor and
the Issuer and the Trustees and stating that such firm has reviewed a
sample of the Contracts and performed specific
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procedures for such sample with respect to certain contract terms and
identifying those Contracts which do not so conform.
(e) Copies of resolutions of the general partner of the Seller
approving the execution, delivery and performance of this Agreement and
the transactions contemplated hereunder, certified in each case by the
Secretary or an Assistant Secretary of general partner of the Seller.
(f) Officially certified recent evidence of formation and good
standing of the Seller under the laws of Illinois.
(g) Evidence of proper filing with the appropriate offices in
Illinois of UCC financing statements executed by the Seller as
debtor/seller, naming the Depositor as secured party/purchaser and the
Issuer as assignee, and listing the Contract Assets as collateral as
well as evidence of proper filing with the appropriate offices in
Delaware of UCC Financing statements executed by the Issuer as debtor,
naming the Indenture Trustee, as assignee, and listing the Contract
Assets as collateral.
(h) The documents, certificates and other items described in
SECTION 2.02 of the Sale and Servicing Agreement, to the extent not
already described above.
SECTION 2.03. ASSIGNMENT OF AGREEMENT. The Depositor has the right to
assign its interest under this Agreement to the Issuer without further notice
to, or consent of, the Seller, and the Issuer shall succeed to the rights of the
Depositor hereunder. The Seller acknowledges that, pursuant to the Sale and
Servicing Agreement, the Depositor will assign all of its right, title and
interest in and to the Contract Assets and all of its rights hereunder to the
Issuer and that the Issuer will pledge the Contract Assets and all of the
Depositor's rights hereunder to the Indenture Trustee for the benefit of the
Noteholders and Certificateholders. The Seller agrees that, upon such assignment
to the Issuer and the Indenture Trustee, such rights will run to and be for the
benefit of the Issuer and the Indenture Trustee and the Issuer and the Indenture
Trustee may enforce directly without joinder of the Depositor, the obligations
of the Seller set forth herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Seller makes the following representations and warranties, on which
the Depositor will rely in purchasing the Contract Assets on the Closing Date
and concurrently reconveying the same to the Issuer, and on which the Issuer,
the Noteholders and Certificateholders will rely under the Sale and Servicing
Agreement. Such representations 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 Contracts to the Issuer and the pledge of the Contracts to the
Indenture Trustee. The repurchase obligation of the Seller set forth in SECTION
5.01 below and in SECTION 7.07 of the Sale and Servicing Agreement constitutes
the sole remedy available for a breach of a representation or warranty of the
Seller set forth in SECTION 3.02, 3.03 or 3.04 of this Agreement.
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<PAGE>
SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER.
The Seller represents and warrants, as of the execution and delivery of this
Agreement and as of the Closing Date that:
(a) ORGANIZATION AND GOOD STANDING. The Seller is a limited
partnership duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the requisite
power to own its assets and to transact the business in which it is
currently engaged. The Seller is duly qualified to do business and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires
such qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or otherwise) of the Seller or the Depositor.
(b) AUTHORIZATION; BINDING OBLIGATION. The Seller has the
power and authority to make, execute, deliver and perform this
Agreement and the other Transaction Documents to which the Seller is a
party and all of the transactions contemplated under this Agreement and
the other Transaction Documents to which the Seller is a party, and has
taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the other Transaction Documents to
which the Seller is a party. This Agreement and the other Transaction
Documents to which the Seller is a party constitute the legal, valid
and binding obligation of the Seller enforceable in accordance with
their terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable
remedies.
(c) NO CONSENT REQUIRED. The Seller is not required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement and the other Transaction Documents to which the Seller is a
party.
(d) NO VIOLATIONS. The Seller's execution, delivery and
performance of this Agreement and the other Transaction Documents to
which the Seller is a party will not violate any provision of any
existing law or regulation or any order or decree of any court or of
any Federal or state regulatory body or administrative agency having
jurisdiction over the Seller or any of its properties or the
Certificate of Limited Partnership or Partnership Agreement of the
Seller, or constitute a material breach of any mortgage, indenture,
contract or other agreement to which the Seller is a party or by which
the Seller or any of the Seller's properties may be bound or result in
the creation of or imposition of any security interest, lien, pledge,
preference, equity or encumbrance of any kind upon any of its
properties pursuant to the terms of any such mortgage, indenture,
contract or other agreement other than this Agreement.
(e) LITIGATION. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently
pending, or to the knowledge of the Seller threatened, against the
Seller or any of its properties or with respect to this Agreement or
any other Transaction Document to which the Seller is a party which, if
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<PAGE>
adversely determined, would in the opinion of the Seller have a
material adverse effect on the business, properties, assets or
condition (financial or other) of the Seller or the transactions
contemplated by this Agreement or any other Transaction Document to
which the Seller is a party.
(f) PLACE OF BUSINESS; NO CHANGES. The Seller's sole place of
business (within the meaning of Article 9 of the UCC) is as set forth
in SECTION 7.06 below. The Seller has not changed its name whether by
amendment of its Certificate of Limited Partnership, by reorganization
or otherwise, and has not changed the location of its place of
business, within the four months preceding the Closing Date.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING EACH
CONTRACT. The Seller represents and warrants as to each Contract as of the
execution and delivery of this Agreement and as of the Closing Date that:
(a) LIST OF CONTRACTS. The information set forth in the List
of Contracts is true, complete and correct in all material respects as
of the Cutoff Date.
(b) PAYMENTS. As of the Cutoff Date, the most recent scheduled
payment with respect to any Contract either had been made or was not
delinquent for more than 30 days. To the best of the Seller's
knowledge, all payments made on each Contract were made by or on behalf
of the respective Obligor.
(c) NO WAIVERS. As of the Closing Date, the terms of the
Contracts have not been waived, altered or modified in any respect,
except by instruments or documents included in the related Contract
File.
(d) BINDING OBLIGATION. Each Contract is a valid and binding
payment obligation of the Obligor thereunder and is enforceable in
accordance with its terms, except as such enforceability may be limited
by insolvency, bankruptcy, moratorium, reorganization, or other similar
laws affecting the enforcement of creditors' rights generally.
(e) NO DEFENSES. No Contract is subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of such Contract or the
exercise of any right thereunder will not render the Contract
unenforceable in whole or in part or subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and no such right of rescission, setoff, counterclaim or defense
has been asserted or threatened with respect thereto.
(f) INSURANCE. Each Contract requires the related Obligor to
maintain physical damage insurance (i) in an amount not less than the
value of the Financed Vehicle at the time of origination of the
Contract, (ii) naming the Seller as a loss payee and (iii) insuring
against loss and damage due to fire, theft, transportation, collision
and other risks covered by comprehensive coverage, and all premiums due
on such insurance have been paid in full from the date of the
Contract's origination.
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<PAGE>
(g) ORIGINATION. Each Contract was originated by a retailer of
new or used automobiles or other third party that finances the sale of
new or used motor vehicles in the ordinary course of its business which
dealer or third party had all necessary licenses and permits to
originate the Contracts in the state where such dealer or third party
was located, was fully and properly executed by the parties thereto,
and has been purchased by the Seller in the regular course of its
business or directly originated by the Seller in the ordinary course of
its business. To the best of the Seller's knowledge, each Contract was
sold by such dealer or other third party to the Seller without any
fraud on the part of such dealer or third party.
(h) LAWFUL ASSIGNMENT. No Contract was originated in or is
subject to the laws of any jurisdiction whose laws would make the sale,
transfer and assignment of the Contract under this Agreement or under
the Sale and Servicing Agreement or the pledge of the Contract under
the Indenture unlawful, void or voidable.
(i) COMPLIANCE WITH LAW. None of the Contracts, the
origination of the Contracts by the dealers or other third parties, the
purchase of the Contracts by the Seller, the sale of the Contracts by
the Seller to the Depositor or by the Depositor to the Issuer, or any
combination of the foregoing, violated at the time of origination or as
of the Closing Date any requirement of any federal, state or local law
and regulations thereunder, including, without limitation, usury, truth
in lending, motor vehicle installment loan and equal credit opportunity
laws, applicable to the Contracts and the sale of the Financed
Vehicles. The Seller shall, for at least the period of this Agreement,
maintain in its possession, available for the Depositor's and the
Trustees' inspection, and shall deliver to the Depositor or the Trustee
upon demand, evidence of compliance with all such requirements.
(j) CONTRACT IN FORCE. As of the Closing Date, no Contract has
been satisfied or subordinated in whole or in part or rescinded, and
the related Financed Vehicle securing any Contract has not been
released from the lien of the Contract in whole or in part.
(k) VALID SECURITY INTEREST. Each Contract creates a valid,
subsisting and enforceable first priority perfected security interest
in favor of the Seller in the Financed Vehicle covered thereby, and
such security interest has been assigned by the Seller to the
Depositor. The original certificate of title, certificate of lien or
other notification (the "LIEN CERTIFICATE") issued by the body
responsible for the registration of, and the issuance of certificates
of title relating to, motor vehicles and liens thereon (the "REGISTRAR
OF TITLES") of the applicable state to a secured party which indicates
the lien of the secured party on the Financed Vehicle is recorded on
the original certificate of title, and the original certificate of
title for each Financed Vehicle, show, or if a new or replacement Lien
Certificate is being applied for with respect to such Financed Vehicle
the Lien Certificate will be received within 180 days of the Closing
Date and will show, the Seller as original secured party under each
Contract as the holder of a first priority security interest in such
Financed Vehicle. With respect to each Contract for which the Lien
Certificate has not yet been returned from the Registrar of Titles, the
Seller has received
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<PAGE>
written evidence from the related dealer or other third party that such
Lien Certificate showing the Seller as lienholder has been applied for.
(l) CAPACITY OF PARTIES. All parties to any Contract had
capacity to execute such Contract and all other documents related
thereto and to grant the security interest purported to be granted
thereby.
(m) GOOD TITLE. Each Contract was originated by the Seller or
purchased by the Seller for value and taken into possession prior to
the Cutoff Date in the ordinary course of its business, without
knowledge that the Contract was subject to a security interest. No
Contract has been sold, assigned or pledged to any person other than
the Depositor and the Issuer as the transferee of the Depositor, and
prior to the transfer of the Contract to the Depositor, the Seller had
good and marketable title to each Contract free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest
and was the sole owner thereof and had full right to transfer the
Contract to the Depositor and to permit the Depositor to transfer the
same to the Issuer, and, as of the Closing Date, the Issuer will have a
first priority perfected security interest therein.
(n) NO DEFAULTS. As of the Cutoff Date, no default, breach,
violation or event permitting acceleration existed with respect to any
Contract and no event had occurred which, with notice and the
expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such
Contract. The Seller has not waived any such default, breach, violation
or event permitting acceleration. As of the Cutoff Date, no Financed
Vehicle had been repossessed.
(o) NO LIENS. As of the Closing Date there are no liens or
claims which have been filed for work, labor, materials or unpaid taxes
affecting the Financed Vehicle securing any Contract which are or may
be liens prior to, or equal with, the lien of such Contract.
(p) ENFORCEABILITY. Each Contract contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Financed
Vehicle of the benefits of the security.
(q) ONE ORIGINAL. Each Contract is evidenced by only one
original executed Contract, which original is being held by the
Servicer as custodian.
(r) NO GOVERNMENT CONTRACTS. No Obligor is the United States
government or any State or an agency, authority, instrumentality or
other political subdivision of the United States government or any
state government or municipality.
(s) OBLIGOR BANKRUPTCY. At the Cutoff Date, no Obligor was
subject to a bankruptcy proceeding or other insolvency proceeding.
(t) CHATTEL PAPER. The Contracts constitute chattel paper
within the meaning of the UCC as in effect in the State of Illinois.
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(u) NO IMPAIRMENT. Neither the Seller nor the Depositor has
done anything to convey any right to any Person that would result in
such Person having a right to payments due under the Contract or
otherwise to impair the rights of the Issuer in any Contract or the
proceeds thereof.
(v) CONTRACT NOT ASSUMABLE. No Contract is assumable by
another Person in a manner which would release the Obligor thereof from
such Obligor's obligations to the Depositor with respect to such
Contract.
(w) OBLIGOR LOCATION. Each Contract is a U.S.
dollar-denominated obligation and each Obligor's billing address is
located in one of the states of the United States, the District of
Columbia or Puerto Rico.
(x) LOCKBOX BANK. The Lockbox Bank is the only institution
holding any Lockbox Account for receipt of payments from Obligors, and
all Obligors, and only such Obligors, have been instructed to make
payments to the Lockbox Account, and no person claiming through or
under Seller has any claim or interest in the Lockbox or the Lockbox
Account other than the Lockbox Bank; PROVIDED, HOWEVER,
_______________, shall have an interest in certain other collections
therein not related to the Contracts.
SECTION 3.03. REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACTS IN
THE AGGREGATE. The Seller represents and warrants, as of the execution and
delivery of this Agreement and as of the Closing Date that:
(a) AMOUNTS. The sum of the aggregate Principal Balances
payable by Obligors under the Contracts as of the Cutoff Date equals
the sum of the principal balance of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class B Notes and the Certificates on
the Closing Date.
(b) CHARACTERISTICS. The Contracts have the following
characteristics: (i) all the Contracts are secured by Financed
Vehicles; (ii) no Contract has a remaining maturity of less than ___
months or more than ___ months; (iii) no Contract had an original term
to maturity of less than ___ months or more than ___ months; (iv) the
final scheduled payment on the Contract with the latest maturity is due
no later than ____________ 20___; (v) each Contract is a
fully-amortizing fixed rate Simple Interest Contract or Precomputed
Contract; and (vi) each Contract had a remaining Principal Balance of
no less than $________ and no more than $________. Approximately _____%
of the Principal Balance of the Contracts as of the Cutoff Date is
attributable to loans for purchases of new Financed Vehicles and
approximately _____% is attributable to loans for purchases of used
Financed Vehicles. No Contract has a Contract Rate of less than ____%.
No Contract was originated after the Cutoff Date. No Contract has a
Contract Rate less than ____%. The first scheduled Distribution Date of
the Contracts is due no later than ____________.
(c) MARKING RECORDS. As of the Closing Date, the Seller has
caused the Computer Disk relating to the Contracts sold hereunder and
concurrently reconveyed by the Depositor to the Issuer and pledged by
the Issuer to the Indenture Trustee to be
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clearly and unambiguously marked to indicate that such Contracts
constitute part of the Trust Corpus, are owned by the Issuer and
constitute security for the Notes.
(d) NO ADVERSE SELECTION. No selection procedures adverse to
Noteholders and Certificateholders have been employed in selecting the
Contracts.
(e) TRUE SALE. The transaction contemplated by this Agreement
constitutes a valid sale, transfer and assignment from the Seller to
the Depositor and from the Depositor to the Issuer of all of the
Seller's right, title and interest in the Contract Assets as of the
Closing Date or creates a first priority security interest for the
benefit of the Issuer in the Contract Assets as of the Closing Date.
(f) ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to
give the Trustees a first priority perfected lien on, or ownership
interest in, the Contracts and the proceeds thereof have been made,
taken or performed.
SECTION 3.04. REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACT
FILES. The Seller represents and warrants as of the execution and delivery of
this Agreement and as of the Closing Date that:
(a) POSSESSION. Immediately prior to the Closing Date, the
Servicer will have possession of each original Contract and the related
complete Contract File, and there are and there will be no custodial
agreements relating to the same in effect. Each of such documents which
is required to be signed by the Obligor has been signed by the Obligor
in the appropriate spaces. All blanks on any form have been properly
filled in and each form has otherwise been correctly prepared. The
complete Contract File for each Contract currently is in the possession
of the Servicer.
(b) BULK TRANSFER LAWS. The transfer, assignment and
conveyance of the Contracts and the Contract Files by the Seller
pursuant to this Agreement and by the Depositor pursuant to the Sale
and Servicing Agreement is not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable jurisdiction.
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
SECTION 4.01. CUSTODY OF CONTRACTS. The contents of each Contract File
shall be held in the custody of the Servicer for the benefit of the Issuer as
the owner thereof in accordance with the Sale and Servicing Agreement.
SECTION 4.02. FILING. On or prior to the Closing Date, the Seller shall
cause the UCC financing statement(s) referred to in SECTION 2.02(g) hereof and
in SECTION 2.02(g) of the Sale and Servicing Agreement to be filed and from time
to time the Seller shall take and cause to be taken such actions and execute
such documents as are necessary or desirable or as the Depositor or the Issuer
may reasonably request to perfect and protect the Depositor's and the Issuer's
ownership
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interest in the Contract Assets against all other persons, including, without
limitation, the filing of financing statements, amendments thereto and
continuation statements, the execution of transfer instruments and the making of
notations on or taking possession of all records or documents of title.
SECTION 4.03. NAME CHANGE OR RELOCATION. (a) During the term of this
Agreement, the Seller shall not change its name, identity or structure or
relocate its chief executive office without first giving at least thirty (30)
days' prior written notice to the Depositor and to the Trustees.
(b) If any change in the Seller's name, identity or structure or other
action would make any financing or continuation statement or notice of ownership
interest or lien filed under this Agreement seriously misleading within the
meaning of applicable provisions of the UCC or any title statute, the Seller, no
later than five (5) days after the effective date of such change, shall file
such amendments as may be required to preserve and protect the Depositor's and
the Issuer's interests in the Contract Assets and proceeds thereof. In addition,
the Seller shall not change its place of business or its chief executive office
(within the meaning of Article 9 of the UCC) from the location specified in
SECTION 7.06 below unless it has first taken such action as is advisable or
necessary to preserve and protect the Depositor's and Issuer's interest in the
Contract Assets. Promptly after taking any of the foregoing actions, the Seller
shall deliver to the Depositor and the Trustees an opinion of counsel stating
that, in the opinion of such counsel, all financing statements or amendments
necessary to preserve and protect the interests of the Depositor in the Contract
Assets have been filed, and reciting the details of such filing.
SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this
Agreement, the Seller will maintain its chief executive office in one of the
States of the United States, except Louisiana, Tennessee, Colorado, Kansas, New
Mexico, Oklahoma, Utah or Wyoming.
SECTION 4.05. COSTS AND EXPENSES. The Seller agrees to pay all
reasonable costs and disbursements in connection with the perfection and the
maintenance of perfection, as against all third parties, of (i) the Depositor's
and the Issuer's right, title and interest in and to the Contract Assets
(including, without limitation, the security interest in the Financed Vehicles
related thereto) and (ii) the security interests provided for in the Indenture.
SECTION 4.06. SALE TREATMENT. Each of the Seller and the Depositor
shall treat the transfer of Contract Assets made hereunder for all purposes
(including tax and financial accounting purposes) as a sale and purchase on all
of its relevant books, records, financial statements and other applicable
documents.
ARTICLE V
REMEDIES UPON MISREPRESENTATION
SECTION 5.01. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS
AND WARRANTIES. The Seller hereby agrees, for the benefit of the Issuer and the
Depositor, that it shall repurchase a Contract (together with all related
Contract Assets), at its Repurchase Price, as of the end of the second Due
Period after the Seller becomes aware, or should have become aware, or receives
written notice from the Depositor, either of the Trustees or the Servicer of any
breach of a representation or warranty of the Seller set forth in ARTICLE III of
this Agreement that materially
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adversely affects the Depositor's or the Issuer's interest in such Contract or
collectibility of the Contract (without regard to the benefits of the Reserve
Fund) and which breach has not been cured by depositing such Repurchase Price in
the Collection Account on the related Distribution Date unless the breach shall
have been cured by the last day of the Due Period following the Due Period in
which the Depositor becomes aware, or should have become aware, or receives
written notice from a Trustee or the Servicer of such breach.
SECTION 5.02. SELLER'S REPURCHASE OPTION. On written notice to the
Owner Trustee and the Indenture Trustee at least twenty (20) days prior to a
Distribution Date, provided the sum of (i) the aggregate unpaid principal
balances of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and
the Class B Notes and (ii) the Certificate Balance on such Distribution Date is
less than 10% of the Aggregate Principal Balance as of the Cutoff Date, the
Seller may (but is not required to) repurchase from the Issuer on that
Distribution Date all outstanding Contracts (and related Contract Assets) at a
price equal to the sum of (i) the aggregate unpaid principal balances of the
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class B Notes
and (ii) the Certificate Balance as of that Distribution Date plus the aggregate
of the Note Interest Distributable Amount and the Certificate Interest
Distributable Amount for the current Distribution Date as well as any
unreimbursed Servicer Advances and the accrued and unpaid Monthly Servicing Fee
and Indenture Trustee Fees to the date of such repurchase. Such price will be
deposited in the Collection Account not later than one (1) Business Day before
such Distribution Date, against the Trustees' release of the Contracts and
Contract Files as described in SECTION 7.08 of the Sale and Servicing Agreement.
ARTICLE VI
INDEMNITIES
SECTION 6.01. SELLER INDEMNIFICATION. The Seller will defend and
indemnify the Depositor, the Issuer, the Trustees, any agents of the Trustees
and the Certificateholders and Noteholders against any and all costs, expenses,
losses, damages, claims and liabilities, joint or several, including reasonable
fees and expenses of counsel and expenses of litigation arising out of or
resulting from (i) this Agreement or the use, ownership or operation of any
Financed Vehicle by the Seller or the Servicer or any Affiliate of either and
(ii) any representation or warranty or covenant made by the Seller in this
Agreement being untrue or incorrect (subject to the second sentence of the
preamble to ARTICLE III of this Agreement above). Notwithstanding any other
provision of this Agreement, the obligation of the Seller under this SECTION
6.01 shall survive any termination of this Agreement.
SECTION 6.02. LIABILITIES TO OBLIGORS. No obligation or liability to
any Obligor under any of the Contracts is intended to be assumed by the
Trustees, the Trust, the Noteholders or the Certificateholders under or as a
result of this Agreement and the transactions contemplated hereby.
SECTION 6.03. TAX INDEMNIFICATION. The Seller agrees to pay, and to
indemnify, defend and hold harmless the Depositor, the Trust, the Trustees, the
Noteholders or the Certificateholders from, any taxes which may at any time be
asserted with respect to, and as of the date of, the transfer of the Contracts
to the Depositor hereunder and the concurrent
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reconveyance to the Issuer and the further pledge by the Issuer to the Indenture
Trustee, including, without limitation, any sales, gross receipts, general
corporation, personal property, privilege or license taxes (but not including
any federal, state or other taxes arising out of the creation of the Issuer and
the issuance of the Notes and Certificates) and costs, expenses and reasonable
counsel fees in defending against the same, whether arising by reason of the
acts to be performed by the Seller under this Agreement or the Servicer under
the Sale and Servicing Agreement or imposed against the Issuer, a Noteholder, a
Certificateholder or otherwise. Notwithstanding any other provision of this
Agreement, the obligation of the Seller under this SECTION 6.03 shall survive
any termination of this Agreement.
SECTION 6.04. OPERATION OF INDEMNITIES. Indemnification under this
ARTICLE VI shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If the Seller has made any indemnity
payments to the Depositor or the Trustees pursuant to this ARTICLE VI and the
Depositor or the Trustees thereafter collects any of such amounts from others,
the Depositor or the Trustees will repay such amounts collected to the Seller,
except that any payments received by the Depositor or the Trustees from an
insurance provider as a result of the events under which the Seller's indemnity
payments arose shall be repaid prior to any repayment of the Seller's indemnity
payment.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Prohibited Transactions with Respect to the Issuer. The
Seller shall not:
(a) Provide credit to any Noteholder or Certificateholder
for the purpose of enabling such Noteholder or Certificateholder to
purchase Notes or Certificates, respectively;
(b) Purchase any Notes or Certificates in an agency or
trustee capacity; or
(c) Lend any money to the Issuer.
SECTION 7.02. MERGER OR CONSOLIDATION. (a) Except as otherwise provided
in this SECTION 7.02, the Seller will keep in full force and effect its
existence, rights and franchises as an Illinois limited partnership, and will
obtain and preserve its qualification to do business as a foreign limited
partnership in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement and of
any of the Contracts and to perform its duties under this Agreement.
(b) Any person into which the Seller may be merged or consolidated, or
any corporation or other entity resulting from such merger or consolidation to
which the Seller is a party, or any person succeeding to the business of the
Seller, shall be the successor to the Seller hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
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(c) Upon the merger or consolidation of the Seller as described in this
SECTION 7.02, the Seller shall provide Standard & Poor's and Moody's notice of
such merger or consolidation within thirty (30) days after completion of the
same.
SECTION 7.03. TERMINATION. This Agreement shall terminate (after
distribution of any Note Distributable Amount and Certificate Distributable
Amount due pursuant to SECTION 7.04 of the Sale and Servicing Agreement) on the
Payment Date on which the principal balance of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class B Notes and the Certificate Balance is reduced
to zero; PROVIDED, that the Seller's representations and warranties and
indemnities by the Seller shall survive termination.
SECTION 7.04. ASSIGNMENT OR DELEGATION BY THE SELLER. Except as
specifically authorized hereunder, the Seller may not convey and assign or
delegate any of its rights or obligations hereunder absent the prior written
consent of the Depositor and the Trustees, and any attempt to do so without such
consent shall be void.
SECTION 7.05. AMENDMENT. (a) This Agreement may be amended from time to
time by the Seller and the Depositor, with notice to the Rating Agencies, but
without the consent of the Trustees or any of the Securityholders, to correct
manifest error, to cure any ambiguity, to correct or supplement any provisions
herein which may be ambiguous or inconsistent with any other provisions herein
or in any other Transaction Document, as the case may be, or to add any other
provisions with respect to matters or questions arising under this Agreement
that shall not be inconsistent with the provisions of this Agreement; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel,
materially and adversely affect the interests of any Securityholder.
(b) This Agreement may also be amended from time to time by the Seller
and the Depositor, with the consent of Noteholders of more than 50% of the
aggregate principal amount of the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, or if there are no Class A-1 Notes, Class A-2 Notes or Class A-3 Notes
outstanding, with the consent of Noteholders of more than 50% of the aggregate
principal amount of the Class B Notes or, if there are no Notes outstanding, the
consent of Certificateholders of more than 50% 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 Certificateholders; PROVIDED, HOWEVER, that no such
amendment or waiver shall (x) reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on the Contracts or
distributions which are required to be made on any Note or Certificate, (y)
change the interest rate on any Notes or Certificates which such change
adversely affects the priority of payment of principal or interest made to the
Noteholders or Certificateholders or (z) increase or reduce the aforesaid
percentage required to consent to any such amendment, without the consent of the
Noteholders and Certificateholders then outstanding; and PROVIDED, FURTHER, that
no such amendment or consent shall be effective unless each Rating Agency
delivers written confirmation that such amendment or consent will not cause its
then-current rating on any Class of Notes or the Certificates to be qualified,
reduced or withdrawn.
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(c) Promptly after the execution of any amendment or consent pursuant
to this SECTION 7.05, the Depositor shall furnish written notification of the
substance of such amendment or consent together with a copy thereof to each
Trustee and each Rating Agency.
(d) It shall not be necessary for the consent of Noteholders or
Certificateholders under this SECTION 7.05 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Noteholders and Certificateholders
shall be subject to such reasonable requirements as the Trustees may prescribe.
(e) Upon the execution of any amendment or consent pursuant to this
SECTION 7.05, this Agreement shall be modified in accordance therewith, and such
amendment or consent shall form a part of this Agreement for all purposes, and
every holder of Notes and Certificates theretofore or thereafter issued
hereunder shall be bound thereby.
SECTION 7.06. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
(1) Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:
(i) If to the Seller:
Premier Auto Finance, L.P.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: (312) _____________
(ii) If to the Depositor:
Dealer Auto Receivables Corp.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: (312) ________________
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(iii) If to the Indenture Trustee:
The Bank of New York
Attention:
Telecopier No.: ( ) ____________
(iv) If to the Owner Trustee:
Attention:
Telecopier No.: ( ) _____________
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-1350
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies
55 Water Street
New York, New York 10041
Telecopier No.: (212) 438-2657
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
All communications and notices pursuant hereto to a Noteholders or
Certificateholder shall be in writing and delivered or mailed at the address
shown in the Note Register or Certificate Register, respectively.
SECTION 7.07. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 7.08. HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 7.09. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Illinois.
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[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
DEALER AUTO RECEIVABLES CORP.
By:___________________________
Printed Name:
Title:
PREMIER AUTO FINANCE, L.P.
By: Premier Auto Finance, Inc.,
Its General Partner
By:___________________________
Printed Name:
Title:
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Exhibit A
Transfer and Sale
Agreement
FORM OF ASSIGNMENT
In accordance with the Transfer and Sale Agreement (the "AGREEMENT")
dated as of ______________, 2000 made by and between the undersigned, as seller
thereunder (the "SELLER"), and Dealer Auto Receivables Corp., a Delaware
corporation and wholly-owned subsidiary of Premier Auto Finance, Inc. (the
"DEPOSITOR"), as purchaser thereunder, the undersigned does hereby sell,
transfer, convey and assign, set over and otherwise convey to the Depositor (i)
all the right, title and interest of the Seller in and to the Contracts listed
on the List of Contracts in effect on the Closing Date (including, without
limitation, all security interests and all rights to receive scheduled payments
and prepayments which are collected pursuant thereto on or after the Initial
Cutoff Date, including any liquidation proceeds therefrom, but excluding any
rights to receive scheduled payments due on or after, but received prior to, the
Cutoff Date), (ii) all security interests in each Financed Vehicle, (iii) all
rights of the Seller to proceeds from any claims on theft, physical damage,
credit life or disability insurance or other individual insurance policy
relating to any such Contract, an Obligor or a Financed Vehicle securing such
Contract, (iv) all documents contained in the related Contract Files, (v) all
rights (but not the obligations) of the Seller against any originating dealer or
third party (i.e. the originators of the Contracts) under any agreements between
the Seller and such originating dealers or other third party, (vi) all rights of
the Seller in the Lockbox, the Lockbox Account and related Lockbox Agreement to
the extent they relate to such Contracts, (vii) any rebates of premiums and
other amounts relating to insurance policies, extended service contracts, other
repair agreements or any other items financed under such Contract and (viii) all
proceeds and products of the foregoing.
This Assignment is made pursuant to and in reliance upon the
representation and warranties on the part of the undersigned contained in
ARTICLE III of the Agreement and no others.
Capitalized terms used herein but not otherwise defined shall have the
meanings assigned to such terms in the Sale and Servicing Agreement dated as of
____________, 2000 by and among the Depositor, Premier Auto Finance, Inc., as
Servicer, and the Trust, as issuer and The Bank of New York as indenture
trustee.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed this ___ day of ______________, 2000.
PREMIER AUTO FINANCE, L.P.
By: Premier Auto Finance, Inc.,
Its General Partner
By:___________________________
Printed Name:
Title:
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Exhibit B
Transfer and Sale
Agreement
FORM OF OFFICER'S CERTIFICATE
(See Exhibit C to the Sale and Servicing Agreement)
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- --------------------------------------------------------------------------------
SALE AND SERVICING AGREEMENT
among
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1,
as Issuer,
DEALER AUTO RECEIVABLES CORP.,
as Depositor,
PREMIER AUTO FINANCE, INC.,
as Servicer
and
____________________
as Indenture Trustee
Dated as of _____________, 2000
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
PAGE
TABLE OF CONTENTS
<S> <C>
ARTICLE ONE DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.01. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.02. USAGE OF TERMS. . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.03. SECTION REFERENCES. . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.04. CALCULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 1.05. ACCOUNTING TERMS. . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE TWO TRANSFER OF CONTRACTS. . . . . . . . . . . . . . . . . . . . 18
SECTION 2.01. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.02. CONDITIONS TO THE CLOSING . . . . . . . . . . . . . . . . . . 18
SECTION 2.03. ACCEPTANCE BY ISSUER. . . . . . . . . . . . . . . . . . . . . 20
ARTICLE THREE REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 20
SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE DEPOSITOR. . . . 21
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER . . . . 22
ARTICLE FOUR PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS . 23
SECTION 4.01. CUSTODY OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.02. FILING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.03. NAME CHANGE OR RELOCATION . . . . . . . . . . . . . . . . . . 26
SECTION 4.04. CHIEF EXECUTIVE OFFICE. . . . . . . . . . . . . . . . . . . . 26
SECTION 4.05. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE FIVE SERVICING OF CONTRACTS. . . . . . . . . . . . . . . . . . . . 26
SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION. . . . . . . . . . 26
SECTION 5.02. STANDARD OF CARE. . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.03. RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.04. INSPECTION. . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.05. TRUST ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.06. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.07. TRUSTEES TO COOPERATE . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.08. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES. . . . 32
SECTION 5.10. MAINTENANCE OF INSURANCE. . . . . . . . . . . . . . . . . . . 32
ARTICLE SIX THE DEPOSITOR . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.01. COVENANTS OF THE DEPOSITOR. . . . . . . . . . . . . . . . . . 32
SECTION 6.02. LIABILITY OF DEPOSITOR; INDEMNITIES . . . . . . . . . . . . . 33
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, DEPOSITOR; CERTAIN LIMITATIONS. . . . . . . . . . . . . . 34
SECTION 6.04. LIMITATION ON LIABILITY OF DEPOSITOR AND OTHERS . . . . . . . 34
SECTION 6.05. DEPOSITOR NOT TO RESIGN . . . . . . . . . . . . . . . . . . . 35
SECTION 6.06. DEPOSITOR MAY OWN NOTES OR CERTIFICATES . . . . . . . . . . . 35
ARTICLE SEVEN DISTRIBUTIONS; RESERVE FUND . . . . . . . . . . . . . . . . . 35
SECTION 7.01. FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.02. ADVANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.03. DISTRIBUTIONS.. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.04. RESERVE FUND. . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.05. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND
WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.06. REASSIGNMENT OF REPURCHASED CONTRACTS . . . . . . . . . . . . 38
SECTION 7.07. SELLER'S REPURCHASE OPTION. . . . . . . . . . . . . . . . . . 38
ARTICLE EIGHT SERVICER DEFAULT; SERVICE TRANSFER. . . . . . . . . . . . . 38
SECTION 8.01. SERVICER DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.02. WAIVER OF SERVICER DEFAULT. . . . . . . . . . . . . . . . . . 39
SECTION 8.03. SERVICE TRANSFER. . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.04. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF
SUCCESSOR SERVICER. . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.05. NOTIFICATION TO CERTIFICATEHOLDERS. . . . . . . . . . . . . . 41
SECTION 8.06. EFFECT OF TRANSFER. . . . . . . . . . . . . . . . . . . . . . 41
i
<PAGE>
SECTION 8.07. DATABASE FILE . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.08. SUCCESSOR SERVICER INDEMNIFICATION. . . . . . . . . . . . . . 41
SECTION 8.09. RESPONSIBILITIES OF THE SUCCESSOR SERVICER. . . . . . . . . . 41
SECTION 8.10. LIABILITY OF SERVICER; INDEMNITIES. . . . . . . . . . . . . . 42
SECTION 8.11. LIMITATION OF LIABILITY OF SERVICER.. . . . . . . . . . . . . 43
SECTION 8.12. MERGER OR CONSOLIDATION OF SERVICER . . . . . . . . . . . . . 43
SECTION 8.13. SERVICER NOT TO RESIGN. . . . . . . . . . . . . . . . . . . . 43
SECTION 8.14. APPOINTMENT OF SUBSERVICER. . . . . . . . . . . . . . . . . . 44
ARTICLE NINE REPORTS. . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.01. MONTHLY REPORTS . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.02. OFFICER'S CERTIFICATE . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.03. OTHER DATA. . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.04. ANNUAL REPORT OF ACCOUNTANTS. . . . . . . . . . . . . . . . . 44
SECTION 9.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER. . . . . . . . . 45
SECTION 9.06. MONTHLY REPORTS TO SECURITYHOLDERS. . . . . . . . . . . . . . 45
ARTICLE TEN TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 10.01. TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE ELEVEN MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 11.01. AMENDMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 11.02. PROTECTION OF TITLE TO ISSUER.. . . . . . . . . . . . . . . . 48
SECTION 11.03. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11.04. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 11.05. SEVERABILITY OF PROVISIONS. . . . . . . . . . . . . . . . . . 51
SECTION 11.06. THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . 51
SECTION 11.07. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 11.08. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 11.09. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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EXHIBITS
Exhibit A Form of Assignment A-1
Exhibit B Form of Closing Certificate of Depositor B-1
Exhibit C Form of Closing Certificate of Seller/Servicer C-1
Exhibit D Form of Opinion of Counsel for Depositor regarding
general corporate matters (including perfection opinion) D-1
Exhibit E Form of Opinion of Counsel for Depositor regarding
the "TRUE SALE" nature of the transaction E-1
Exhibit F Form of Opinion of Counsel for Depositor regarding
non-consolidation F-1
Exhibit G Form of Certificate Regarding Repurchased Contracts G-1
Exhibit H List of Contracts H-1
Exhibit I Form of Monthly Report to Noteholders and Certificateholders I-1
Exhibit J Seller's Representations and Warranties J-1
Exhibit K Lockbox Bank and Lockbox Account K-1
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SALE AND SERVICING AGREEMENT, dated as of ____________, 2000, among Dealer
Auto Receivables Owner Trust 2000-1 (together with its successors and assigns,
the "ISSUER"), Dealer Auto Receivables Corp. (together with its successor and
assigns, the "DEPOSITOR"), The Bank of New York (solely in its capacity as
Indenture Trustee together with its successors and assigns, the "INDENTURE
TRUSTEE") and Premier Auto Finance, Inc. (solely in its capacity as Servicer
together with its successor and assigns, "PREMIER AUTO FINANCE" or the
"SERVICER").
WHEREAS the Issuer desires to purchase from the Depositor a pool of
installment sale contracts relating to new or used automobiles and light-duty
trucks (collectively, the "CONTRACTS") originated or purchased by Premier Auto
Finance, L.P. and subsequently sold by Premier Auto Finance, L.P. to the
Depositor;
WHEREAS the Depositor is willing to sell, transfer and assign the
Contracts to the Issuer pursuant to the terms hereof; and
WHEREAS the Servicer is willing to service the Contracts pursuant to the
terms hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"ADMINISTRATION AGREEMENT" means the Administration Agreement dated as of
the date hereof among the Issuer, Premier Auto Finance, Inc., as administrator,
the Depositor and the Indenture Trustee, as amended, supplemented or otherwise
modified from time to time.
"ADVANCE" means, with respect to any Distribution Date, the amounts, if
any, deposited by the Servicer in the Collection Account for such Distribution
Date pursuant to SECTION 7.02.
"AFFILIATE" of any specified Person means 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" or "CONTROLLED" have meanings
correlative to the foregoing.
"AGGREGATE PRINCIPAL BALANCE" means, as of any date of determination, the
sum of the Principal Balances of each outstanding Contract as of the close of
business on the last day of the preceding Due Period.
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"AGGREGATE PRINCIPAL BALANCE DECLINE" means, with respect to any
Distribution Date, the amount by which the Aggregate Principal Balance as of
such Distribution Date exceeds the Certificate Balance and the outstanding
aggregate principal balance of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class B Notes as of the immediately preceding Distribution Date, after
giving effect to all payments of principal to Securityholders on such preceding
Distribution Date (or, in the case of the first Distribution Date, the sum of
the Initial Certificate Balance and the original principal balance of the
Notes).
"AGREEMENT" means this Sale and Servicing Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"AVAILABLE AMOUNTS" means, with respect to any Distribution Date, the sum
of the Available Interest and the Available Principal for such Distribution
Date.
"AVAILABLE INTEREST" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer
on or in respect of the Contracts during the related Due Period: (i) (A) with
respect to each Simple Interest Contract, all payments received in respect of
such Contract allocated to the payment of interest and (B) with respect to
each Precomputed Contract, all amounts received in respect of scheduled
interest payments on such Contract and the interest component of all
prepayments in full with respect to such Contract, including the interest
component of all Net Liquidation Proceeds, (ii) the interest component of the
aggregate of the Repurchase Prices for Contracts repurchased by the Depositor
pursuant to SECTION 7.05 as of the last day of the related Due Period, (iii)
the interest component of the aggregate of the Repurchase Prices for
Contracts repurchased by the Servicer pursuant to SECTION 5.06(f) as of the
last day of the related Due Period, (iv) all Advances made by the Servicer
pursuant to SECTION 7.02 in respect of delinquent interest payments on the
related Determination Date, (v) the interest component of the amount paid by
the Seller in connection with an optional repurchase of the Contracts
pursuant to SECTION 7.07 and (vi) all amounts received in respect of
interest, dividends, gains, income and earnings on investment of funds in the
Trust Accounts as contemplated in SECTION 5.05(c).
"AVAILABLE PRINCIPAL" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer
on or in respect of the Contracts during the related Due Period: (i) (A) with
respect to each Simple Interest Contract, all payments received in respect of
such Contract allocated to the payment of principal and (B) with respect to
each Precomputed Contract, all amounts received in respect of scheduled
principal payments on such Contract and the principal component of all
prepayments in full with respect to such Contract, including the principal
component of all Net Liquidation Proceeds, (ii) the principal component of
the aggregate of the Repurchase Prices for Contracts repurchased by the
Depositor pursuant to SECTION 7.05 as of the last day of the related Due
Period, (iii) the principal component of the aggregate of the Repurchase
Prices for Contracts purchased by the Servicer pursuant to SECTION 5.06(f) as
of the last day of the related Due Period, (iv) all Advances made by the
Servicer pursuant to SECTION 7.02 in respect of delinquent principal payments
and (v) the principal component of the amount paid by the Seller in
connection with an optional repurchase of the Contracts pursuant to SECTION
7.07.
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"AVAILABLE RESERVE MONIES" means, with respect to any Distribution Date,
the amount of funds on deposit in the Reserve Fund on such Distribution Date
before giving effect to any reduction thereto on such date.
"BUSINESS DAY" means any day other than a Saturday or a Sunday, or another
day on which banking institutions in the city of Chicago, Illinois, Wilmington,
Delaware, or New York, New York are authorized or obligated by law, executive
order, or governmental decree to be closed.
"CERTIFICATE BALANCE" equals $_____________ on the Closing Date, and,
thereafter, equals the Initial Certificate Balance, reduced by all amounts
allocable to principal previously distributed to Certificateholders.
"CERTIFICATE DEPOSITORY AGREEMENT" has the meaning specified in the Trust
Agreement.
"CERTIFICATE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the sum of the Certificate Principal Distributable Amount and the
Certificate Interest Distributable Amount for such Distribution Date.
"CERTIFICATE DISTRIBUTION ACCOUNT" shall have the meaning specified in the
Trust Agreement.
"CERTIFICATE FACTOR" means, as of the close of business on any Distribution
Date, a seven-digit decimal figure equal to the Certificate Balance (after
giving effect to any reductions therein to be made on such Distribution Date)
divided by the Initial Certificate Balance. The Certificate Factor will be
1.0000000 as of the Closing Date; thereafter, the Certificate Factor will
decline to reflect reductions in the Certificate Balance.
"CERTIFICATE FINAL SCHEDULED DISTRIBUTION DATE" means the ______________
Distribution Date.
"CERTIFICATE INTEREST CARRYOVER SHORTFALL" means, (a) for the initial
Distribution Date, zero, and (b) with respect to any other Distribution Date,
the excess of the Certificate Interest Distributable Amount with respect to the
immediately preceding Distribution Date, over the amount in respect of interest
on the Certificates that is 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 Pass-Through Rate for the related Interest
Period.
"CERTIFICATE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Monthly Interest Distributable
Amount with respect to such Distribution Date and the Certificate Interest
Carryover Shortfall with respect to such Distribution Date.
"CERTIFICATE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued from and including the Closing Date to but
excluding such Distribution Date) at the Pass-Through Rate on the Certificate
Balance on the immediately preceding Distribution Date,
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<PAGE>
after giving effect to all payments of principal to the Certificateholders on
such preceding Distribution Date (or, in the case of the first Distribution
Date, on the Initial Certificate Balance).
"CERTIFICATE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" will mean, with
respect to any Distribution Date, the Certificate Percentage of the Principal
Distributable Amount for such Distribution Date.
"CERTIFICATE PERCENTAGE" means (i) for each Distribution Date to but
excluding the Distribution Date on which the principal amount of all of the
Notes is reduced to zero, 0%; (ii) on the Distribution Date on which the
principal amount of all of the Notes is reduced to zero, such percentage that
equals 100% minus the Note Percentage for such Distribution Date; and (iii) 100%
thereafter.
"CERTIFICATE PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of the Certificate Principal Distributable Amount
with respect to the immediately preceding Distribution Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date.
"CERTIFICATE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Monthly Principal Distributable
Amount with respect to such Distribution Date and the Certificate Principal
Carryover Shortfall; PROVIDED, HOWEVER, that the Certificate Principal
Distributable Amount shall not exceed the Certificate Balance. In addition, on
the Certificate Final Scheduled Distribution Date, the principal required to be
deposited into the Certificate Distribution Account will include the amount
necessary to reduce the Certificate Balance to zero.
"CERTIFICATE REGISTER" shall have the meaning specified in the Trust
Agreement.
"CERTIFICATEHOLDERS" shall have the meaning specified in the Trust
Agreement.
"CERTIFICATES" means the Trust Certificates (as such term is defined in the
Trust Agreement).
"CLASS" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE" means the _______________
Distribution Date.
"CLASS A-1 NOTEHOLDER" means the Person in whose name a Class A-1 Note is
registered in the Note Register.
"CLASS A-1 RATE" means _____% per annum.
"CLASS A-2 FINAL SCHEDULED DISTRIBUTION DATE" means the _______________
Distribution Date.
"CLASS A-2 NOTEHOLDER" means the Person in whose name a Class A-2 Note is
registered in the Note Register.
"CLASS A-2 RATE" means ____% per annum.
"CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE" means the _______________
Distribution Date.
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"CLASS A-3 NOTEHOLDER" means the Person in whose name a Class A-3 Note is
registered in the Note Register.
"CLASS A-3 RATE" means ____% per annum.
"CLASS B FINAL SCHEDULED DISTRIBUTION DATE" means the _______________
Distribution Date.
"CLASS B NOTEHOLDER" means the Person in whose name a Class B Note is
registered in the Note Register.
"CLASS B RATE" means ____% per annum.
"CLOSING DATE" means ______________, 2000.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" has the meaning given such term in the "granting clause" of
the Indenture.
"COLLECTION ACCOUNT" means a trust account as described in SECTION 5.05
maintained in the name of the Indenture Trustee and which shall be an Eligible
Account.
"COMPUTER DISK" means the computer disk generated by the Servicer which
provides information relating to the Contracts and which was used by the Seller
in selecting the Contracts sold to the Depositor pursuant to the Transfer and
Sale Agreement and by the Depositor in selecting the Contracts sold to the Trust
pursuant to this Agreement, and includes the master file and the history file as
well as servicing information with respect to the Contracts.
"CONTRACT ASSETS" has the meaning assigned in SECTION 2.01 of the Transfer
and Sale Agreement.
"CONTRACT FILE" means, as to each Contract, (a) the original copy of the
Contract, including the executed installment sale contract or other evidence of
the obligation of the Obligor, (b) the original title certificate to the
Financed Vehicle and, where applicable, the certificate of lien recordation, or,
if such title certificate has not yet been issued, an application for such title
certificate, or other appropriate evidence of a security interest in the covered
Financed Vehicle, (c) the assignments of the Contract; (d) the original copy of
any agreement(s) modifying the Contract including, without limitation, any
extension agreement(s) and (e) documents evidencing the existence of physical
damage insurance covering such Financed Vehicle.
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"CONTRACT RATE" means, as to any Contract, the annual rate of interest
specified in the Contract.
"CONTRACTS" means the installment sale contracts described in the List of
Contracts and constituting part of the Trust Corpus, and includes, without
limitation, all related security interests and any and all rights to receive
payments which are collected pursuant thereto on or after the Cutoff Date, but
excluding any rights to receive payments which are collected pursuant thereto
prior to the Cutoff Date.
"CORPORATE TRUST OFFICE" means the office of the Indenture Trustee at which
at any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Agreement is
located at the address set forth in SECTION 11.04.
"CUTOFF DATE" means _____________, 2000.
"DEFAULTED CONTRACT" means a Contract with respect to which there has
occurred one or more of the following: (i) all or part of a scheduled payment
under the Contract is 120 days or more than 120 days past due and the Servicer
has not repossessed the related Financed Vehicle, (ii) the Servicer, has in
accordance with its customary servicing procedures, determined that eventual
payment in full is unlikely and has either repossessed and liquidated the
related Financed Vehicle or repossessed and held the related Financed Vehicle in
its repossessed inventory for 90 days, whichever occurs first or (iii) the
relevant Obligor has suffered an Insolvency Event.
"DELINQUENCY AMOUNT" means, as of any Distribution Date, the sum of the
outstanding Principal Balance of all Contracts that were delinquent 60 days or
more as of the close of business on the last day of the related Due Period
(including Contracts which are not Defaulted Contracts in respect of which the
related Financed Vehicles have been repossessed and are still inventory).
"DELINQUENT AMOUNTS" means, with respect to any Determination Date, the sum
of the Delinquent Interest and the Delinquent Principal for the immediately
preceding Due Period.
"DELINQUENT INTEREST" means, for each Due Period (i) with respect to each
Precomputed Contract an amount equal to the scheduled payment of interest due on
such Contract in such Due Period minus the amount of interest received with
respect to such Contract in such Due Period and (ii) with respect to each Simple
Interest Contract an amount equal to the product of (x) the Principal Balance of
such Contract as of the first day of such Due Period and (y) the stated annual
percentage rate of such Contract and (z) the number of days in the period
between the Due Dates on such Contract divided by 360 minus the amount of
interest received with respect to such Contract during such Due Period.
"DELINQUENT PRINCIPAL" means, for each Due Period with respect to each
Precomputed Contract, an amount equal to the scheduled payment of principal due
on such Contract in such Due Period minus the amount of principal received with
respect to such Contract in such Due Period.
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<PAGE>
"DEPOSITOR" has the meaning assigned such term in the preamble hereunder or
any successor thereto.
"DETERMINATION DATE" means the [________] Business Day following the
conclusion of a Due Period during the term of this Agreement.
"DISTRIBUTION DATE" means the [________] day of each calendar month during
the term of this Agreement, or if such day is not a Business Day, the next
succeeding Business Day, with the first such Distribution Date hereunder being
______________.
"DUE DATE" means, with respect to any Contract, the day of the month on
which each scheduled payment of principal and interest is due on such Contract,
exclusive of days of grace.
"DUE PERIOD" means a calendar month during the term of this Agreement, and
the Due Period related to a Determination Date or Distribution Date shall be the
calendar month immediately preceding such date; PROVIDED, HOWEVER, that with
respect to the Initial Determination Date or Initial Distribution Date, the
related Due Period shall be the period from the Cutoff Date to and including
__________________.
"ELIGIBLE ACCOUNT" means an account maintained (i) with the Indenture
Trustee or Owner Trustee as long as the Indenture Trustee's or the Owner
Trustee's short-term unsecured debt obligations have a rating of "P-1" by
Moody's and a rating of "A-1+" by Standard & Poor's (the "REQUIRED DEPOSIT
RATING") or (ii) in a segregated trust account with a depository institution or
trust company organized under the laws of the United States of America, or any
of the States thereof, or the District of Columbia, having a certificate of
deposit, short-term deposit or commercial paper rating of at least "P-1" by
Moody's and "A-1+" by Standard & Poor's.
"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 (or any domestic branch of a foreign
bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; PROVIDED, HOWEVER, that at
the time of the investment or contractual commitment to invest therein, 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) thereof
shall have a credit rating from the Rating Agency in the highest investment
category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from the Rating Agency
in the highest investment category granted thereby;
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(d) investments in money market funds having a rating from the Rating
Agency in the highest investment category granted thereby (including funds
for which the Indenture Trustee or the Owner Trustee or any of their
respective Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or
trust company referred to in CLAUSE (b); and
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed as to timely payment 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) described in CLAUSE (b).
"EXCESS AMOUNTS" shall have the meaning specified in SECTION 7.03(b).
"EXCESS PAYMENT" shall have the meaning specified in SECTION 5.05(f).
"FINAL SCHEDULED DISTRIBUTION DATE" means with respect to (i) the Notes,
the Class A-1 Final Scheduled Distribution Date, the Class A-2 Final Scheduled
Distribution Date, the Class A-3 Final Scheduled Distribution Date or the Class
B Final Scheduled Distribution Date, as the case may be, or (ii) the
Certificates, the Certificate Final Scheduled Distribution Date.
"FINANCED VEHICLE" means a new or used automobile or light-duty truck,
together with all accessions thereto, securing an Obligor's indebtedness under
the related Contract.
"HOLDER" means, with respect to a (i) Certificate, the Person in whose name
such Certificate is registered in the Certificate Register and (ii) Note, the
Person in whose name such Note is registered in the Note Register.
"INDEBTEDNESS" means, with respect to any Person at any time, (i)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (ii)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (iii) current liabilities of such Person in respect of
unfunded vested benefits under plans covered by Title IV of ERISA; (iv)
obligations issued for or liabilities incurred on the account of such Person;
(v) obligations or liabilities of such Person arising under acceptance
facilities; (vi) obligations of such Person under any guaranties, endorsements
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person or otherwise to assure a creditor against
loss; (vii) obligations of such Person secured by any lien on property or assets
of such Person, whether or not the obligations have been assumed by such Person;
or (viii) obligations of such Person under any interest rate or currency
exchange agreement.
"INDENTURE" means the Indenture, dated as of the date hereof, between the
Issuer and the Indenture Trustee.
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"INDENTURE TRUSTEE" means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"INDENTURE TRUSTEE FEE" means, with respect to any Distribution Date,
______ of the product of _______% of the Aggregate Principal Balance as of the
preceding Distribution Date.
"INDEPENDENT", when used with respect to any specified Person, means such a
Person who (i) is in fact independent of the Issuer, the Depositor or the
Servicer, (ii) is not a director, officer or employee of any Affiliate of the
Issuer, the Depositor or the Servicer, (iii) is not a person related to any
officer or director of the Issuer, the Depositor or the Servicer or any of their
respective Affiliates, (iv) is not a holder (directly or indirectly) of more
than 10% of any voting securities of Issuer, the Depositor or the Servicer or
any of their respective Affiliates, and (v) is not connected with the Issuer,
the Depositor or the Servicer as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
"INITIAL CLASS A-1 NOTE BALANCE" means $_____________.
"INITIAL CLASS A-2 NOTE BALANCE" means $_____________.
"INITIAL CLASS A-3 NOTE BALANCE" means $_____________.
"INITIAL CLASS B NOTE BALANCE" means $_____________.
"INITIAL CERTIFICATE BALANCE" means $_____________.
"INSOLVENCY EVENT" means, with respect to a specified Person, (i) the entry
of a decree or order for relief by a court or regulatory authority having
jurisdiction in respect of such Person in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future,
federal or state, bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; (ii) the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and such case is
not dismissed within 60 days; or (iii) the commencement by such Person of a
voluntary case under the federal bankruptcy laws, as now or hereinafter in
effect, or any other present or future federal or state, bankruptcy, insolvency
or similar law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or other similar official for such Person or for any substantial part of its
property, or the making by such Person of an 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 corporate action by such Person in furtherance of
any the foregoing.
"INTEREST PERIOD" means, with respect to any Distribution Date, and (i) the
Class A-1 Notes, means the period from and including the preceding Distribution
Date (or, in the case of the first Distribution Date, the Closing Date) to but
excluding such Distribution Date; and (ii) in the case of the Class A-2 Notes,
the Class A-3 Notes, the Class B Notes or the Certificates, means the period
from and including the fifteenth day of the month of the Distribution Date
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immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but excluding the fifteenth day of the
month of such Distribution Date.
"INTEREST RATE" means the Class A-1 Rate, the Class A-2 Rate, the Class A-3
Rate or the Class B Rate, as applicable.
"ISSUER" means the Dealer Auto Receivables Owner Trust 2000-1, a Delaware
business trust.
"LATE PAYMENT PENALTY FEES" means any late payment fees paid by Obligors on
Contracts after all sums received have been allocated first to regular
installments due or overdue and all such installments are then paid in full.
"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 Contract by operation of law.
"LIST OF CONTRACTS" means the list identifying each Contract constituting
part of the Trust Corpus, which list shall consist of the List of Contracts
reflecting the Contracts transferred to the Issuer on the Closing Date and which
list (a) identifies each Contract, (b) sets forth as to each Contract (i) the
Principal Balance as of the Cutoff Date, (ii) the amount of monthly payments due
from the Obligor, (iii) the Contract Rate and (iv) the maturity date, and (c)
which list (as in effect on the Closing Date) is attached to this Agreement as
EXHIBIT H.
"LOCKBOX" means the Lockbox maintained by the Lockbox Bank identified on
EXHIBIT K hereto.
"LOCKBOX ACCOUNT" means the account maintained with the Lockbox Bank and
identified on EXHIBIT K hereto.
"LOCKBOX AGREEMENT" means the ____________ dated as of __________, ______
by and among the Servicer, the Depositor, the Indenture Trustee and
____________, with respect to the Lockbox Account, unless such agreement shall
be terminated in accordance with its terms, in which event
"LOCKBOX AGREEMENT" shall mean such other agreement, in form and substance
acceptable to the above-described parties.
"LOCKBOX BANK" means the financial institution maintaining the Lockbox
Agreement and identified on EXHIBIT K hereto or any successor thereto.
"LOCKOUT PERIOD" means the period from and including the date on which the
maturity of the Notes is accelerated pursuant to SECTION 5.02 of the Indenture
after the occurrence of an "Event of Default" described in SECTION 5.01(i) or
(ii) of the Indenture and ending on the date on which the aggregate unpaid
principal balance of the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class B Notes has been reduced to zero and all accrued and unpaid
interest on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and
the Class B Notes has been paid in full.
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"MONTHLY REPORT" shall have the meaning specified in SECTION 9.06.
"MONTHLY SERVICING FEE" means, as to any Distribution Date, the product of
one-twelfth of 1% and the Aggregate Principal Balance as of the preceding
Distribution Date.
"MOODY'S" means Moody's Investors Service, Inc. or any successor thereto.
"NET LIQUIDATION LOSSES" means, as of any Distribution Date, with respect
to a Defaulted Contract, the amount, if any, by which (a) the outstanding
Principal Balance of such Defaulted Contract plus accrued and unpaid interest
thereon at the Contract Rate to the date on which such Defaulted Contract became
a Defaulted Contract exceeds (b) the Net Liquidation Proceeds for such Defaulted
Contract.
"NET LIQUIDATION PROCEEDS" means, as to any Defaulted Contract, the
proceeds realized on the sale or other disposition of the related Financed
Vehicle, including proceeds realized on the repurchase of such Financed Vehicle
by the originating dealer for breach of warranties, and the proceeds of any
insurance relating to such Financed Vehicle, after payment of all reasonable
expenses incurred thereby, together, in all instances, with the expected or
actual proceeds of any recourse rights relating to such Contract as well as any
post-disposition proceeds received by the Servicer.
"NOTE DEPOSITORY AGREEMENT" shall have the meaning specified in the
Indenture.
"NOTE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date,
the sum of the Note Principal Distributable Amount and the Note Interest
Distributable Amount for such Distribution Date.
"NOTE DISTRIBUTION ACCOUNT" means the account established and maintained as
such pursuant to SECTION 5.05.
"NOTE FACTOR" means with the respect to any Class of Notes as of the close
of business on any Distribution Date, a seven-digit decimal figure equal to the
outstanding principal amount of such Class of Notes (after giving effect to any
reductions thereof to be made on such Distribution Date) divided by the original
outstanding principal amount of such Class of Notes. Each Note Factor will be
1.0000000 as of the Closing Date; thereafter the Note Factor will decline to
reflect reductions in the outstanding principal amount of such Class of Notes.
"NOTE INTEREST CARRYOVER SHORTFALL" means, (a) with respect to the Initial
Distribution Date and each Class of Notes, zero and (b) with respect to any
other Distribution Date and a Class of Notes, the excess, if any, of the Note
Interest Distributable Amount for such Class for the immediately preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Note Distribution Account with respect to such Class on such
preceding Distribution Date, plus, interest on such excess to the extent
permitted by applicable law, at the related Interest Rate for the related
Interest Period.
"NOTE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date and a Class of Notes, the sum of the Note Monthly Interest
Distributable Amount and the Note Interest Carryover Shortfall for such Class of
Notes with respect to such Distribution Date.
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"NOTE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date for any Class of Notes, interest accrued for the related
Interest Period (calculated on the basis of, in the case of the Class A-1 Notes,
the actual number of days in such Interest Period and a year assumed to consist
of 360 days, and in the case of all other Classes of Notes, such Interest Period
being assumed to consist of 30 days and a year assumed to consist of 360 days)
at the related Interest Rate for such Class of Notes on the outstanding
principal amount of the Notes of such Class on the immediately preceding
Distribution Date, after giving effect to all payments of principal to
Noteholders of such Class on or prior to such preceding Distribution Date (or,
in the case of the first Distribution Date, on the original principal amount of
such Class of Notes).
"NOTE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the Note Percentage of the Principal Distributable Amount for
such Distribution Date.
"NOTE PERCENTAGE" means, (i) for each Distribution Date to but excluding
the Distribution Date on which the principal amount of all of the Notes is
reduced to zero, 100%; (ii) for the Distribution Date on which the principal
amount of all of the Notes is reduced to zero, such percentage which represents
the fraction of the Principal Distributable Amount necessary to reduce the
principal amount of all of the Notes to zero; and (iii) for each Distribution
Date thereafter, 0.0%.
"NOTE PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of the Note Principal Distributable Amount with
respect to the immediately preceding Distribution Date over the amount in
respect of principal that is actually deposited in the Note Distribution Account
on such preceding Distribution Date.
"NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Note Monthly Principal Distributable Amount
with respect to such Distribution Date and the Note Principal Carryover
Shortfall with respect to such Distribution Date; PROVIDED, HOWEVER, that the
Note Principal Distributable Amount shall not exceed the outstanding principal
amount of the Notes; and PROVIDED, FURTHER, that the Note Principal
Distributable Amount (i) on the Class A-1 Final Scheduled Distribution Date
shall not be less than the amount that is necessary (after giving effect to
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal amount of the Class A-1 Notes to zero, (ii) on the Class A-2 Final
Scheduled Distribution Date shall not be less than the amount that is necessary
(after giving effect to other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
outstanding principal amount of the Class A-2 Notes to zero, (iii) on the Class
A-3 Final Scheduled Distribution Date shall not be less than the amount that is
necessary (after giving effect to other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal) to
reduce the outstanding principal amount of the Class A-3 Notes to zero and (iv)
on the Class B Final Scheduled Distribution Date shall not be less than the
amount that is necessary (after giving effect to other amounts to be deposited
in the Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal amount of the Class B Notes to
zero.
"NOTE REGISTER" shall have the meaning specified in the Indenture.
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"OBLIGOR" means such person who owes payments under a Contract.
"OFFICER'S CERTIFICATE" means a certificate signed by the Chairman, the
President, a Vice President, the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
any Person delivering such certificate and delivered to the Person to whom such
certificate is required to be delivered. In the case of an Officer's
Certificate of the Servicer, at least one of the signing officers must be a
Servicing Officer. Unless otherwise specified, any reference herein to an
Officer's Certificate shall be to an Officer's Certificate of the Servicer.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be counsel
to the Depositor or the Servicer) acceptable to the Indenture Trustee or the
Owner Trustee, as the case may be.
"OWNER TRUSTEE" means the Person acting, not in its individual capacity,
but solely as Owner Trustee under the Trust Agreement, its successors in
interest and any successor owner trustee under the Trust Agreement.
"OWNER TRUSTEE FEE" means, with respect to any Distribution Date,
____________.
"PASS-THROUGH RATE" means _____% per annum.
"PAYING AGENT" means as described in SECTION 6.11 of the Indenture and
SECTION 3.10 of the Trust Agreement.
"PERFORMANCE GUARANTEE" means the Performance Guarantee dated as of the
date hereof by the Performance Guarantor, as amended, supplemented or otherwise
modified from time to time.
"PERFORMANCE GUARANTOR" means Virginia Surety Company, Inc., an Illinois
corporation, or its successor, in its capacity as Performance Guarantor under
the Performance Guarantee.
"PERSON" means any individual, corporation, estate, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"PRECOMPUTED CONTRACT" means any Contract providing for the allocation of
payments made thereunder to principal and interest in accordance with the
Precompute Method.
"PRECOMPUTE METHOD" means the method of allocating a fixed level payment to
principal and interest pursuant to which either (a) the portion of such payment
that is allocated to the payment of interest is equal to one-twelfth of the
annual fixed rate of interest on the Contract multiplied by the scheduled
principal balance of the Contract and the remainder of such payment is allocated
to the payment of principal or (b) the allocation is made in accordance with the
"Rule of 78s".
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"PRINCIPAL BALANCE" means, as of the close of business on the last day of
any Due Period, (a) with respect to any Simple Interest Contract, an amount
equal to the unpaid principal balance of such Contract as of the opening of
business on the Cutoff Date, reduced by the sum of all payments received by the
Servicer as of such date allocable to principal; (b) with respect to any
Precomputed Contract, an amount equal to the unpaid principal balance of such
Contract as of the opening of business on the Cutoff Date, reduced by the sum of
(x) that portion of all scheduled payments due on or after the Cutoff Date and
on or prior to the last day of such Due Period allocated to principal and (y)
all prepayments and other amounts applied by the Servicer as of such date to the
payment of principal on that Contract, PROVIDED, HOWEVER, that (i) if (x) a
Contract is repurchased by the Seller pursuant to SECTION 5.01 of the Transfer
and Sale Agreement or by the Performance Guarantor pursuant to the Performance
Guarantee or by the Depositor pursuant to SECTION 7.05 or by the Servicer
pursuant to SECTION 5.06(f) as of the last day of such Due Period, or if (y) the
Seller gives notice of its intent to repurchase the Contracts pursuant to
SECTION 5.02 of the Transfer and Sale Agreement and SECTION 7.07 on the next
succeeding Distribution Date, in each case the Principal Balance of such
Contract or Contracts shall be deemed as of the close of business on the last
day of such Due Period and each Due Period thereafter to be zero and (ii) from
and after the Due Period in which a Contract becomes a Defaulted Contract, the
Principal Balance of such Contract shall be deemed to be zero.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any Distribution Date, the
Aggregate Principal Balance Decline for such Distribution Date.
"QUALIFIED ELIGIBLE INVESTMENTS" means Eligible Investments acquired by the
Indenture Trustee in its name and in its capacity as Indenture Trustee, which
are held by the Indenture Trustee in the Reserve Fund and with respect to which
(a) the Indenture Trustee has noted its interest therein on its books and
records, and (b) the Indenture Trustee has purchased such investments for value
without notice of any adverse claim thereto (and, if such investments are
securities or other financial assets or interests therein, within the meaning of
Section 8-102 of the UCC as enacted in Illinois, without acting in collusion
with a securities intermediary in violating such securities intermediary's
obligations to entitlement holders in such assets, under Section 8-504 of such
UCC, to maintain a sufficient quantity of such assets in favor of such
entitlement holders), and (c) either (i) such investments are in the possession
of the Indenture Trustee, or (ii) such investments, (A) if certificated
securities and in bearer form, have been delivered to the Indenture Trustee, or
in registered form, have been delivered to the Indenture Trustee and either
registered by the issuer thereof in the name of the Indenture Trustee or
endorsed by effective endorsement to the Indenture Trustee or in blank; (B) if
uncertificated securities, the ownership of which has been registered to the
Indenture Trustee on the books of the issuer thereof (or another person, other
than a securities intermediary, either becomes the registered owner of the
uncertified security on behalf of the Indenture Trustee or, having previously
become the registered owner, acknowledges that it holds for the Indenture
Trustee); or (C) if securities entitlements (within the meaning of Section 8-102
of the UCC as enacted in Illinois) representing interests in securities or other
financial assets (or interests therein) held by a securities intermediary
(within the meaning of said Section 8-102), a securities intermediary indicates
by book entry that a security or other financial asset has been credited to the
Indenture Trustee's securities account with such securities intermediary. Any
such Qualified Eligible Investment may be purchased by or through the Indenture
Trustee or any of its affiliates.
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"RATING AGENCY" means each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on one or more classes of the Securities; and if
either Moody's or Standard & Poor's no longer maintains a rating on any class of
the Securities, such other nationally recognized statistical rating organization
selected by the Depositor.
"RECORD DATE" means, with respect to any Distribution Date, the last
Business Day of the preceding calendar month.
"REIMBURSEMENT AMOUNT" has the meaning assigned in SECTION 7.02.
"REPURCHASE PRICE" means, with respect to a Contract to be repurchased
hereunder as of the last day of any Due Period an amount equal to (a) the
Principal Balance of such Contract as of such day plus (b) accrued and unpaid
interest at the Contract Rate on such Contract through the end of such Due
Period.
"REQUIRED DEPOSIT RATING" has the meaning assigned in the definition of
"Eligible Account".
"RESERVE FUND" means the Reserve Fund established and maintained pursuant
to SECTION 7.04.
"RESERVE FUND INITIAL DEPOSIT" means $______________.
"RESERVE FUND DEPOSITS" means all moneys deposited in the Reserve Fund from
time to time including, but not limited to, the Reserve Fund Initial Deposit and
any monies deposited therein pursuant to SECTION 7.03(b), all investments and
reinvestments thereof, earnings thereon, and proceeds of the foregoing, whether
now or hereafter existing.
"RESPONSIBLE OFFICER" means, with respect to the Owner Trustee, any officer
in its Corporate Trust Administration Department (or any similar group of a
successor Owner Trustee) and with respect to the Indenture Trustee, the chairman
and any vice chairman of the board of directors, the president, the chairman and
vice chairman of any executive committee of the board of directors, every vice
president, assistant vice president, the secretary, every assistant secretary,
cashier or any assistant cashier, controller or assistant controller, the
treasurer, every assistant treasurer, every trust officer, assistant trust
officer and every other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by persons who at the time shall
be such officers, respectively, or to whom a corporate trust matter is referred
because of knowledge of, familiarity with, and authority to act with respect to
a particular matter.
"SECURITIES" means the Notes and the Certificates.
"SECURITYHOLDERS" means the Holders of the Notes or the Certificates.
"SELLER" means Premier Auto Finance, L.P., an Illinois limited partnership,
or its successor, in its capacity as Seller of Contract Assets under the
Transfer and Sale Agreement.
"SERVICER" means Premier Auto Finance, Inc., a Delaware corporation, or its
successor, until any Service Transfer hereunder and thereafter means the
Successor Servicer appointed
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pursuant to ARTICLE VIII below with respect to the duties and obligations
required of the Servicer under this Agreement.
"SERVICER DEFAULT" means an event specified in SECTION 8.01.
"SERVICE TRANSFER" has the meaning assigned in SECTION 8.03(a).
"SERVICING FEE" means, on any Determination Date, the sum of (a) the
Monthly Servicing Fee payable on the related Distribution Date, (b) Late Payment
Penalty Fees received by the Servicer during the related Due Period, and (c)
extension fees received by the Servicer during the related Due Period.
"SERVICING OFFICER" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Indenture Trustee by the Servicer, as the same may be amended
from time to time.
"SHORTFALL" means, with respect to a Distribution Date, the excess, if any,
of the sum of the amounts described in clauses (v) through (viii) of SECTION
7.03 over the Available Amounts for such Distribution Date minus the amounts
payable pursuant to clauses (i) through (iv) of SECTION 7.03 on such
Distribution Date.
"SIMPLE INTEREST CONTRACT" means any Contract providing for the allocation
of payments made thereunder to principal and interest in accordance with the
Simple Interest Method.
"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 the payment of 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 and
the remainder of such payment is allocated to the payment of principal.
"SPECIFIED RESERVE FUND BALANCE" means, with respect to any Distribution
Date, an amount equal to [_________________].
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a Division of
The McGraw Hill Companies, or any successor thereto.
"SUCCESSOR SERVICER" means a servicer described in SECTION 8.03(b).
"TRANSACTION DOCUMENTS" means this Agreement, the Transfer and Sale
Agreement, the Lockbox Agreement, the Indenture, the Trust Agreement, the
Administration Agreement, the Performance Guarantee, the Note Depository
Agreement, and the Certificate Depository Agreement.
"TRANSFER AND SALE AGREEMENT" means the Transfer and Sale Agreement dated
as of the date hereof by and between the Seller and the Depositor, as amended,
supplemented or otherwise modified from time to time.
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"TRUST ACCOUNTS" means, collectively, the Collection Account, the Note
Distribution Account and the Reserve Fund, or any of them.
"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), including the Reserve Fund Initial Deposit, and all
proceeds of the foregoing.
"TRUST AGREEMENT" means the Trust Agreement, dated as of the date hereof,
between the Depositor and the Owner Trustee.
"TRUST CORPUS" has the meaning given to such term in SECTION 2.01.
"TRUST ESTATE" shall have the meaning specified in the Trust Agreement.
"TRUSTEES" means the Owner Trustee and the Indenture Trustee.
"UCC" means the Uniform Commercial Code as enacted in Illinois or Delaware,
as applicable.
"UNCOLLECTIBLE ADVANCE" means with respect to any Determination Date and
any Contract, the amount, if any, if advanced by the Servicer in respect of such
Contract pursuant to SECTION 7.02, which the Servicer has as of such
Determination Date determined in good faith would not be ultimately recoverable
by the Servicer from insurance policies on the related Financed Vehicle, the
related Obligor or out of Net Liquidation Proceeds with respect to such
Contract. The determination by the Servicer that it has made an Uncollectible
Advance shall be evidenced by an Officer's Certificate delivered to the Trustee.
"UNDERWRITERS" means Chase Securities Inc. and Aon Capital Markets, Inc.
"UNITED STATES" means the United States of America.
"VICE PRESIDENT" of any Person means any vice president of such Person,
whether or not designated by a number or words before or after the title "VICE
PRESIDENT" who is a duly elected officer of such Person.
SECTION 1.02. USAGE OF TERMS. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation."
SECTION 1.03. SECTION REFERENCES. All section references, unless
otherwise indicated, shall be to Sections in this Agreement.
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SECTION 1.04. CALCULATIONS. Except as otherwise provided herein, all
interest rate and basis point calculations hereunder will be made on the basis
of a 360-day year and twelve 30-day months and will be carried out to at least
three decimal places.
SECTION 1.05. ACCOUNTING TERMS. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
ARTICLE TWO
TRANSFER OF CONTRACTS
SECTION 2.01. CLOSING. On the Closing Date, in consideration of the
Issuer's delivery of the Securities to and upon the order of the Depositor, the
Depositor does hereby sell, transfer, assign, set over and otherwise convey to
the Issuer by execution of an assignment substantially in the form of EXHIBIT A
hereto, without recourse other than as expressly provided herein, (i) all the
right, title and interest of the Depositor in and to the Contracts listed on the
List of Contracts in effect on the Closing Date (including, without limitation,
all security interests and all rights to receive scheduled payments and
prepayments which are collected pursuant thereto on or after the Cutoff Date,
including any liquidation proceeds therefrom, but excluding any rights to
receive scheduled payments due on or after, but received prior to, the Cutoff
Date), (ii) all security interests in each Financed Vehicle, (iii) all rights of
the Depositor to proceeds from any claims on theft, physical damage, credit life
or disability insurance or other individual insurance policy relating to any
such Contract, an Obligor or a Financed Vehicle securing such Contract, (iv) all
documents contained in the related Contract Files, (v) all rights (but not the
obligations) of the Depositor against any originating dealer or other third
party (i.e. the originators of the Contracts) under any agreements between the
Seller and such originating dealers or third party, (vi) all rights of the
Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to
the extent they relate to such Contracts, (vii) any rebates of premiums and
other amounts relating to insurance policies, extended service contracts, other
repair agreements or any other items financed under such Contract, and (viii)
all rights (but not the obligations) of the Depositor under the Transfer and
Sale Agreement, including but not limited to the Depositor's rights under
ARTICLE V thereof, (ix) all rights of the Depositor under the Performance
Guarantee, (x) the remittances, deposits and payments made into the Trust
Accounts from time to time and amounts in the Trust Accounts (other than the
Reserve Fund) from time to time (and any investments of such amounts), and (xi)
all proceeds and products of the foregoing (the property in clauses (i)-(xi)
above, being the "TRUST CORPUS"). Although the Depositor and the Owner Trustee
agree that such transfer is intended to be a sale of ownership of the Trust
Corpus, rather than the granting of a security interest to secure a borrowing,
and that the Trust Corpus shall not be property of the Depositor, in the event
such transfer is deemed to be of a mere security interest to secure a borrowing,
the Depositor shall be deemed to have granted the Issuer a perfected first
priority security interest in such Trust Corpus and this Agreement shall
constitute a security agreement under applicable law.
SECTION 2.02. CONDITIONS TO THE CLOSING. On or before the Closing Date,
the Depositor shall deliver or cause to be delivered the following documents to
the Owner Trustee:
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(a) The initial List of Contracts, certified by the Chairman of the
Board, President or any Vice President of the Depositor, together with an
assignment substantially in the form of EXHIBIT A hereto.
(b) A certificate of an officer of the Seller substantially in the
form of EXHIBIT B to the Transfer and Sale Agreement and of an officer of
the Depositor substantially in the form of EXHIBIT B hereto.
(c) Opinions of counsel for the Seller and the Depositor
substantially in the form of EXHIBITS D, E and F hereto (and including as
an addressee thereof each Rating Agency).
(d) A letter or letters from Ernst & Young LLP, or another nationally
recognized accounting firm, addressed to the Seller and the Underwriters
and stating that such firm has reviewed a sample of the Contracts and
performed specific procedures for such sample with respect to certain
contract terms and which identifies those Contracts which do not conform.
(e) Copies of resolutions of the general partner of the Seller and of
the Board of Directors of each of the Servicer and the Depositor or of the
Executive Committee of the Board of Directors of each of the Servicer and
the Depositor approving the execution, delivery and performance of this
Agreement and the other Transaction Documents to which any of them is a
party, as applicable, and the transactions contemplated hereunder and
thereunder, certified in each case by the Secretary or an Assistant
Secretary of the general partner of the Seller, the Servicer and the
Depositor.
(f) Officially certified, recent evidence of due incorporation and
good standing of each of the Servicer and the Depositor under the laws of
Delaware.
(g) Evidence of proper filing with the appropriate offices in
Delaware and Illinois of UCC financing statements executed by the Seller,
as debtor, naming the Depositor as secured party (and the Issuer as
assignee) and identifying the Contract Assets as collateral; and evidence
of proper filing with the appropriate offices in Delaware and Illinois of
UCC financing statements executed by the Depositor, as debtor, naming the
Issuer as secured party and identifying the Trust Corpus as collateral; and
evidence of proper filing with appropriate officers in Delaware of UCC
financing statements executed by the Issuer and naming the Indenture
Trustee, as secured party and identifying the Collateral, as collateral;
and evidence of proper filing with the appropriate offices in Delaware and
Illinois of UCC financing statements executed by the Depositor, as debtor,
naming the Indenture Trustee, as secured party and identifying the Other
Collateral, as collateral.
(h) An Officer's Certificate listing the Servicer's Servicing
Officers.
(i) Evidence of deposit in the Collection Account of all funds
received with respect to the Contracts on or after the Cutoff Date to the
second Business Day preceding the Closing Date, together with an Officer's
Certificate from the Depositor to the effect that such amount is correct.
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(j) The Officer's Certificate of the Seller specified in SECTION
2.02(b) of the Transfer and Sale Agreement.
(k) Evidence of deposit in the Reserve Fund of the Reserve Fund
Initial Deposit by the Owner Trustee.
(l) A fully executed Transfer and Sale Agreement.
(m) A fully executed Trust Agreement.
(n) A fully executed Administration Agreement.
(o) A fully executed Performance Guarantee.
(p) A fully executed Indenture.
SECTION 2.03. ACCEPTANCE BY ISSUER. On the Closing Date, upon the
acceptance by the Depositor of the Securities, the ownership of the Trust Corpus
will be vested in the Issuer, subject only to the lien of the Indenture Trustee.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
The Seller under the Transfer and Sale Agreement has made each of the
representations and warranties set forth in EXHIBIT J hereto and has consented
to the assignment by the Depositor to the Issuer of the Depositor's rights with
respect thereto. Such representations 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 Contracts to the Issuer. Pursuant to SECTION 2.01 of this
Agreement, the Depositor has sold, assigned, transferred and conveyed to the
Issuer as part of the Trust Corpus its rights under the Transfer and Sale
Agreement, including without limitation, the representations and warranties of
the Seller therein as set forth in EXHIBIT J attached hereto, together with all
rights of the Depositor with respect to any breach thereof including any right
to require the Seller to repurchase any Contract in accordance with the Transfer
and Sale Agreement. It is understood and agreed that the representations and
warranties set forth or referred to in this Section shall survive delivery of
the Contract Files to the Owner Trustee or any custodian.
The Depositor hereby represents and warrants to the Issuer and the
Indenture Trustee that it has entered into the Transfer and Sale Agreement with
the Seller, that the Seller has made the representations and warranties in the
Transfer and Sale Agreement as set forth in EXHIBIT J hereto, that such
representations and warranties run to and are for the benefit of the Depositor,
and that pursuant to SECTION 2.01 of this Agreement the Depositor has
transferred and assigned to the Issuer all rights of the Depositor to cause the
Seller under the Transfer and Sale Agreement to repurchase Contracts in the
event of a breach of such representations and warranties or, in the event of the
Seller's failure to repurchase such Contracts, to cause the Performance
Guarantor pursuant to the Performance Guarantee to repurchase such Contracts.
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SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE DEPOSITOR. By
its execution of this Agreement, the Depositor represents and warrants to the
Issuer that:
(a) ASSUMPTION OF SELLER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in EXHIBIT J are true and correct.
(b) ORGANIZATION AND GOOD STANDING. The Depositor is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its
assets and to transact the business in which it is currently engaged. The
Depositor is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial
or other) of the Depositor or the Issuer.
(c) AUTHORIZATION; VALID SALE; BINDING OBLIGATIONS. The Depositor
has the power and authority to make, execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to
which it is a party and all of the transactions contemplated under this
Agreement and the other Transaction Documents to which it is a party, and
to create the Issuer and cause it to make, execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to
which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party and to cause the Issuer
to be created. This Agreement shall effect a valid sale, transfer and
assignment of the Trust Corpus, enforceable against the Depositor and
creditors of and purchasers from the Depositor. This Agreement and the
other Transaction Documents to which the Depositor is a party constitute
the legal, valid and binding obligation of the Depositor enforceable in
accordance with their terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies.
(d) NO CONSENT REQUIRED. The Depositor is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or the other
Transaction Documents to which it is a party.
(e) NO VIOLATIONS. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party by the
Depositor, and the consummation of the transactions contemplated hereby and
thereby, will not violate any provision of any existing law or regulation
or any order or decree of any court or of any Federal or state regulatory
body or administrative agency having jurisdiction over the Depositor or any
of its properties or the Articles of Incorporation or Bylaws of the
Depositor, or constitute a material breach of any mortgage, indenture,
contract or other agreement to which the Depositor is a party or by which
the Depositor or any of the
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Depositor's properties may be bound, or result in the creation or
imposition of any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind upon any of its properties pursuant to
the terms of any such mortgage, indenture, contract or other agreement,
other than as contemplated by the Transaction Documents.
(f) LITIGATION. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Depositor threatened, against the Depositor or any of
its properties or with respect to this Agreement, the other Transaction
Documents to which it is a party or the Securities (1) which, if adversely
determined, would in the opinion of the Depositor have a material adverse
effect on the business, properties, assets or condition (financial or
otherwise) of the Depositor or the Issuer or the transactions contemplated
by this Agreement or the other Transaction Documents to which the Depositor
is a party, (2) which might adversely affect the federal income tax or
other federal, state or local tax attributes of the Certificates or Notes,
(3) asserting the invalidity of this Agreement, any other Transaction
Document, the Notes or the Certificates or (4) seeking to prevent the
issuance of the Securities or the consummation of the transactions
contemplated by the Transaction Documents.
(g) PLACE OF BUSINESS; NO CHANGES. The Depositor's sole place of
business (within the meaning of Article 9 of the UCC) is as set forth in
SECTION 11.04. The Depositor has not changed its name, whether by
amendment of its Articles of Incorporation, by reorganization or otherwise,
and has not changed the location of its place of business, within the four
months preceding the Closing Date.
Such representations 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 Contracts to the Issuer and the pledge thereof to the Indenture Trustee.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER. The
Servicer represents and warrants to the Issuer that:
(a) ORGANIZATION AND GOOD STANDING. The Servicer is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its
assets and to transact the business in which it is currently engaged. The
Servicer is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial
or otherwise) of the Servicer or the Issuer. The Servicer is properly
licensed in each jurisdiction to the extent required by the laws of such
jurisdiction to service the Contracts in accordance with the terms hereof
other than such licenses the failure to obtain would not have a material
adverse effect on the business, properties, assets, or condition (financial
or otherwise) of the Servicer or on the ability of the Servicer to perform
its obligations hereunder.
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(b) AUTHORIZATION; BINDING OBLIGATIONS. The Servicer has the power
and authority to make, execute, deliver and perform this Agreement and the
other Transaction Documents to which the Servicer is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which the Servicer is a party, and has taken all necessary
corporate action to authorize the execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Servicer is
a party. This Agreement and the other Transaction Documents to which the
Servicer is a party constitute the legal, valid and binding obligation of
the Servicer enforceable in accordance with their terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and
by the availability of equitable remedies.
(c) NO CONSENT REQUIRED. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement and the other
Transaction Documents to which the Servicer is a party.
(d) NO VIOLATIONS. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Servicer is a
party by the Servicer will not violate any provisions of any existing law
or regulation or any order or decree of any court or of any Federal or
state regulatory body or administrative agency having jurisdiction over the
Servicer or any of its properties or the Articles of Incorporation or
Bylaws of the Servicer, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Servicer is a party or
by which the Servicer or any of the Servicer's properties may be bound, or
result in the creation of or imposition of any security interest, lien,
pledge, preference, equity or encumbrance of any kind upon any of its
properties pursuant to the terms of any such mortgage, indenture, contract
or other agreement, other than this Agreement.
(e) LITIGATION. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Servicer threatened, against the Servicer or any of
its properties or with respect to this Agreement, any other Transaction
Document to which the Servicer is a party which, if adversely determined,
would in the opinion of the Servicer have a material adverse effect on the
business, properties, assets or condition (financial or otherwise) of the
Servicer or the Issuer or the transactions contemplated by this Agreement
or any other Transaction Document to which the Servicer is a party.
ARTICLE FOUR
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
SECTION 4.01. CUSTODY OF CONTRACTS. (a) Subject to the terms and
conditions of this SECTION 4.01, the contents of each Contract File shall be
held in the custody of the Servicer for the benefit of, and as agent for, the
Issuer as the owner thereof.
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(b) The Servicer agrees to maintain the related Contract Files at its
offices where they are currently maintained, or at such other offices of the
Servicer in the State of Illinois as shall from time to time be identified to
the Trustees by written notice. The Servicer may temporarily move individual
Contract Files or any portion thereof without notice as necessary to conduct
collection and other servicing activities in accordance with its customary
practices and procedures; PROVIDED, HOWEVER, that the Servicer will take all
action necessary to maintain the perfection of the Issuer's interest in the
Contracts and the proceeds thereof. It is intended that by the Servicer's
agreement pursuant to SECTION 4.01(a) above and this SECTION 4.01(b) the Issuer
shall be deemed to have possession of the Contract Files for purposes of Section
9-305 of the Uniform Commercial Code of the State in which the Contract Files
are located.
(c) As custodian, the Servicer shall have and perform the following powers
and duties:
(i) hold the Contract Files on behalf of the Issuer, maintain
accurate records pertaining to each Contract to enable it to comply with
the terms and conditions of this Agreement, maintain a current inventory
thereof, conduct annual physical inspections of Contract Files held by it
under this Agreement and certify to the Owner Trustee and the Indenture
Trustee annually that it continues to maintain possession of such Contract
Files;
(ii) implement policies and procedures in writing and signed by a
Servicing Officer with respect to persons authorized to have access to the
Contract Files on the Servicer's premises and the receipting for Contract
Files taken from their storage area by an employee of the Servicer for
purposes of servicing or any other purposes;
(iii) attend to all details in connection with maintaining custody
of the Contract Files on behalf of the Issuer;
(iv) at all times maintain the original of the fully executed
Contract;
(v) clearly identify the assignment of the Contract and the
contemporaneous grant of a security interest therein to the Indenture
Trustee; and
(vi) within 30 days of the Closing Date deliver an Officer's
Certificate to the Owner Trustee and the Indenture Trustee certifying that
as of a date no earlier than the Closing Date it has conducted an inventory
of the Contract Files and that there exists a Contract File for each
Contract and stating all exceptions to such statement, if any.
(d) The Servicer shall promptly report to the Owner Trustee and the
Indenture Trustee any failure by it to hold the Contract Files as herein
provided and shall promptly take appropriate action to remedy any such failure.
In acting as custodian of the Contract Files, the Servicer further agrees not to
assert any legal or beneficial ownership interest in the Contracts or the
Contract Files, except as provided in SECTION 5.06. The Servicer agrees to
indemnify the Issuer for any and all liabilities, obligations, losses, damages,
payments, costs, or expenses of any kind whatsoever which may be imposed on,
incurred by or asserted against the Issuer as the result of any act or omission
by the Servicer relating to the maintenance and custody of the Contract Files;
PROVIDED, HOWEVER, that the Servicer will not be liable for any portion of any
such
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amount resulting from the gross negligence or willful misconduct of the
Issuer. The Trustees shall have no duty to monitor or otherwise oversee the
Servicer's performance as custodian hereunder.
(e) The Servicer shall make available to the Owner Trustee, the Indenture
Trustee or their respective duly authorized representatives, attorneys or
auditors, the Contract Files and the related accounts, records and computer
systems maintained by the Servicer at such times during normal operating hours
as the Owner Trustee or Indenture Trustee shall reasonably instruct which does
not unreasonably interfere with the Servicer's normal operations or customer or
employee relations.
(f) Upon instruction from the Indenture Trustee (or, if the Notes have
been paid in full, from the Owner Trustee), the Servicer shall release any
document in the Contract Files to the Indenture Trustee or Owner Trustee, or
their respective agents or designee, as the case may be, at such place or places
as such Person may reasonably designate as soon as reasonably practicable to the
extent it does not unreasonably interfere with the Servicer's normal operations
or customer or employee relations. The Servicer shall not be responsible for
any loss occasioned by the failure of the Owner Trustee or Indenture Trustee, or
their respective agents or designees, to return any document or any delay in
doing so.
(g) 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 4.01(g) or until this Agreement shall be terminated.
If all of the rights and obligations of the Servicer shall have been terminated
under SECTION 8.03, the appointment of the Servicer as custodian may be
terminated by the Indenture Trustee or by Noteholders representing more than 50%
of the outstanding balance of the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes, voting as a single class or, if there are no Class A-1 Notes,
Class A-2 Notes or Class A-3 Notes outstanding, Noteholders representing more
than 50% of the outstanding balance of the Class B Notes or, if there are no
Notes outstanding, the Certificateholders holding Certificates representing more
than 50% of the Certificate Balance, in the same manner as the Indenture Trustee
or the Noteholders may terminate the rights and obligations of the Servicer
under SECTION 8.03. As soon as practicable after any termination of such
appointment, the Servicer shall, at its expense, deliver the Contract Files to
the Issuer or the Issuer's agent at such place or places as the Issuer may
reasonably designate. Notwithstanding the termination of the Servicer as
custodian, the Owner Trustee agrees that upon any such termination, the Issuer
shall provide, or cause its agent to provide, access to the Contract Files to
the Servicer for the purpose of carrying out its duties and responsibilities
with respect to the servicing of the Contracts hereunder.
SECTION 4.02. FILING. On or prior to the Closing Date, the Servicer shall
cause the UCC financing statement(s) referred to in SECTION 2.02(g) hereof to be
filed and from time to time the Servicer shall take and cause to be taken such
actions and execute such documents as are necessary or desirable or as the Owner
Trustee or Indenture Trustee may reasonably request to perfect and protect the
Issuer's first priority perfected interest in the Trust Corpus against all other
persons, including, without limitation, the filing of financing statements,
amendments thereto and continuation statements, the execution of transfer
instruments and the making of notations on or taking possession of all records
or documents of title.
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SECTION 4.03. NAME CHANGE OR RELOCATION. (a) During the term of this
Agreement, neither the Seller nor the Depositor shall change its name, identity
or structure or relocate its chief executive office without first giving at
least 30 days' prior written notice to the Owner Trustee and the Indenture
Trustee.
(b) If any change in either the Seller's or the Depositor's name, identity
or structure or other action would make any financing or continuation statement
or notice of lien filed under this Agreement seriously misleading within the
meaning of applicable provisions of the UCC or any title statute, the Servicer,
no later than five days after the effective date of such change, shall file such
amendments as may be required to preserve and protect the Issuer's interests in
the Trust Corpus and the proceeds thereof. In addition, neither the Seller nor
the Depositor shall change its place of business (within the meaning of Article
9 of the UCC) from the location specified in SECTION 11.04 below unless it has
first taken such action as is advisable or necessary to preserve and protect the
Issuer's interest in the Trust Corpus. Promptly after taking any of the
foregoing actions, the Servicer shall deliver to the Owner Trustee and the
Indenture Trustee an opinion of counsel reasonably acceptable to the Owner
Trustee stating that, in the opinion of such counsel, all financing statements
or amendments necessary to preserve and protect the interests of the Issuer in
the Trust Corpus have been filed, and reciting the details of such filing.
SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this Agreement,
the Depositor will maintain its chief executive office in one of the States of
the United States, except Louisiana, Tennessee, Colorado, Kansas, New Mexico,
Oklahoma, Utah or Wyoming.
SECTION 4.05. COSTS AND EXPENSES. The Servicer agrees to pay all
reasonable costs and disbursements in connection with the perfection and the
maintenance of perfection, as against all third parties, of the Issuer's right,
title and interest in and to the Contracts (including, without limitation, the
security interest in the Financed Vehicles granted thereby).
ARTICLE FIVE
SERVICING OF CONTRACTS
SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION. The Servicer
will have the sole obligation to manage, administer, service and make
collections on the Contracts and perform or cause to be performed all
contractual and customary undertakings of the holder of the Contracts to the
Obligor. The Owner Trustee, at the written request of a Servicing Officer,
shall furnish the Servicer with any powers of attorney or other documents
necessary or appropriate in the opinion of the Owner Trustee to enable the
Servicer to carry out its servicing and administrative duties hereunder. The
Servicer is hereby appointed the servicer hereunder until such time as any
Service Transfer may be effected under ARTICLE VIII.
SECTION 5.02. STANDARD OF CARE. In managing, administering, servicing and
making collections on the Contracts pursuant to this Agreement, the Servicer
will exercise that degree of skill and care consistent with the skill and care
that the Servicer exercises with respect to similar contracts serviced by the
Servicer for itself and others and, in any event, no less degree of skill and
care than would be exercised by a prudent servicer of motor vehicle retail
installment sale
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contracts; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer
shall not release or waive the right to collect the unpaid balance of any
Contract.
SECTION 5.03. RECORDS. The Servicer shall, during the period it is
servicer hereunder, maintain such books of account and other records as will
enable the Owner Trustee and the Indenture Trustee to determine the status of
each Contract.
SECTION 5.04. INSPECTION. (a) At all times during the term hereof, the
Servicer shall afford the Owner Trustee and the Indenture Trustee and their
respective authorized agents reasonable access during normal business hours to
the Servicer's records relating to the Contracts and will cause its personnel to
assist in any examination of such records by the Owner Trustee or the Indenture
Trustee, or such authorized agents and allow copies of the same to be made. The
examination referred to in this Section will be conducted in a manner which does
not unreasonably interfere with the Servicer's normal operations or customer or
employee relations. Without otherwise limiting the scope of the examination the
Owner Trustee or the Indenture Trustee may, using generally accepted audit
procedures, verify the status of each Contract and review the Computer Disk and
records relating thereto for conformity to Monthly Reports prepared pursuant to
ARTICLE IX and compliance with the standards represented to exist as to each
Contract in this Agreement.
(b) At all times during the term hereof, the Servicer shall keep available
a copy of the List of Contracts at its principal executive office for inspection
by the Trustees.
SECTION 5.05. TRUST ACCOUNTS. (a) On or before the Closing Date, the
Indenture Trustee shall establish the Collection Account, Note Distribution
Account and Reserve Fund, each in the name of the Indenture Trustee for the
benefit of the Noteholders and the Certificateholders, respectively. The
Indenture Trustee is hereby required to ensure that each of the Trust Accounts
is established and maintained as an Eligible Account.
(b) The Indenture Trustee shall deposit (or the Servicer shall deposit,
with respect to payments by or on behalf of the Obligors and Net Liquidation
Proceeds received by the Servicer), without deposit into any intervening
account, into the Collection Account as promptly as practical (but in any case
not later than the second Business Day following the receipt thereof):
(i) All payments on the Contracts (as well as Late Payment Penalty
Fees and extension fees) received by the Servicer on or after the Cutoff
Date (which for the purpose of this paragraph (b)(i) shall include those
monies deposited in the Lockbox Account allocable to principal and interest
on the Contracts);
(ii) All Net Liquidation Proceeds related to the Contracts;
(iii) The aggregate of the Repurchase Prices for Contracts
repurchased by the Depositor as described in SECTION 7.05 which amounts
shall be funded with amounts coming from the Seller pursuant to SECTION
5.01 of the Transfer and Sale Agreement or from the Performance Guarantor
pursuant to the Performance Guarantee;
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(iv) The aggregate of the Repurchase Prices for Contracts repurchased
by the Servicer as described in SECTION 5.06(f);
(v) All Advances made by the Servicer pursuant to SECTION 7.02;
(vi) All amounts paid by the Seller in connection with an optional
repurchase of the Contracts described in SECTION 7.07;
(vii) All amounts received in respect of interest, dividends,
gains, income and earnings on investments of funds in the Trust Accounts
(except the Reserve Fund) as contemplated herein.
(c) If the Servicer so directs, in writing, the Indenture Trustee shall
invest the amounts in the Trust Accounts in Qualified Eligible Investments that
mature not later than one Business Day prior to the next succeeding Distribution
Date. Once such funds are invested, the Indenture Trustee shall not change the
investment of such funds. Any loss on such investments shall be deposited in
the applicable Trust Account by the Servicer out of its own funds immediately as
realized. Funds in the Trust Accounts not so invested must be insured to the
extent permitted by law by the Bank Insurance Fund or the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation. Subject to the
restrictions herein, the Indenture Trustee may purchase a Qualified Eligible
Investment from itself or an Affiliate. Subject to the other provisions
hereof, the Indenture 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 Indenture Trustee or
its agent, together with each document of transfer, if any, necessary to
transfer title to such investment to the Indenture Trustee in a manner which
complies with this SECTION 5.05(c). All interest, dividends, gains upon sale
and other income from, or earnings on, investments of funds in the Trust
Accounts (other than the Reserve Fund) shall be deposited in the Collection
Account pursuant to SECTION 5.05(b) and distributed on the next Distribution
Date pursuant to SECTION 7.03. The Depositor and the Issuer agree and
acknowledge that the Indenture Trustee is to have "CONTROL" (within the meaning
of Section 8-102 of the UCC as enacted in Illinois) of collateral comprised of
"INVESTMENT PROPERTY" (within the meaning of Section 9-115 of the UCC as enacted
in Illinois) for all purposes of this Agreement.
(d) Notwithstanding anything to the contrary herein, the Servicer may
remit payments on the Contracts and Net Liquidation Proceeds to the Collection
Account in next-day funds or immediately available funds no later than ___ a.m.,
Central time, on the Business Day prior to the next succeeding Distribution
Date, but only for so long as (a)(i) the short-term certificate of deposit
ratings of the Servicer are at least P-1 by Moody's and "A-1" by Standard &
Poor's or (ii) the Rating Agency shall have notified the Servicer, the Indenture
Trustee and the Owner Trustee, in writing, that monthly remittances of
collections will not result in reduction or withdrawal of any then outstanding
rating of any outstanding Note or Certificate and (b) the Servicer is Premier
Auto Finance, Inc.
(e) The Servicer shall apply collections received in respect of a Contract
as follows:
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(i) First, to reimburse any outstanding Advances made by the
Servicer with respect to such Contract;
(ii) Second, (1) in the case of a Precomputed Contract, to the
related scheduled payment, or (2) in the case of a Simple Interest Contract,
first to interest accrued on such Contract as of such date and then to principal
to the extent due and owing under such Contract; and
(iii) Third, to pay any unpaid late charges or extension fees (if
any) due and owing under such Contract.
(f) Any collections on a Contract remaining after application by the
Servicer in accordance with the provisions of SECTION 5.05(e) shall
constitute an excess payment (an "EXCESS PAYMENT"). Excess Payments (x)
constituting a prepayment in full of a Precomputed Contract or (y) relating
to a Simple Interest Contract shall be applied as a prepayment of the
Principal Balance of such Contract. All other Excess Payments in respect of
Precomputed Contracts shall be held by the Servicer in accordance with
SECTION 5.05(d), or in the event the Servicer has not satisfied the
requirements of SECTION 5.05(d), deposited in an account, which shall be an
Eligible Account established with the Indenture Trustee or Owner Trustee for
the benefit of the Securityholders to be held until the Payment Date
following the month during which such prepaid amount would have been due
under such Contract. The Indenture Trustee may invest amounts on deposit in
such account in accordance with, and subject to the terms and conditions of,
SECTION 5.05(c).
(g) The Servicer will, from time to time as provided herein, be permitted
to withdraw from the Collection Account any amount deposited therein that, based
on the Servicer's good-faith determination, was deposited in error or required
to be repaid to the related Obligor.
SECTION 5.06. ENFORCEMENT. (a) The Servicer will, consistent with SECTION
5.02, act with respect to the Contracts in such manner as will maximize the
receipt of all payments called for under the terms of the Contracts. The
Servicer shall use its best efforts to cause Obligors to make all payments on
the Contracts directly to the Lockbox Account. The Servicer will act in a
commercially reasonable manner with respect to the repossession and disposition
of a Financed Vehicle following a default under the related Contract with a view
to realizing proceeds at least equal to the Financed Vehicle's fair market
value. If the Servicer determines that eventual payment in full of a Contract
is unlikely, the Servicer will follow its normal practices and procedures to
recover all amounts due upon that Contract, including repossessing and disposing
of the related Financed Vehicle at a public or private sale or taking other
action permitted by applicable law. The Servicer will be entitled to recover
all reasonable out-of-pocket expenses incurred by it in liquidating a Contract
and disposing of the related Financed Vehicle.
(b) The Servicer may sue to enforce or collect upon Contracts, in its own
name, if possible, or as agent for the Trustees. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of commencement shall
be deemed to be an automatic assignment of the Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the ground
that it is not a real party in interest or a holder entitled to enforce the
Contract, the Owner Trustee (or the
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Indenture Trustee) on behalf of the Issuer shall, at the Servicer's expense,
take such steps as the Servicer deems reasonably necessary to enforce the
Contract, including bringing suit in its name.
(c) The Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Contract in accordance with the
Servicer's usual practice. In exercising recourse rights, the Servicer is
authorized on the Issuer's behalf to reassign the Defaulted Contract or the
related Financed Vehicle to the Person against whom recourse exists at the price
set forth in the document creating the recourse; PROVIDED, HOWEVER, the Servicer
in exercising recourse against any third persons as described in the immediately
preceding sentence shall do so in such manner as to maximize the aggregate
recovery with respect to the Contract; and PROVIDED FURTHER, HOWEVER, that
notwithstanding the foregoing the Servicer in its capacity as such may exercise
such recourse only if such Contract (i) was not required to be repurchased by
the Seller pursuant to the Transfer and Sale Agreement or (ii) was required to
be repurchased by the Seller and the Seller has defaulted on such repurchase
obligation and the Performance Guarantor has defaulted on its obligation to
repurchase such Contract pursuant to the Performance Guarantee.
(d) The Servicer will not permit any rescission or cancellation of any
Contract due to the acts or omissions of the Depositor.
(e) The Servicer may grant to the Obligor on any Contract an extension of
payments due under such Contract; PROVIDED that (i) the Servicer believes in
good faith that such extension is necessary to avoid liquidation of the Contract
and will maximize the amount received under the Contract, (ii) such extension is
consistent with the Servicer's customary servicing procedures and is consistent
with SECTION 5.02, (iii) such extension does not extend the maturity date of the
Contract beyond the month preceding the Certificate Final Scheduled Distribution
Date and (iv) such extension does not modify the terms of the Contract in a
manner which constitutes a cancellation of the Contract and the creation of a
new contract for federal income tax purposes.
(f) The Servicer may agree to modify or amend any Contract if such
modification or amendment is consistent with the Servicer's customary servicing
procedures and is consistent with SECTION 5.02; provided that the Servicer
hereby covenants that it will not (i) release the Lien on a Financed Vehicle
granted in such Contract, (ii) undertake any action which would materially and
adversely impact the rights of the Issuer in such Contract, (iii) modify, alter
or change the Contract Rate of such Contract, (iv) modify, alter or change the
number of installment payments the related Obligor is obligated to make under
such Contract or (v) increase the Principal Balance of such Contract. The
Servicer hereby agrees that it shall purchase a Contract (together with all
related Contract Assets) as of the last day of the immediately preceding Due
Period, at its Repurchase Price, not later than the second Distribution Date
after the Servicer becomes aware, or should have become aware, or receives
written notice from the Depositor or either of the Trustees of any breach of a
covenant of the Servicer set forth in clauses (i) through (iv) above or in
SECTION 5.06(e) above that materially adversely affects the interest of the
Issuer or the interest of the Noteholders or the Certificateholders in such
Contract or the collectibility of the Contract (without regard to the benefits
of the Reserve Fund) and which breach has not been cured.
(g) The Servicer will not add to the outstanding Principal Balance of any
Contract the premium of any physical damage or other individual insurance on a
Financed Vehicle securing
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such Contract it obtains on behalf of the Obligor under the terms of such
Contract, but may create a separate Obligor obligation with respect to such
premium if and as provided by the Contract.
(h) If the Servicer shall have repossessed a Financed Vehicle on behalf of
the Issuer, the Servicer shall either (i) maintain at its expense physical
damage insurance with respect to such Financed Vehicle, or (ii) indemnify the
Issuer against any damage to such Financed Vehicle prior to resale or other
disposition. The Servicer shall not allow such repossessed Financed Vehicles to
be used in an active trade or business, but rather shall dispose of the Financed
Vehicle in a reasonable time in accordance with the Servicer's normal business
practices.
SECTION 5.07. TRUSTEES TO COOPERATE. Upon payment in full on any
Contract, the Servicer will notify the Trustees and the Depositor on the next
succeeding Distribution Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that all amounts received
in connection with such Contract which are required to be deposited in the
Collection Account pursuant to SECTION 5.05 have been so deposited) and shall
(if the Servicer is not then in possession of the Contracts and Contract Files)
request delivery of the Contract and Contract File to the Servicer. Upon
receipt of such delivery and request, the Trustees shall promptly release or
cause to be released such Contract and Contract File to the Servicer. Upon
receipt of such Contract and Contract File, each of the Depositor and the
Servicer is authorized to execute an instrument in satisfaction of such Contract
and to do such other acts and execute such other documents as the Servicer deems
necessary to discharge the Obligor thereunder and eliminate the security
interest in the Financed Vehicle related thereto. The Servicer shall determine
when a Contract has been paid in full; to the extent that insufficient payments
are received on a Contract credited by the Servicer as prepaid or paid in full
and satisfied, the shortfall shall be paid by the Servicer out of its own funds.
From time to time as appropriate for servicing and repossession in connection
with any Contract, if the Indenture Trustee, and not the Servicer is then in
possession of the Contracts and Contract Files, the Indenture Trustee shall,
upon written request of a Servicing Officer and delivery to the Indenture
Trustee of a receipt signed by such Servicing Officer, cause the original
Contract and the related Contract File to be released to the Servicer and shall
execute such documents as the Servicer shall deem reasonably necessary to the
prosecution of any such proceedings. Such receipt shall obligate the Servicer
to return the original Contract and the related Contract File to the Indenture
Trustee when the need by the Servicer has ceased unless the Contract shall be
repurchased as described in SECTION 7.07. Upon request of a Servicing Officer,
the Indenture Trustee shall perform such other acts as reasonably requested by
the Servicer and otherwise cooperate with the Servicer in the enforcement of the
Securityholders' rights and remedies with respect to the Contracts.
SECTION 5.08. COSTS AND EXPENSES. All costs and expenses incurred by the
Servicer in carrying out its duties hereunder, fees and expenses of accountants
and payments of all fees and expenses incurred in connection with the
enforcement of Contracts (including enforcement of Defaulted Contracts and
repossessions of Financed Vehicles securing such Contracts) and all other fees
and expenses not expressly stated hereunder to be for the account of the Issuer
shall be paid by the Servicer and the Servicer shall not be entitled to
reimbursement hereunder except as otherwise provided in SECTION 5.06(a).
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SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES. The
Servicer shall take such steps as are necessary to maintain continuous
perfection and the first priority of the security interest created by each
Contract in the related Financed Vehicles. The Owner Trustee and the Indenture
Trustee hereby authorize the Servicer to take such steps as are necessary to
perfect such security interest and to maintain the first priority thereof in the
event of a relocation of a Financed Vehicle or for any other reason.
SECTION 5.10. MAINTENANCE OF INSURANCE. The Servicer shall, at its own
cost and expense, during the term of its service as Servicer maintain in force
an insurance policy or financial guarantee bond to protect against losses due to
errors and omissions by the Servicer in the performance of its duties hereunder.
Such insurance policy or financial guarantee bond shall be in form and in an
amount as is generally customary among Persons which service a portfolio of
automobile retail installment sale contracts and which are generally regarded as
servicers acceptable to institutional investors.
ARTICLE SIX
THE DEPOSITOR
SECTION 6.01. COVENANTS OF THE DEPOSITOR.
(a) CORPORATE EXISTENCE. During the term of this Agreement, the
Depositor 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 other Transaction
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby.
(b) ARM'S LENGTH TRANSACTIONS. During the term of this Agreement,
all transactions and dealings between the Depositor and its Affiliates will be
conducted on an arm's-length basis.
(c) NO OTHER BUSINESS. The Depositor shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Agreement and the other Transaction
Documents and activities incidental thereto.
(d) NO BORROWING. The Depositor shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for any Indebtedness permitted by or arising under the
Transaction Documents. The proceeds of the Notes and the Certificates shall be
used exclusively to fund the Depositor's purchase of the Contracts and the other
assets specified in this Agreement and to pay the transactional expenses of the
Depositor.
(e) GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES. Except as
otherwise contemplated by the Transaction Documents, the Depositor shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuming
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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, any other interest in, or make any capital
contribution to, any other Person.
(f) CAPITAL EXPENDITURES. The Depositor shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
(g) RESTRICTED PAYMENTS. Except as permitted by the Transaction
Documents, the Depositor 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 any owner of an equity
interest in the Depositor, (ii) redeem, purchase, retire or otherwise acquire
for value any such equity interest or (iii) set aside or otherwise segregate any
amounts for any such purpose.
SECTION 6.02. LIABILITY OF DEPOSITOR; INDEMNITIES. The Depositor shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Depositor under this Agreement.
The Depositor shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee and the Servicer from and against any taxes
that may at any time be asserted against any such Person with respect to the
transactions contemplated herein and in the other Transaction Documents,
including any sales, gross receipts, general corporation, tangible personal
property, Illinois personal property replacement privilege or license taxes
(but, in the case of the Issuer, not including any taxes asserted with respect
to, and as of the date of, the sale of the Contracts to the Issuer or the
issuance and original sale of the Securities, ownership of the Contracts, or
federal or other income taxes arising out of distributions on the Certificates
or the Notes) and costs and expenses in defending against the same.
The Depositor shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee and the Securityholders from and against
any loss, liability or expense incurred by reason of the Depositor'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.
The Depositor shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee and the Indenture Trustee from and against all costs, expenses,
losses, claims, damages and liabilities arising out of or incurred in connection
with the acceptance or performance of the trusts and duties herein and, in the
case of the Owner Trustee, in the Trust Agreement and, in the case of the
Indenture Trustee, in the Indenture, except to the extent that such cost,
expense, loss, claim, damage or liability in the case of (i) the Owner Trustee
shall be due to the willful misfeasance, bad faith or negligence of the Owner
Trustee or shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in SECTION 7.03 of the Trust Agreement,
or (ii) the Indenture Trustee, shall be due to the willful misfeasance, bad
faith or negligence of the Indenture Trustee.
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Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Depositor 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 Depositor, without interest.
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, DEPOSITOR; CERTAIN LIMITATIONS.
Notwithstanding any other provision in this Section and any provision of
law, the Depositor shall not do any of the following:
(i) engage in any business or activity other than as set forth in
its Articles of Incorporation;
(ii) without the affirmative vote of a majority of the members of
the Board of Directors of the Depositor (which must include the affirmative
vote of at least one duly appointed Independent director) (A) dissolve or
liquidate, in whole or in part, or institute proceedings to be adjudicated
bankrupt or insolvent, (B) consenting to the institution of bankruptcy or
insolvency proceedings against it, (C) file a petition seeking or consent
to reorganization or relief under any applicable federal or state law
relating to bankruptcy, (D) consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the corporation or a substantial part of its property, (E) make a general
assignment for the benefit of creditors, (F) admit in writing its inability
to pay its debts generally as they become due, or (G) take any corporate
action in furtherance of the actions set forth in clauses (A) through (F)
above; PROVIDED, HOWEVER, that no director may be required by any
shareholder of the Depositor to consent to the institution of bankruptcy or
insolvency proceedings against the Depositor so long as it is solvent; or
(iii) merge or consolidate with any other corporation, company or
entity or sell all or substantially all of its assets or acquire all or
substantially all of the assets or capital stock or other ownership
interest of any other corporation, company or entity.
SECTION 6.04. LIMITATION ON LIABILITY OF DEPOSITOR AND OTHERS. The
Depositor and any director or officer or employee or agent of the Depositor may
rely in good faith on any document of any kind, prima facie properly executed
and submitted by any Person respecting any matters arising hereunder. The
Depositor and any director or officer or employee or agent of the Depositor
shall be reimbursed by the Owner Trustee or the Indenture Trustee, as the case
may be, for any contractual damages, liability or expense incurred by reason of
the Owner Trustee's or the Indenture Trustee's willful misfeasance, bad faith or
negligence (except errors in judgment) in the performance of their respective
duties hereunder, or by reason of reckless disregard of their respective
obligations and duties hereunder. The Depositor 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.
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SECTION 6.05. DEPOSITOR NOT TO RESIGN. Subject to the provisions of
SECTION 6.03, the Depositor shall not resign from the obligations and duties
hereby imposed on it as Depositor hereunder.
SECTION 6.06. DEPOSITOR MAY OWN NOTES OR CERTIFICATES. The Depositor and
any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Notes or Certificates with the same rights as it would have
if it were not the Depositor or an Affiliate thereof, except as expressly
provided herein or in any Transaction Document. Notes or Certificates so owned
by or pledged to the Depositor or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority or distinction as among all of the Notes or Certificates,
as the case may be.
ARTICLE SEVEN
DISTRIBUTIONS; RESERVE FUND
SECTION 7.01. FEES. The Indenture Trustee shall be paid the Indenture
Trustee Fee and the Servicer shall be paid the Monthly Servicing Fee, each of
which shall be paid solely from the monies and in accordance with the priorities
described in SECTION 7.03. No recourse may be had to the Seller, Depositor,
Trustees, Servicer, or any of their respective Affiliates in the event that
amounts available under SECTION 7.02 are insufficient for payment of the
Indenture Trustee Fee and the Monthly Servicing Fee.
SECTION 7.02. ADVANCES. On each Determination Date, the Servicer shall
compute the amount of Delinquent Interest, and Delinquent Principal for the
immediately preceding Due Period. Not later than each Determination Date, the
Servicer shall advance (each, an "ADVANCE") an amount equal to the Delinquent
Amounts for such Determination Date by depositing such amount in the Collection
Account; PROVIDED, HOWEVER, that the Servicer shall be obligated to advance in
respect of a Contract only to the extent that the Servicer, in its sole
discretion, expects that such advance would not be an Uncollectible Advance.
The Servicer shall indicate on each Monthly Report (i) the amount of Delinquent
Interest, if any, for the related Due Period, (ii) the amount of Delinquent
Principal, if any, for the related Due Period and (iii) the amount of the
Advance, if any, made by the Servicer in respect of the Delinquent Amounts
pursuant to this SECTION 7.02. If the amount of such Advance is less than the
amount of the Delinquent Amounts, the relevant Monthly Report shall be
accompanied by a certificate of a Servicing Officer setting forth in reasonable
detail the basis for the determination by the Servicer that the portion of the
Delinquent Amounts not advanced would be an Uncollectible Advance. By each
Determination Date, the Servicer shall determine the amount of prior
unreimbursed Advances for which it shall be entitled to be reimbursed (such
amount, the "REIMBURSEMENT AMOUNT"). The Servicer shall be entitled to be
reimbursed for an Advance made in respect of a delinquent payment under a
Contract on the earlier of (i) the Distribution Date following the Due Period in
which that delinquent payment was paid and (ii) the Distribution Date following
the Due Period in which that Contract became a Defaulted Contract.
SECTION 7.03. DISTRIBUTIONS.
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(a) On each Distribution Date, the Indenture Trustee at the Servicer's
direction will make the following distributions in the following order of
priority:
(i) to the Servicer from Available Amounts, the Reimbursement
Amount for Advances previously made;
(ii) to the Servicer from Available Amounts, the Servicing Fee,
including any unpaid Servicing Fee with respect to one or more prior Due
Periods;
(iii) to the Indenture Trustee from Available Amounts, any accrued
and unpaid Indenture Trustee Fee with respect to one or more prior Due
Periods;
(iv) to the Owner Trustee from Available Amounts, any accrued and
unpaid Owner Trustee Fee with respect to one or more prior Due Periods;
(v) to the Note Distribution Account from Available Amounts,
together with any amounts deposited therein pursuant to SECTION 7.04, the
Note Interest Distributable Amount with respect to such Distribution Date
for each Class of Notes;
(vi) except during any Lockout Period, to the Certificate
Distribution Account from Available Amounts, together with any amounts
deposited therein pursuant to SECTION 7.04, the Certificate Interest
Distributable Amount with respect to such Distribution Date;
(vii) to the Note Distribution Account from Available Amounts,
together with any amounts deposited therein pursuant to SECTION 7.04, the
Note Principal Distributable Amount with respect to such Distribution Date;
and
(viii) to the Certificate Distribution Account from Available
Amounts, together with any amounts deposited therein pursuant to SECTION
7.04, the Certificate Principal Distributable Amount with respect to such
Distribution Date.
(b) In the event that the distributions described in clauses (i) through
(vii) above have been funded exclusively from Available Amounts, the Indenture
Trustee will deposit any remaining Available Amounts ("EXCESS AMOUNTS") into
the Reserve Fund in accordance with SECTION 7.04(d), until the amount on deposit
therein equals the Specified Reserve Fund Balance with respect to such
Distribution Date and the Indenture Trustee will pay any excess over such
Specified Reserve Fund Balance to the Depositor.
SECTION 7.04. RESERVE FUND.
(a) On or prior to the Closing Date, the Owner Trustee shall deposit the
Reserve Fund Initial Deposit into the Reserve Fund. The Servicer shall
establish and maintain the Reserve Account as an Eligible Account at ___________
in the name of the Indenture Trustee for the benefit of the Securityholders.
(b) The Indenture Trustee shall at the written direction of the Servicer
invest the funds in the Reserve Fund in Qualified Eligible Investments. Funds
in the Reserve Fund shall be
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invested in investments that mature on or before the Business Day prior to each
Distribution Date. Once such funds are invested, the Indenture Trustee shall not
change the investment of such funds prior to maturity. Upon any such investment,
the Indenture Trustee shall, consistent with the definition of Qualified
Eligible Investment herein, make an appropriate notation of security interest in
such Qualified Eligible Investment on the Indenture Trustee's records, by book
entry or otherwise. All income and gain realized from any such investments as
well as any interest earned on Reserve Fund Deposits shall be deposited and
retained in the Reserve Fund (subject to SECTION 7.04(d)). Losses, if any,
realized on amounts in the Reserve Fund invested pursuant to this paragraph
shall first be credited against undistributed investment earnings on amounts in
the Reserve Fund invested pursuant to this paragraph, and shall thereafter be
deemed to reduce the amount on deposit in the Reserve Fund. The Depositor and
the Indenture Trustee shall not be liable for the amount of any loss incurred in
respect of any investment, or lack of investment, of funds held in the Reserve
Fund.
(c) On the Business Day immediately preceding each Distribution Date, the
Servicer shall instruct the Indenture Trustee in writing (based on the
information contained in the Monthly Report delivered on the related
Determination Date pursuant to SECTION 9.01) on such Distribution Date to
withdraw from the Reserve Account an amount equal to the Shortfall with respect
to such Distribution Date and apply such funds in the following order of
priority: first, to the Note Distribution Account; the amount of such Shortfall
relating to the Note Interest Distributable Amount, second, to the Certificate
Distribution Account, the amount of such Shortfall relating to the Certificate
Interest Distributable Amount; third, to the Note Distribution Account, the
amount of such Shortfall relating to the Note Principal Distributable Amount;
and fourth, to the Certificate Distribution Account, the amount of such
Shortfall relating to the Certificate Principal Distributable Amount. On each
Distribution Date, the Indenture Trustee shall withdraw funds from the Reserve
Fund and apply them in accordance with the Servicer's instructions.
(d) On each Distribution Date on which the amount on deposit in the
Reserve Fund (after giving effect to all deposits thereto and withdrawals
therefrom on such Distribution Date) is greater than the Specified Reserve Fund
Balance with respect to such Distribution Date the Indenture Trustee shall
withdraw such excess funds and pay them to the Depositor.
SECTION 7.05. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND
WARRANTIES.
Upon a discovery by the Servicer, the Depositor or the Trustees of a breach
of a representation or warranty of the Depositor as set forth in SECTION 3.01(a)
or of the Seller as set forth in EXHIBIT J hereto that materially adversely
affects the Issuer's interest in or collectibility of such Contract (without
regard to the benefits of the Reserve Fund), the party discovering the breach
shall give prompt written notice to the other parties; PROVIDED, that the
Trustees shall have no duty or obligation to inquire or to investigate the
breach by the Depositor or the Seller of any of such representations or
warranties. Unless the breach shall have been cured by the last day of the Due
Period following the Due Period in which the Depositor becomes aware, or should
have become aware, or receives written notice from a Trustee or the Servicer of
such breach, the Depositor in accordance with this SECTION 7.05, shall
repurchase such Contract as of the last day of such Due Period at its Repurchase
Price, by depositing such Repurchase Price in the
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Collection Account on the related Distribution Date. The repurchase obligation
described in this SECTION 7.05 is in no way to be satisfied with monies in the
Reserve Fund.
SECTION 7.06. REASSIGNMENT OF REPURCHASED CONTRACTS. Upon receipt by the
Indenture Trustee for deposit in the Collection Account of the Repurchase Price
as described in SECTION 7.05 or SECTION 7.07, and upon receipt of a certificate
of a Servicing Officer in the form attached hereto as EXHIBIT G, the Indenture
Trustee shall release its lien on and the Owner Trustee shall assign to the
Seller all of the Issuer's right, title and interest in the repurchased Contract
without recourse, representation or warranty.
SECTION 7.07. SELLER'S REPURCHASE OPTION. As provided in the Transfer and
Sale Agreement, on written notice to the Indenture Trustee at least 20 days
prior to a Distribution Date, and provided that the sum of (i) the aggregate
unpaid principal balance of the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes and the Class B Notes and (ii) the Certificate Balance on such
Distribution Date is less than 10% of the Aggregate Principal Balance as of the
Cutoff Date, the Seller, through the Depositor, may (but is not required to)
repurchase on that Distribution Date pursuant to the Transfer and Sale Agreement
all outstanding Contracts (and related Contract Assets) at a price equal to the
sum of (i) the aggregate unpaid principal balance of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes and the Class B Notes and (ii) the
Certificate Balance as of that Distribution Date plus the aggregate of the Note
Interest Distributable Amount and the Certificate Interest Distributable Amount
for the current Distribution Date, the Reimbursement Amount (if any) as well as
accrued and unpaid Monthly Servicing Fees and the Indenture Trustee Fees to the
date of such repurchase. Such price will be deposited in the Collection Account
not later than one (1) Business Day before such Distribution Date, against the
Trustees' release of the Contracts and the Contract Files to the Seller.
ARTICLE EIGHT
SERVICER DEFAULT; SERVICE TRANSFER
SECTION 8.01. SERVICER DEFAULT. "Servicer Default" means the occurrence
of any of the following:
(a) Any failure by the Servicer (i) to make any payment or deposit
required to be made hereunder or (ii) to direct the Trustees to make any payment
or distribution required to be made hereunder and the continuance of either such
failure described in clauses (i) or (ii) above for a period of five (5) Business
Days after receipt of written notice from the Trustees or discovery by the
Servicer of such failure;
(b) Failure on the Servicer's part to observe or perform in any material
respect any covenant or agreement set forth herein (other than a covenant or
agreement, the breach of which is specifically addressed elsewhere in this
Agreement) which (i) materially and adversely affects the rights of the
Securityholders and (ii) continues unremedied for thirty (30) days after receipt
of written notice from the Trustees or by Noteholders of more than 25% of the
aggregate principal amount of the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, or, if there are no Class A-1 Notes, Class A-2 Notes or Class A-3 Notes
outstanding, by Noteholders of more
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than 25% of the aggregate principal amount of the Class B Notes, or, if there
are no Notes outstanding, by Certificateholders of more than 25% of the
Certificate Balance;
(c) An involuntary case under any applicable bankruptcy, insolvency or
other similar law shall have been commenced in respect of the Servicer and shall
not have been dismissed within 60 days, or a court having jurisdiction in the
premises shall have entered a decree or order for relief in respect of the
Servicer in an involuntary case under any applicable 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 Servicer, or for any substantial liquidation or winding up of its affairs;
(d) The Servicer shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have consented to the entry of an order for relief in an
involuntary case under any such law, or shall have consented to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian
or sequestrator (or other similar official) of the Servicer or for any
substantial part of its property, or shall have made any general assignment for
the benefit of its creditors, or shall have failed to, or admitted in writing
its inability to, pay its debts as they become due, or shall have taken any
corporate action in furtherance of the foregoing;
(e) Any representation, warranty or statement of the Servicer made in this
Agreement, or any certificate, report or other writing delivered pursuant hereto
shall prove to be incorrect in any material respect as of the time when the same
shall have been made and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Securityholders and, within 30
days after written notice thereof shall have been given to the Servicer by the
Indenture Trustee or, if there are no Notes outstanding, the Owner Trustee or by
Noteholders of more than 25% of the aggregate principal amount of the Class A-1
Notes, Class A-2 Notes and Class A-3 Notes or, if there are no Class A-1 Notes,
Class A-2 Notes or Class A-3 Notes outstanding, by Noteholders of more than 25%
of the aggregate principal amount of the Class B Notes, or, if there are no
Notes outstanding, by Certificateholders of more than 25% of the Certificate
Balance, the circumstances or condition in respect of which such representation,
warranty or statement was incorrect shall not have been eliminated or otherwise
cured.
SECTION 8.02. WAIVER OF SERVICER DEFAULT. Noteholders representing more
than 50% of the outstanding balance of the Class A-1 Notes, the Class A-2 Notes
and the Class A-3 Notes, voting as a single class, or if there are no Class A-1
Notes, Class A-2 Notes or Class A-3 Notes outstanding, Noteholders representing
more than 50% of the outstanding balance of the Class B Notes or, if there are
no Notes outstanding, Certificateholders representing more than 50% of the
Certificate Balance, may, by written notice delivered to the parties hereto,
waive any Servicer Default other than a Servicer Default described in SECTION
8.01(a).
SECTION 8.03. SERVICE TRANSFER. (a) If a Servicer Default has occurred
and is continuing and has not been waived pursuant to SECTION 8.02, (x)
Noteholders representing more than 50% of the outstanding balance of the Class
A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, voting as a single
class, or if there are no Class A-1 Notes, Class A-2 Notes or Class A-3 Notes
outstanding, Noteholders representing more than 50% of the outstanding balance
of the Class B Notes or, if there are no Notes outstanding, Certificateholders
representing more than 50% of the
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Certificate Balance or (y) the Indenture Trustee or, if there are no Notes
outstanding, the Owner Trustee may, by written notice delivered to the parties
hereto, terminate all (but not less than all) of the Servicer's management,
administrative, servicing, custodial and collection functions (such termination
being herein called a "SERVICE TRANSFER").
(b) Upon receipt of the notice required by SECTION 8.03(a) (or, if later,
on a date designated therein), all rights, benefits, fees, indemnities,
authority and power of the Servicer under this Agreement, whether with respect
to the Contracts, the Contract Files or otherwise, shall pass to and be vested
in the Indenture Trustee (the "SUCCESSOR SERVICER") pursuant to and under this
SECTION 8.03; and, without limitation, the Successor Servicer is authorized and
empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination. The Servicer agrees to cooperate with the Successor Servicer in
effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the Successor Servicer
for administration by it of all cash amounts which shall at the time be held by
the Servicer for deposit, or have been deposited by the Servicer, in the
Collection Account, or for its own account in connection with its services
hereafter or thereafter received with respect to the Contracts. The Servicer
shall transfer to the Successor Servicer all records held by the Servicer
relating to the Contracts in such electronic form as the Successor Servicer may
reasonably request and (ii) any Contract Files in the Servicer's possession. In
addition, the Servicer shall permit access to its premises (including all
computer records and programs) to the Successor Servicer or its designee, and
shall pay the reasonable transition expenses of the Successor Servicer. Upon a
Service Transfer, the Successor Servicer shall also be entitled to receive the
Monthly Servicing Fee for performing the obligations of the Servicer.
SECTION 8.04. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF SUCCESSOR
SERVICER. On or after a Service Transfer pursuant to SECTION 8.03, the
Successor Servicer shall be the successor in all respects to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and the terminated Servicer shall be relieved of such responsibilities,
duties and liabilities arising after such Service Transfer; PROVIDED, HOWEVER,
that (i) the Successor Servicer will not assume any obligations of the Servicer
described in SECTION 8.08 and (ii) the Successor Servicer shall not be liable
for any acts or omissions of the Servicer occurring prior to such Service
Transfer or for any breach by the Servicer of any of its representations and
warranties contained herein or in any related document or agreement.
Notwithstanding the above, if the Successor Servicer is legally unable or
unwilling to act as Servicer, it may appoint or petition a court of competent
jurisdiction to appoint, an established financial institution (x) having a net
worth of not less than $100,000,000 as of the last day of the most recent fiscal
quarter for such institution and (y) whose regular business shall include the
servicing of automobile receivables, to act as Servicer. As compensation
therefor, the Successor Servicer shall be entitled to receive reasonable
compensation equal to the Monthly Servicing Fee. The Trustees and such
Successor Servicer shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. To the extent the
terminated Servicer has made Advances, it shall be entitled to reimbursement of
the same notwithstanding its termination hereunder, to the same extent as if it
had continued to service the Contracts hereunder.
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SECTION 8.05. NOTIFICATION TO CERTIFICATEHOLDERS. (a) Promptly following
the occurrence of any Servicer Default, the Servicer shall give written notice
thereof to the Trustees, the Depositor and each Rating Agency at the addresses
described in SECTION 11.04. The Indenture Trustee shall give written notice
thereof to the Noteholders and the Owner Trustee shall give written notice
thereof to the Certificateholders at their respective addresses appearing on the
Note Register and the Certificate Register, respectively.
(b) Within 10 days following any termination or appointment of a Successor
Servicer pursuant to this ARTICLE VIII, the Indenture Trustee shall give written
notice thereof to each Rating Agency and the Depositor at the addresses
described in SECTION 11.04 and to the Noteholders at their addresses appearing
on the Note Register and the Owner Trustee shall give written notice to the
Certificateholders at their addresses appearing in the Certificate Register.
SECTION 8.06. EFFECT OF TRANSFER. (a) After a Service Transfer, the
terminated Servicer shall have no further obligations with respect to the
management, administration, servicing, custody or collection of the Contracts
and the Successor Servicer appointed pursuant to SECTION 8.04 shall have all of
such obligations, except that the terminated Servicer will transmit or cause to
be transmitted directly to the Successor Servicer for its own account, promptly
on receipt and in the same form in which received, any amounts (properly
endorsed where required for the Successor Servicer to collect them) received as
payments upon or otherwise in connection with the Contracts.
(b) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer)
other than those relating to the management, administration, servicing, custody
or collection of the Contracts.
SECTION 8.07. DATABASE FILE. The Servicer will provide the Successor
Servicer with a magnetic tape containing the database file for each Contract (i)
as of the Cutoff Date, (ii) thereafter, as of the last day of the preceding Due
Period on each Determination Date prior to a Servicer Default and (iii) on and
as of the Business Day before the actual commencement of servicing functions by
the Successor Servicer following the occurrence of a Servicer Default.
SECTION 8.08. SUCCESSOR SERVICER INDEMNIFICATION. The Servicer shall
defend, indemnify and hold the Successor Servicer and any officers, directors,
employees or agents of the Successor Servicer harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments and any other costs, fees, and expenses that the Successor Servicer
may sustain in connection with the claims asserted at any time by third parties
against the Successor Servicer which result from (i) any willful or grossly
negligent act taken or omission by the Servicer or (ii) a breach of any
representations of the Servicer in SECTION 3.02. The indemnification provided
by this SECTION 8.08 shall survive the termination of this Agreement.
SECTION 8.09. RESPONSIBILITIES OF THE SUCCESSOR SERVICER. The Successor
Servicer will not be responsible for delays attributable to the Servicer's
failure to deliver information, defects in the information supplied by the
Servicer or other circumstances beyond the control of the Successor Servicer.
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The Successor Servicer will make arrangements with the Servicer for the
prompt and safe transfer of, and the Servicer shall provide to the Successor
Servicer, all necessary servicing files and records, including (as deemed
necessary by the Successor Servicer at such time): (i) microfiche loan
documentation, (ii) servicing system tapes, (iii) Contract payment history, (iv)
collections history and (v) the trial balances, as of the close of business on
the day immediately preceding conversion to the Successor Servicer, reflecting
all applicable loan information.
The Successor Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information. The
Successor Servicer shall have no responsibility, shall not be in default and
shall incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Depositor or the Trustees or for any inaccuracy or
omission in a notice or communication received by the Successor Servicer from
any third party or (ii) which is due to or results from the invalidity,
unenforceability of any Contract with applicable law or the breach or the
inaccuracy of any representation or warranty made with respect to any Contract.
SECTION 8.10. LIABILITY OF SERVICER; INDEMNITIES. (a) The Servicer shall
indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Indenture
Trustee and the Securityholders from and against any loss, liability or expense
incurred by reason of the Servicer's willful misfeasance, bad faith or gross
negligence (other than errors in judgment) in the performance of its duties
under this Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement or as a result of any breach of the Servicer's
covenants set forth in clauses (i) through (iv) of SECTION 5.06(f) or in
SECTION 5.06(e).
(b) The Servicer shall defend, indemnify, and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee and the Securityholders 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 Issuer,
the Owner Trustee and the Indenture Trustee from and against any taxes that may
at any time be asserted against the Issuer with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales, gross
receipts, general corporation, tangible or intangible personal property,
privilege, or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the sale of the Contracts to the Issuer or the
issuance and original sale of the Notes or the Certificates, or asserted with
respect to ownership of the Contracts or federal, state or other income taxes,
including franchise taxes measured by net income) arising out of distributions
on the Notes or the Certificates and costs and expenses in defending against the
same.
(d) Indemnification under this Section shall include, without limitation,
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
Person to or on behalf of whom such payments are made thereafter shall collect
any of such amounts from others, such Person shall promptly repay such amounts
to the Servicer, without interest.
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SECTION 8.11. LIMITATION OF LIABILITY OF SERVICER.
(a) Neither the Servicer nor any of the directors, officers, employees or
agents of the Servicer shall be under any liability to the Issuer, the Owner
Trustee, the Indenture Trustee, the Certificateholders or the Noteholders,
except as provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement 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 and any director, officer, employee or agent of the
Servicer may rely in good faith on the advice of counsel or on any document of
any kind, prima facie properly executed and submitted by any Person respecting
any matters arising under this Agreement.
(b) 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 Contracts in accordance with this
Agreement, and that in its opinion may cause it to incur any expense or
liability; PROVIDED, HOWEVER, that the Servicer may undertake any reasonable
action that it may deem necessary or desirable in respect of the Transaction
Documents and the rights and duties of the parties to the Transaction Documents
and the interests of the Certificateholders under the Trust Agreement and the
Noteholders under the Indenture. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Servicer and the Servicer will not be entitled to be
reimbursed therefor.
SECTION 8.12. MERGER OR CONSOLIDATION OF SERVICER. Any Person into which
the Servicer may be merged or consolidated, or any corporation, or other entity
resulting from any merger conversion or consolidation to which the Servicer
shall be a party, or any Person succeeding to all or substantially all of the
business of the Servicer (which Person assumes the obligations of the Servicer),
shall be the successor of the Servicer hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Servicer shall give prior
written notice of any such merger or consolidation to which it is a party to the
Issuer, the Owner Trustee, the Indenture Trustee and the Rating Agencies.
SECTION 8.13. SERVICER NOT TO RESIGN. Subject to the provisions of
SECTION 8.03, Servicer shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any such determination permitting
the resignation of Servicer shall be communicated to the Owner Trustee and the
Indenture Trustee at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination shall be evidenced by an Opinion of Counsel to
such effect delivered to the Owner Trustee and the Indenture Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee shall have assumed the
responsibilities and rights of the predecessor Servicer in accordance with
SECTION 8.04.
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SECTION 8.14. APPOINTMENT OF SUBSERVICER. So long as Premier Auto
Finance, Inc. acts as the Servicer, the Servicer may at any time without notice
or consent (a) subcontract substantially all its duties under this Agreement to
any corporation more than 50% of the voting stock of which is owned, directly or
indirectly, by Aon Corporation or (b) perform specific duties as servicer under
this Agreement through other subcontractors; PROVIDED, HOWEVER, that, in each
case, no such delegation or subcontracting shall relieve the Servicer of its
responsibilities with respect to such duties as to which the Servicer shall
remain primarily responsible with respect thereto.
ARTICLE NINE
REPORTS
SECTION 9.01. MONTHLY REPORTS. No later than 10:00 a.m. Chicago, Illinois
time on each Determination Date, the Servicer shall cause the Trustees and each
Rating Agency to receive a "MONTHLY REPORT" substantially in the form of EXHIBIT
I hereto.
SECTION 9.02. OFFICER'S CERTIFICATE. On or before [_______] of each year,
the Servicer shall deliver to each Trustee and Rating Agency a certificate of a
Servicing Officer substantially in the form of EXHIBIT C, certifying the
accuracy of the Monthly Reports delivered during the preceding year and that no
Servicer Default or event that with notice or lapse of time or both would become
a Servicer Default has occurred, or if such event has occurred and is
continuing, specifying the event and its status.
SECTION 9.03. OTHER DATA. In addition, the Depositor and the Servicer
shall, upon the request of the Trustees, Moody's or Standard & Poor's, furnish
the Trustees, Moody's or Standard & Poor's, as the case may be, such underlying
data as may be reasonably requested.
SECTION 9.04. ANNUAL REPORT OF ACCOUNTANTS.
(a) The Servicer shall cause a firm of nationally recognized independent
certified public accountants (the "INDEPENDENT ACCOUNTANTS"), who may also
render other services to the Servicer, the Seller or to the Depositor, to
deliver to the Trustees and each Rating Agency, on or before March 31 (or 90
days after the end of the Servicer's fiscal year, if other than December 31) of
each year, beginning on [ ], 2001, with respect to the twelve
months ended the immediately preceding December 31 (or other applicable date), a
statement (the "ACCOUNTANT'S REPORT") addressed to the Board of Directors of the
Servicer and to the Trustees to the effect that such firm has audited the
financial statements of the direct or indirect parent of the Servicer and issued
its report thereon and that such audit:
(1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records
and such other auditing procedures as such firm considered necessary in the
circumstances;
(2) included an examination of documents and records relating to
the servicing of motor vehicle installment sale contracts under pooling and
servicing agreements substantially similar to one another (such statement
to have attached thereto a
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schedule setting forth the pooling and servicing agreements covered
thereby, including this Agreement);
(3) included an examination of the delinquency and loss statistics
relating to the Servicer's portfolio of motor vehicle installment sale
contracts; and
(4) except as described in the statement, disclosed no exceptions
or errors in the records relating to motor vehicle loans serviced for
others that, in the firm's opinion, generally accepted auditing standards
requires such firm to report.
The Accountant's Report shall further state that:
(1) a review in accordance with agreed upon procedures was made of
one randomly selected Monthly Report; and
(2) except as disclosed in the Report, no exceptions or errors in
the Monthly Report so examined were found.
(b) The Accountant's Report shall also indicate that the firm is
independent of the Seller and the Servicer and the Servicer's direct or indirect
parent within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 9.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER. The Servicer
will deliver to the Trustees and each of the Rating Agencies, on or before
January 31 of each year commencing January 31, 2001, an Officer's Certificate
stating that (a) a review of the activities of the Servicer during the prior
calendar year and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to such officer's
knowledge, based on such review, the Servicer has fully performed all its
obligations under this Agreement, or, if there has been a default in the
performance of any such obligation, specifying each such default known to such
officer and the nature and status thereof. A copy of such certificate may be
obtained by any Securityholder by a request in writing to the Indenture Trustee
or Owner Trustee.
SECTION 9.06. MONTHLY REPORTS TO SECURITYHOLDERS. (a) On or before each
Determination Date, the Servicer shall prepare and, concurrently with each
distribution to Certificateholders and Noteholders, deliver to the Trustees and
the Trustees shall cause to be delivered and mailed to each Noteholder and each
Certificateholder at the addresses appearing on the Note Register and
Certificate Register, respectively, a statement as of the related Distribution
Date setting forth (the "MONTHLY REPORT"):
(i) the amount of distribution allocable to principal of each Class
of the Notes and the amount of distribution allocable to the Certificate
Balance;
(ii) the amount of the distribution allocable to interest on each
Class of Notes and the amount of Certificateholder's interest distribution;
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(iii) the amount of fees payable on such Distribution Date,
separately identifying the Monthly Servicing Fee, the Owner Trustee Fee and
the Indenture Trustee Fee;
(iv) the amount of any Note Interest Carryover Shortfall, Note
Principal Carryover Shortfall, Certificate Interest Carryover Shortfall and
Certificate Principal Carryover Shortfall for the next succeeding
Distribution Date and the change in such amounts from those with respect to
such Distribution Date;
(v) the outstanding principal amount and Note Factor for each Class
of Notes and the Certificate Balance and Certificate Factor, in each case
as of such Distribution Date each after giving effect to the distribution
of principal to each Class of Notes and the Certificates;
(vi) the amount of the distributions described in (i) or (ii) above
payable with funds withdrawn from the Reserve Fund and the amount remaining
in the Reserve Fund after giving effect to all deposits and withdrawals
from the Reserve Fund on such date;
(vii) the amount otherwise distributable to the Class B Notes or the
Certificates that has instead been distributed to one or more senior Class
of Notes on such Distribution Date;
(viii) the amount of Advances made by the Servicer in respect of
the related Contracts and the related Due Period and the amount of
unreimbursed Advances in respect of the related Contracts determined by the
Servicer to be a Defaulted Contract; and
(ix) the Aggregate Principal Balance as of the end of the
immediately preceding Due Period.
(b) Within the prescribed period of time for tax reporting purposes after
the end of each calendar year, the Servicer shall prepare and the Indenture
Trustee and Owner Trustee, respectively, shall mail to each Noteholder or
Certificateholder of record at any time during such year a report as to the
aggregate amounts reported pursuant to subsections (i), (ii), (iii) and (iv) of
this Section, attributable to such Noteholder or Certificateholder.
ARTICLE TEN
TERMINATION
SECTION 10.01. TERMINATION.
(a) NOTICE. As described in Article NINE of the Trust Agreement, notice
of any termination of the Issuer shall be given by the Servicer to the Owner
Trustee and the Indenture Trustee as soon as practicable after the Servicer has
received notice thereof.
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(b) DURATION OF THE POSITION OF THE INDENTURE TRUSTEE FOR THE BENEFIT OF
CERTIFICATEHOLDERS. Notwithstanding (i) the earlier payment in full of all
principal and interest due to the Noteholders under the terms of the Notes of
each Class, (ii) the cancellation of the Notes pursuant to Section 2.08 of the
Indenture and (iii) the discharge of the Indenture Trustee's duties under the
Indenture with respect to the Notes, the Indenture Trustee shall continue to act
in the capacity of the Indenture Trustee under the Indenture for the benefit of
the Certificateholders, and the Indenture Trustee, for the benefit of the
Certificateholders, shall comply with its obligations hereunder, as appropriate,
until such time as all distributions in respect of the Certificate Balance and
interest due to the Certificateholders have been paid in full.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. AMENDMENT.
(a) This Agreement may be amended from time to time by the Depositor, the
Servicer, the Indenture Trustee and the Owner Trustee on behalf of the Issuer,
collectively, with notice to each Rating Agency, but without the consent of any
of the Securityholders, to correct manifest error, to cure any ambiguity, to
correct or supplement any provisions herein which may be ambiguous or
inconsistent with any other provision herein or in any other Transaction
Document, as the case may be, or to add any other provisions with respect to
matters or questions arising under this Agreement that shall not be inconsistent
with the provisions of this Agreement; PROVIDED, HOWEVER that any such action
shall not, as evidenced by an Opinion of Counsel, materially and adversely
affect the interests of any Securityholder.
(b) This Agreement may also be amended from time to time by the Depositor,
the Servicer, the Indenture Trustee and the Owner Trustee on behalf of the
Issuer, with the consent of the Noteholders of more than 50% of the aggregate
principal amount of the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes or,
if there are no Class A-1 Notes, Class A-2 Notes or Class A-3 Notes outstanding,
with the consent of the Noteholders of more than 50% of the aggregate principal
amount of the Class B Notes or, if there are no Notes outstanding, with the
consent of Certificateholders of more than 50% 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 (x) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on the Contracts or
distributions which are required to be made on any Note or Certificate, (y)
change the interest rate on any Notes or Certificates which such change
adversely affects the priority of payment of principal or interest made to the
Noteholders or Certificateholders or (z) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the
Noteholders and Certificateholders then outstanding; and PROVIDED, FURTHER, that
no such amendment or consent shall be effective unless each Rating Agency
delivers written confirmation that such amendment or consent will not cause its
then-current rating on any Class of Notes or Certificates to be qualified,
reduced or withdrawn.
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(c) Promptly after the execution of any amendment or consent, the
Indenture Trustee shall furnish written notification of the substance of such
amendment or consent, together with a copy thereof, to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish
written notification of the substance of such amendment or consent to each
Certificateholder and Noteholder, respectively. It shall not be necessary for
the consent of Noteholders and Certificateholders pursuant to SECTION 11.01(b)
to approve the particular form of any proposed amendment or consent, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization by
Noteholders and Certificateholders of the execution thereof shall be subject to
such reasonable requirements as the Trustees may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. 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.
(f) Upon the execution of any amendment or consent pursuant to this
SECTION 11.01, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall form a part of this Agreement for all purposes,
and every holder of Notes and Certificates theretofore or thereafter issued
hereunder shall be bound thereby.
SECTION 11.02. PROTECTION OF TITLE TO ISSUER.
(a) The Servicer shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of the Issuer, the Securityholders and the Indenture
Trustee in the Contracts and in the proceeds thereof. The Servicer shall
deliver (or cause to be delivered) to the Owner Trustee and the Indenture
Trustee file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) Neither the Seller, the Depositor 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
SECTION 4.02 seriously misleading within the meaning of Section 9-402(7) of the
UCC, unless it shall have given the Issuer, the Owner Trustee and the Indenture
Trustee at least 30 days' prior written notice thereof and shall have promptly
filed appropriate amendments to all previously filed financing statements or
continuation statements.
(c) The Seller, the Depositor and the Servicer shall give the Issuer, the
Owner Trustee and the Indenture Trustee at least 30 days' prior written notice
of any relocation of the principal executive office of Premier Auto Finance,
Inc., the Depositor and the Servicer (in the case of notice provided by the
Servicer) if, as a result of such relocation, the applicable provisions of the
UCC would require filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment or new
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financing statement. The Servicer shall at all times maintain each office from
which it shall service Contracts, and its principal executive office, within the
United States.
(d) The Servicer shall maintain or cause to be maintained accounts and
records as to each Contract accurately and in sufficient detail to permit (i)
the reader thereof to know at any time the status of such Contract, 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
Contract and the amounts from time to time deposited in or credited to the
Collection Account in respect of each Contract.
(e) The Servicer shall maintain or cause to be maintained its computer
systems so that, from and after the time of sale under this Agreement of the
Contracts, the Servicer's master computer records (including any backup
archives) that shall refer to a Contract indicate clearly the interest of the
Issuer and the Indenture Trustee in such Contract and that such Contract is
owned by the Issuer and has been pledged to the Indenture Trustee. Indication
of the Issuer's ownership of and the Indenture Trustee's interest in a Contract
shall be deleted from or modified on the Servicer's computer systems when, and
only when, the related Contract shall have been paid in full or repurchased or
shall have become a Defaulted Contract.
(f) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in motor
vehicle retail installment sale contracts to any prospective purchaser, lender
or other transferee, the Servicer shall give or cause to be given to such
prospective purchaser, lender or other transferee computer tapes, records or
print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any Contract, shall indicate clearly that such
Contract has been sold and is owned by the Issuer and has been pledged to the
Indenture Trustee.
(g) The Servicer shall permit the Owner Trustee and its agents, at any
time during normal business hours, to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Contract.
(h) Upon request, the Servicer shall furnish to the Owner Trustee and the
Indenture Trustee, within five Business Days, a list of all Contracts then held
as part of the Trust Estate, together with a reconciliation of such list to the
List of Contracts and to each of the Monthly Reports furnished before such
request indicating removal of Contracts from the Issuer.
(i) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee
and each Rating Agency upon the execution and delivery of this Agreement and
promptly after the execution and delivery of each amendment hereto, an Opinion
of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Owner
Trustee and the Indenture Trustee and reciting the details of each filings or
referring to prior Opinions of Counsel in which such details are given, or (B)
stating that, in the opinion of such counsel, no such action shall be necessary
to preserve and protect such interest.
SECTION 11.03. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Illinois and the obligations, rights,
and remedies of the parties under the
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Agreement shall be determined in accordance with such laws, except that the
duties of the Owner Trustee shall be governed by the laws of the State of
Delaware.
SECTION 11.04. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Premier Auto Finance, Inc.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: (312) [ ]
(ii) If to the Depositor:
Dealer Auto Receivables Corp.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: (312) [ ]
(iii) If to the Indenture Trustee:
The Bank of New York
Attention:
Telecopier No.: [ ]
(iv) If to the Owner Trustee:
Attention:
Telecopier No.: [ ]
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
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New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-1350
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, A
Division of The McGraw Hill Companies
55 Water Street
New York, New York 10004
Telecopier No.: (212) 438-2657
(vii) If to the Underwriters:
Chase Securities Inc.
[ ]
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11.05. SEVERABILITY OF PROVISIONS. If one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
Certificates or the rights of the Holders thereof.
SECTION 11.06. THIRD PARTY BENEFICIARIES. This Agreement will inure to the
benefit of and be binding upon the parties hereto, and their respective
successors and permitted assigns. The Administrator and the Owner Trustee,
individually and on behalf of the Certificateholders are third-party
beneficiaries to this Agreement and are entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
Except as otherwise provided in this Agreement, no other person will have any
right or obligation hereunder.
SECTION 11.07. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall together
constitute but one and the same instrument.
SECTION 11.08. 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 11.09. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE
TRUSTEE.
(a) Notwithstanding anything contained herein to the contrary, this
instrument has been countersigned by __________________, not in its individual
capacity but solely in its
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capacity as Owner Trustee of the Issuer, and in no event shall
_____________________ in its individual capacity or any beneficial owner of the
Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of ARTICLES SIX, SEVEN and EIGHT of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by The Bank of New York, not in its individual
capacity but solely as Indenture Trustee, and in no event shall The Bank of New
York 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.
[signature page follows]
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.
DEALER AUTO RECEIVABLES OWNER TRUST
2000-1
By: ___________________, not in its individual
capacity but solely as Owner Trustee on
behalf of the Issuer
By:
----------------------------------------------
Printed Name:
Title:
DEALER AUTO RECEIVABLES CORP.
By:
----------------------------------------------
Printed Name:
-------------------------------
Title:
--------------------------------------
PREMIER AUTO FINANCE, INC., as Servicer
By:
----------------------------------------------
Printed Name:
-------------------------------
Title:
--------------------------------------
___________________, not in its
individual capacity but solely as Indenture Trustee
By:
----------------------------------------------
Printed Name:
-------------------------------
Title:
--------------------------------------
<PAGE>
EXHIBIT A
[Form of Assignment]
In accordance with the Sale and Servicing Agreement (the "SALE AND
SERVICING AGREEMENT") dated as of [ ], 2000 made by and between
the undersigned, as Depositor ("DEPOSITOR"), Premier Auto Finance, Inc., as
Servicer, The Bank of New York, as Indenture Trustee and Dealer Auto Receivables
Owner Trust 2000-1 (the "TRUST"), as assignee thereunder, the undersigned does
hereby sell, transfer, convey and assign, set over and otherwise convey to the
Trust (i) all the right, title and interest of the Depositor in and to the
Contracts listed on the List of Contracts in effect on the Closing Date
(including, without limitation, all security interests and all rights to receive
scheduled payments and prepayments which are collected pursuant thereto on or
after the Cutoff Date, including any liquidation proceeds therefrom, but
excluding any rights to receive scheduled payments due on or after, but received
prior to, the Cutoff Date), (ii) all security interests in each Financed
Vehicle, (iii) all rights of the Depositor to proceeds from any claims on theft,
physical damage, credit life or disability insurance or other individual
insurance policy relating to any such Contract, an Obligor or a Financed vehicle
securing such Contract, (iv) all documents contained in the related Contract
Files, (v) all rights (but not the obligations) of the Depositor against any
originating dealer or third party (i.e. the originators of the Contracts) under
any agreements between the Seller and such originating dealers or other third
party, (vi) all rights of the Depositor in the Lockbox, the Lockbox Account and
related Lockbox Agreement to the extent they relate to such Contracts, (vii) any
rebates of premiums and other amounts relating to insurance policies, extended
service contracts, other repair agreements or any other items financed under
such Contract, (viii) all rights (but not the obligations) of the Depositor
under the Transfer and Sale Agreement, including but not limited to the
Depositor's rights under ARTICLE V thereof, (ix) all rights of the Depositor
under the Performance Guarantee, (x) the remittances, deposits and payments made
into the Trust Accounts from time to time and amounts in the Trust Accounts
(other than the Reserve Fund) from time to time (and any investments of such
amounts), and (xi) all proceeds and products of the foregoing.
This Assignment is made pursuant to and in reliance upon the representation
and warranties on the part of the undersigned contained in Article III of the
Sale and Servicing Agreement and no others.
Capitalized terms used herein but not otherwise defined shall have the
meanings assigned to such terms in the Sale and Servicing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this _____ day of [___________], 2000.
DEALER AUTO RECEIVABLES CORP.
By:
---------------------------------------------------
Printed Name:
Title:
A-1
<PAGE>
EXHIBIT B
[Form of Closing Certificate of Depositor]
DEALER AUTO RECEIVABLES CORP.
PRESIDENT'S CERTIFICATE
[Reserved]
<PAGE>
EXHIBIT C
[Form of Closing Certificate of Servicer/Seller]
PREMIER AUTO FINANCE, INC.
PRESIDENT'S CERTIFICATE
[Reserved]
<PAGE>
EXHIBIT D
[Form of Opinion of Counsel for Depositor
Regarding General Corporate Matters
(Including Perfection Opinion)]
[Reserved]
D-1
<PAGE>
EXHIBIT E
[Form of Opinion of Counsel for Trust
Depositor Regarding the "TRUE SALE" Nature
of the Transaction]
[Reserved]
E-1
<PAGE>
EXHIBIT F
[Form of Opinion of Counsel for Trust
Depositor Regarding Non-consolidation]
[Reserved]
F-1
<PAGE>
EXHIBIT G
[Form of Certificate Regarding Repurchased Contracts]
Premier Auto Finance, Inc.
Certificate Regarding Repurchased Contracts
The undersigned certifies that he is the [______________] of Premier Auto
Finance, Inc., a Delaware corporation (the "SERVICER"), and that as such is duly
authorized to execute and deliver this certificate on behalf of the Servicer
pursuant to SECTION 7.07 of the Sale and Servicing Agreement (the "AGREEMENT")
dated as of [______________], 2000 by and among Dealer Auto Receivables Corp.,
as Depositor, the Servicer, The Bank of New York, as Indenture Trustee, and
Dealer Auto Receivable Owner Trust 2000-1 (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement),
and further certifies that:
1. The Contracts on the attached schedule are to be repurchased on the
date hereof pursuant to [SECTION 7.05 or SECTION 7.07] of the
Agreement and [SECTION 5.01 or SECTION 5.02] of the Transfer and Sale
Agreement.
2. Upon deposit of the Repurchase Price for such Contracts, such
Contracts may, pursuant to [SECTION 7.05 or SECTION 7.07] of the
Agreement, be assigned by the Issuer to the Seller.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ______ day of
_____________.
Premier Auto Finance, Inc.
By:
-------------------------------------------
Printed Name:
Title:
G-1
<PAGE>
EXHIBIT H
[List of Contracts]
H-1
<PAGE>
EXHIBIT I
[Form of Monthly Report to Noteholders And Certificateholders]
Dealer Auto Receivables Owner Trust 2000-1
$[______________][______]% Dealer Auto Receivables Asset-Backed Notes, Class A-1
$[______________][______]% Dealer Auto Receivables Asset-Backed Notes, Class A-2
$[______________][______]% Dealer Auto Receivables Asset-Backed Notes, Class A-3
$[______________][______]% Dealer Auto Receivables Asset-Backed Notes, Class B
$[______________][______]% Dealer Auto Receivables Asset- Backed Certificates
Monthly Report
For the [ ] Distribution Date
<TABLE>
<S><C>
A. Calculation of Available Amounts
1. Available Principal (as defined in
Article I of the Sale and Servicing
Agreement) $____________
2. Available Interest (as defined in
Article I of the Sale and Servicing
Agreement) $____________
3. Available Amounts (l. plus 2.)
Calculation of Principal Distributable $____________
B. Amount (as defined in Article I of the Sale
and Servicing Agreement) $____________
C. Calculation of Note Monthly Principal
Distributable Amount $____________
1. Note Percentage for such Distribution
Date
(a) for each Distribution Date
to but excluding the Distribution Date
on which the principal amount of the
Class B Notes is reduced to zero 100.00%
(b) after the principal amount of the
Class B Notes have been reduced to zero 0.00%
2. Principal Distributable Amount (from B) $____________
I-1
<PAGE>
3. Note Monthly Principal Distributable
Amount for
(a) Class A-1 Notes $____________
(b) Class A-2 Notes $____________
(c) Class A-3 Notes $____________
(d) Class B Notes $____________
(e) Note Principal Carryover Shortfall $____________
D. Calculation of Note Monthly Interest Distributable Amount.
1. Class A-l Interest Rate ___%
2. Class A-2 Interest Rate ___%
3. Class A-3 Interest Rate ___%
4. Class B Interest Rate ___%
5. The Class A-1 Note Interest Rate times the Class A-1 Note
Balance times the number of days from and including the
immediately preceding Distribution Date (or from and
including the Closing Date with respect to the first
Distribution Date) to but excluding the next
Distribution Date divided by 360 $____________
6. One-twelfth of the Class A-2 Note Interest Rate times the
Class A-2 Note Balance from and including the fifteenth day
of the month based on a 360-day year of 12 months of 30 days
each (or from and including the Closing Date with respect
to the first Distribution Date) to but excluding the
[_____] day of the month of the current Distribution Date $____________
7. One-twelfth of the Class A-3 Note Interest Rate times the
Class A-3 Note Balance from and including the fifteenth day
of the month based on a 360-day year of 12 months of 30 days
each (or from and including the Closing Date with respect to
the first Distribution Date) to but excluding the [_____]
day of the month of the current Distribution Date $____________
I-2
<PAGE>
8. One-twelfth of the Class B Note Interest Rate times the
Class B Note Balance from and including the fifteenth day of
the month based on a 360-day year of 12 months of 30 days
each (or from and including the Closing Date with respect to
the first Distribution Date) to but excluding the [_____]
day of the month of the current Distribution Date $____________
9. Aggregate Interest Carryover Shortfall for each Class for
such Distribution Date $____________
10. Note Monthly Interest Distributable Amount (the sum of items
D.5, D.6, D.7, D.8 and D.9 $____________
E. Calculation of Note Distributable Amount (sum of C.3(f) plus D.10.) $____________
F. Calculation of Certificate Principal Distributable Amount $____________
1. Certificate Balance $____________
2. Principal Distributable Amount
3. Certificate Percentage for each respective Distribution Date
3(a). for each Distribution Date to but excluding the Distribution
Date on which the Principal Amount of the Class B Notes is
reduced to zero 0.00%
3(b). on the Distribution Date on which the Principal Amount of
the Class B Notes is reduced to zero ____%
3(c). thereafter 100.00%
4(a). Principal Distributable Amount multiplied by the Certificate
Percentage for such Distribution Date $____________
4(b). Certificate Principal Carryover Shortfall for such
Distribution Date $____________
5. Certificate Principal Distributable Amount (the sum of
4.(a) and 4.(b)) $____________
I-3
<PAGE>
G. Calculation of Certificate Interest
Distributable Amount
1. Certificate Pass-Through Rate ___%
2(a). One-twelfth of the Certificate Pass-Through Rate times the
Certificate Balance on the immediately preceding
Distribution Date, after giving effect to all payments of
principal to the Certificateholders and such preceding
Distribution Date (or in case of the first Distribution Date
on the original Principal Amount of the Certificates) based
on a 360-day year $____________
2(b). of 12 months of 30 days each.Certificate Interest Carryover
Shortfall for such Distribution Date $____________
3. Certificate Interest Distributable Amount (sum of 2.(a)
and 2.(b)) $____________
H. Calculation of Certificate Distributable Amount (sum of F.5 and G.3) $____________
I. Fees
1. The Monthly Servicing Fee for such Distribution Date (1/12
of the product of 1% and the Aggregate Principal Balance of
the Contracts as of the beginning of the preceding
Distribution Date) $____________
2. Late Payment Penalty Fees for such Distribution Date $____________
3. Extension Fees for such Distribution Date $____________
4. Indenture Trustee Fee for such Distribution Date excluding
expense component [___] of the product of .[ ]% and the
Aggregate Principal Balance of the Contracts as of the
preceding Distribution Date $____________
5. Owner Trustee Fee for such Distribution Date [_____________]. $____________
J. Calculation of the Available Amounts for
such Distribution Date
1. The amount of funds deposited into the Collection Account
pursuant to SECTION 5.05(b) of the Sale and Servicing
Agreement with respect to the related Due Period $____________
I-4
<PAGE>
a. All amounts received by the Indenture Trustee
or the Servicer with respect to principal and interest
on the Contracts, as well as Late Payment Penalty Fees
and Extensions Fees for the related Due Period $____________
b. All Net Liquidation Proceeds $____________
c. The aggregate of the Repurchase Prices for
Contracts required to be repurchased by the Depositor as
described in SECTION 7.05 of the Sale and Servicing
Agreement $____________
d. All Advances made by Servicer pursuant to
SECTION 7.02 of the Sale and Servicing Agreement $____________
e. All amounts paid by the Seller in connection
with an optional repurchase of the Contracts described
in SECTION 7.07 of the Sale and Servicing Agreement $____________
f. All amounts received in respect of interest,
dividends, gains, income and earnings on investments of
funds in the Trust Accounts as contemplated in SECTION
5.05(b) of the Sale and Servicing Agreement $____________
g. Total amount of funds deposited into the
Collection Account pursuant to SECTION 5.05(b) (the sum
of a. through g.) $____________
2. The amount of funds permitted to be withdrawn from the
Collection Account pursuant to clauses (i) through (iii) of
SECTION 7.03(a) of the Sale and Servicing Agreement with
respect to the related Due Period $____________
a. Amounts to be paid to the Servicer as the
Reimbursement Amount in accordance with SECTION 7.02 of
the Sale and Servicing Agreement $____________
I-5
<PAGE>
b. Amounts to be paid to the Servicer in respect to
the Servicing Fee for the related Due Period $____________
c. Amounts to be paid to the Indenture Trustee in
respect of the Indenture Trustee Fee for the related Due
Period $____________
d. Amounts to be paid to the Owner Trustee in
respect of the Owner Trustee Fee for the related Due
Period $____________
e. Total amount of funds permitted to be withdrawn
from the Collection Account pursuant to clauses (i)
through (iii) SECTION 7.03(a) of the Sale and Servicing
Agreement with respect to the related Due Period (sum of
a. through d.) $____________
3. The Available Amounts (not including amounts from Reserve
Fund Account) for such Distribution Date available to pay
Note Distributable Amounts and Certificate Distributable
Amounts (1(h) minus 2(e)) $____________
4. The Available Amounts otherwise distributable to the
Certificateholders that will be distributed to the
Noteholders on such Distribution Date $____________
K. The shortfall of Available Amounts for such Distribution Date to pay
either the Note Distributable Amount or the Certificate Distributable
Amount (the Available Amounts for such Distribution Date minus the
sum of the Note Distributable Amount as set forth in E. and the
Certificate Distributable Amount as set forth in H.) $____________
L. The amount to be withdrawn from the Reserve Fund on such Distribution
Date to cover the Note Interest Distributable Amount $____________
M. The amount to be withdrawn from the Reserve Fund on such Distribution
Date to cover the Certificate Interest Distributable Amount $____________
I-6
<PAGE>
N. The amount to be withdrawn from the Reserve Fund on such Distribution
Date to cover the Note Principal Distributable Amount $____________
O. The amount to be withdrawn from the Reserve Fund on such Distribution
Date to cover the Certificate Principal Distributable Amount $____________
P. Interest Earnings on the Reserve Fund. $____________
Q. The amount on deposit in the Reserve Fund after giving effect to
deposits and withdrawals therefrom on such Distribution Date $____________
R. The Specified Reserve Fund Amount for such Distribution Date will be
an amount equal to [______] $____________
S. The Pool Factor
1. The Class A-1 Note Factor immediately
before such Distribution Date ____________
2. The Class A-2 Note Factor immediately
before such Distribution Date ____________
3. The Class A-3 Note Factor immediately
before such Distribution Date ____________
4. The Class B Note Factor immediately
before such Distribution Date ____________
5. The Certificate Factor immediately
before such Distribution Date ____________
6. The Class A-1 Note Factor immediately
after such Distribution Date ____________
7. The Class A-2 Note Factor immediately
after such Distribution Date ____________
8. The Class A-3 Note Factor immediately
after such Distribution Date ____________
9. The Class B Note Factor immediately
after such Distribution Date ____________
I-7
<PAGE>
10. The Certificate Factor immediately
after such Distribution Date ____________
T. Delinquent Contracts
1. 31-59 Days #______ $___________
2. 60-89 Days #______ $___________
3. 90 or More Days #______ $___________
U. Defaulted Contracts
1. Total Defaulted Contracts #______ $___________
2. Identity (attach)
3. Liquidation proceeds for the Due Period $___________
4. Liquidation expenses for the Due Period $___________
5. Net Liquidation Proceeds for the Due Period $___________
6. Net Liquidation Losses for the Due Period $___________
V. Advances
1. Unreimbursed Advances prior to such Distribution Date $___________
2. Amount paid to Servicer on such Distribution Date to
reimburse Servicer for such unreimbursed Advances $___________
3. Amount of Delinquent Interest and Delinquent Principal
for the related Due Period $___________
4. Amount of new Advances on such Distribution Date (if
such amount is less than the amount of Delinquent
Interest and Delinquent Principal, attach the
certificate required by SECTION 7.02 of the Sale and
Servicing Agreement) $___________
5. Total of unreimbursed Advances after new Advances on
such Distribution Date $___________
I-8
<PAGE>
W. Repurchased Contracts
1. Number of Contracts to be repurchased pursuant to
SECTION 7.07 of the Sale and Servicing Agreement $___________
2. Principal Amount of such Contracts $___________
3. Related Repurchase Price of such Contracts $___________
X. Contracts
1. Number of Contracts as of beginning of Due Period $___________
2. Principal Balance of Contracts as of beginning of Due
Period $___________
3. The weighted average Contract Rate of the Contracts as
of the beginning of the Due Period $___________
4. The weighted average remaining term to maturity of the
Contracts as of the beginning of the Due Period $___________
5. Number of Contracts as of end of Due Period $___________
6. Principal Balance of Contracts as of end of Due Period $___________
7. The weighted average Contract Rate of the Contracts as
of the end of the Due Period $___________
8. The weighted average remaining term to maturity of the
Contracts as of the end of the Due Period $___________
</TABLE>
I-9
<PAGE>
EXHIBIT J
[Seller's Representations and Warranties]
REPRESENTATIONS AND WARRANTIES REGARDING EACH CONTRACT. The Seller
represents and warrants as to each Contract as of the Closing Date that:
(a) LIST OF CONTRACTS. The information set forth in the List of
Contracts is true, complete and correct in all material respects as of the
Cutoff Date.
(b) PAYMENTS. As of the Cutoff Date, the most recent scheduled
payment with respect to any Contract either had been made or was not
delinquent for more than 30 days. To the best of the Seller's knowledge,
all payments made on each Contract were made by or on behalf of the
respective Obligor.
(c) NO WAIVERS. As of the Closing Date, the terms of the Contracts
have not been waived, altered or modified in any respect, except by
instruments or documents included in the related Contract File.
(d) BINDING OBLIGATION. Each Contract is a valid and binding
payment obligation of the Obligor thereunder and is enforceable in
accordance with its terms, except as such enforceability may be limited by
insolvency, bankruptcy, moratorium, reorganization, or other similar laws
affecting the enforcement of creditors' rights generally.
(e) NO DEFENSES. No Contract is subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of such Contract or the
exercise of any right thereunder will not render the Contract unenforceable
in whole or in part or subject to any right of rescission, setoff,
counterclaim or defense, including the defense of usury, and no such right
of rescission, setoff, counterclaim or defense has been asserted or
threatened with respect thereto.
(f) INSURANCE. Each Contract requires the related Obligor to
maintain physical damage insurance (i) in an amount not less than the value
of the Financed Vehicle at the time of origination of the Contract, (ii)
naming the Seller as a loss payee and (iii) insuring against loss and
damage due to fire, theft, transportation, collision and other risks
covered by comprehensive coverage, and all premiums due on such insurance
have been paid in full from the date of the Contract's origination.
(g) ORIGINATION. Each Contract was originated by a retailer of new
or used automobiles or other third party that finances the sale of new or
used motor vehicles in the ordinary course of its business which dealer or
third party had all necessary licenses and permits to originate the
Contracts in the state where such dealer or third party was located, was
fully and properly executed by the parties thereto, and has been purchased
by the Seller in the regular course of its business or directly originated
by the Seller in the ordinary course of its business. To the best of the
Seller's knowledge, each Contract was sold by such dealer or other third
party to the Seller without any fraud on the part of such dealer or third
party.
J-1
<PAGE>
(h) LAWFUL ASSIGNMENT. No Contract was originated in or is subject
to the laws of any jurisdiction whose laws would make the sale, transfer
and assignment of the Contract under this Agreement or under the Sale and
Servicing Agreement or the pledge of the Contract under the Indenture
unlawful, void or voidable.
(i) COMPLIANCE WITH LAW. None of the Contracts, the origination of
the Contracts by the dealers or other third parties, the purchase of the
Contracts by the Seller, the sale of the Contracts by the Seller to the
Depositor or by the Depositor to the Issuer, or any combination of the
foregoing, violated at the time of origination or as of the Closing Date
any requirement of any federal, state or local law and regulations
thereunder, including, without limitation, usury, truth in lending, motor
vehicle installment loan and equal credit opportunity laws, applicable to
the Contracts and the sale of the Financed Vehicles. The Seller shall, for
at least the period of this Agreement, maintain in its possession,
available for the Depositor's and the Trustees' inspection, and shall
deliver to the Depositor or the Trustee upon demand, evidence of
compliance with all such requirements.
(j) CONTRACT IN FORCE. As of the Closing Date, no Contract has
been satisfied or subordinated in whole or in part or rescinded, and the
related Financed Vehicle securing any Contract has not been released from
the lien of the Contract in whole or in part.
(k) VALID SECURITY INTEREST. Each Contract creates a valid,
subsisting and enforceable first priority perfected security interest in
favor of the Seller in the Financed Vehicle covered thereby, and such
security interest has been assigned by the Seller to the Depositor. The
original certificate of title, certificate of lien or other notification
(the "LIEN CERTIFICATE") issued by the body responsible for the
registration of, and the issuance of certificates of title relating to,
motor vehicles and liens thereon (the "REGISTRAR OF TITLES") of the
applicable state to a secured party which indicates the lien of the secured
party on the Financed Vehicle is recorded on the original certificate of
title, and the original certificate of title for each Financed Vehicle,
show, or if a new or replacement Lien Certificate is being applied for with
respect to such Financed Vehicle the Lien Certificate will be received
within 180 days of the Closing Date and will show, the Seller as original
secured party under each Contract as the holder of a first priority
security interest in such Financed Vehicle. With respect to each Contract
for which the Lien Certificate has not yet been returned from the Registrar
of Titles, the Seller has received written evidence from the related dealer
or other third party that such Lien Certificate showing the Seller as
lienholder has been applied for.
(l) CAPACITY OF PARTIES. All parties to any Contract had capacity
to execute such Contract and all other documents related thereto and to
grant the security interest purported to be granted thereby.
(m) GOOD TITLE. Each Contract was originated by the Seller or
purchased by the Seller for value and taken into possession prior to the
Cutoff Date in the ordinary course of its business, without knowledge that
the Contract was subject to a security interest. No Contract has been
sold, assigned or pledged to any person other than the
J-2
<PAGE>
Depositor and the Issuer as the transferee of the Depositor, and prior to
the transfer of the Contract to the Depositor, the Seller had good and
marketable title to each Contract free and clear of any encumbrance,
equity, loan, pledge, charge, claim or security interest and was the sole
owner thereof and had full right to transfer the Contract to the Depositor
and to permit the Depositor to transfer the same to the Issuer, and, as of
the Closing Date, the Issuer will have a first priority perfected security
interest therein.
(n) NO DEFAULTS. As of the Cutoff Date, no default, breach,
violation or event permitting acceleration existed with respect to any
Contract and no event had occurred which, with notice and the expiration of
any grace or cure period, would constitute such a default, breach,
violation or event permitting acceleration under such Contract. The Seller
has not waived any such default, breach, violation or event permitting
acceleration. As of the Cutoff Date, no Financed Vehicle had been
repossessed.
(o) NO LIENS. As of the Closing Date there are no liens or claims
which have been filed for work, labor, materials or unpaid taxes affecting
the Financed Vehicle securing any Contract which are or may be liens prior
to, or equal with, the lien of such Contract.
(p) ENFORCEABILITY. Each Contract contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Financed Vehicle of
the benefits of the security.
(q) ONE ORIGINAL. Each Contract is evidenced by only one original
executed Contract, which original is being held by the Servicer as
custodian.
(r) NO GOVERNMENT CONTRACTS. No Obligor is the United States or
any State government or an agency, authority, instrumentality or other
political subdivision of the United States government or any state
government or municipality.
(s) OBLIGOR BANKRUPTCY. At the Cutoff Date, no Obligor was subject
to a bankruptcy proceeding or other insolvency proceeding.
(t) CHATTEL PAPER. The Contracts constitute chattel paper within
the meaning of the UCC as in effect in the State of Illinois.
(u) NO IMPAIRMENT. Neither the Seller nor the Depositor has done
anything to convey any right to any Person that would result in such Person
having a right to payments due under the Contract or otherwise to impair
the rights of the Issuer in any Contract or the proceeds thereof.
(v) CONTRACT NOT ASSUMABLE. No Contract is assumable by another
Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Depositor with respect to such Contract.
(w) OBLIGOR LOCATION. Each Contract is a U.S. dollar-denominated
obligation and each Obligor's billing address is located in one of the
states of the United States, the District of Columbia or Puerto Rico.
J-3
<PAGE>
(x) LOCKBOX BANK. The Lockbox Bank is the only institution holding
any Lockbox Account for receipt of payments from Obligors, and all
Obligors, and only such Obligors, have been instructed to make payments to
the Lockbox Account, and no person claiming through or under Seller has any
claim or interest in the Lockbox or the Lockbox Account other than the
Lockbox Bank; PROVIDED, HOWEVER, ____________, shall have an interest in
certain other collections therein not related to the Contracts.
REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACTS IN THE AGGREGATE.
The Seller represents and warrants as of the Closing Date that:
(a) AMOUNTS. The sum of the aggregate Principal Balances payable
by Obligors under the Contracts as of the Cutoff Date equals the sum of the
principal balance of the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class B Notes and the Certificates on the Closing Date.
(b) CHARACTERISTICS. The Contracts have the following
characteristics: (i) all the Contracts are secured by Financed Vehicles;
(ii) no Contract has a remaining maturity of less than ___ months or more
than __ months; (iii) no Contract had an original term to maturity of less
than ___ months or more than ___ months; (iv) the final scheduled payment
on the Contract with the latest maturity is due no later than ____________
20__; (v) each Contract is a fully-amortizing fixed rate Simple Interest
Contract or Precomputed Contract; and (vi) each Contract had a remaining
Principal Balance of no less than $______ and no more than $______.
Approximately _____% of the Principal Balance of the Contracts as of the
Cutoff Date is attributable to loans for purchases of new Financed Vehicles
and approximately _____% is attributable to loans for purchases of used
Financed Vehicles. No Contract has a Contract Rate of less than ___%. No
Contract was originated after the Cutoff Date. No Contract has a Contract
Rate less than ____%. The first scheduled Distribution Date of the
Contracts is due no later than ___________.
(c) MARKING RECORDS. As of the Closing Date, the Seller has caused
the Computer Disk relating to the Contracts sold under the Transfer and
Sale Agreement and concurrently reconveyed by the Depositor to the Issuer
and pledged by the Issuer to the Indenture Trustee to be clearly and
unambiguously marked to indicate that such Contracts constitute part of the
Trust Corpus, are owned by the Issuer and constitute security for the
Notes.
(d) NO ADVERSE SELECTION. No selection procedures adverse to
Noteholders and Certificateholders have been employed in selecting the
Contracts.
(e) TRUE SALE. The transaction contemplated by this Agreement
constitutes a valid sale, transfer and assignment from the Seller to the
Depositor and from the Depositor to the Issuer of all of the Seller's
right, title and interest in the Contract Assets as of the Closing Date or
creates a first priority security interest in the Contract Assets for the
benefit of the Issuer as of the Closing Date.
J-4
<PAGE>
(f) ALL FILINGS MADE. All filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to be
taken or performed by any Person in any jurisdiction to give the Trustees a
first priority perfected lien on, or ownership interest in, the Contracts
and the proceeds thereof have been made, taken or performed.
REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACT FILES. The Seller
represents and warrants as of the Closing Date that:
(a) POSSESSION. Immediately prior to the Closing Date, the
Servicer will have possession of each original Contract and the related
complete Contract File, and there are and there will be no custodial
agreements relating to the same in effect. Each of such documents which is
required to be signed by the Obligor has been signed by the Obligor in the
appropriate spaces. All blanks on any form have been properly filled in
and each form has otherwise been correctly prepared. The complete Contract
File for each Contract currently is in the possession of the Servicer.
(b) BULK TRANSFER LAWS. The transfer, assignment and conveyance of
the Contracts and the Contract Files by the Seller pursuant to the Transfer
and Sale Agreement and by the Depositor pursuant to the Sale and Servicing
Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
J-5
<PAGE>
EXHIBIT K
[Lockbox Bank and Lockbox Account]
LOCKBOX
LOCKBOX BANK
K-1
<PAGE>
==============================================================================
POOLING AND SERVICING AGREEMENT
AMONG
DEALER AUTO RECEIVABLES CORP.
as Depositor
PREMIER AUTO FINANCE, INC.
as Servicer
and
[______________________],
not in its individual capacity but solely as Trustee of
DEALER AUTO RECEIVABLES GRANTOR TRUST 2000-1
Dated as of _____________, 2000
==============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE ONE DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. SPECIFIC TERMS. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO TRANSFER OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . .14
SECTION 2.01. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 2.02. CONDITIONS TO THE CLOSING . . . . . . . . . . . . . . . . .14
SECTION 2.03. ACCEPTANCE BY TRUSTEE . . . . . . . . . . . . . . . . . . .16
SECTION 2.04. TAX TREATMENT . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE THREE REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . .16
SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE DEPOSITOR. . .16
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER . . .18
ARTICLE FOUR PERFECTION OF TRANSFER AND PROTECTION OF SECURITY
INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 4.01. CUSTODY OF CONTRACTS. . . . . . . . . . . . . . . . . . . .19
SECTION 4.02. FILING. . . . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 4.03. NAME CHANGE OR RELOCATION . . . . . . . . . . . . . . . . .21
SECTION 4.04. CHIEF EXECUTIVE OFFICE. . . . . . . . . . . . . . . . . . .22
SECTION 4.05. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . .22
ARTICLE FIVE SERVICING OF CONTRACTS. . . . . . . . . . . . . . . . . . . . .22
SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION. . . . . . . . .22
SECTION 5.02. STANDARD OF CARE. . . . . . . . . . . . . . . . . . . . . .22
SECTION 5.03. RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 5.04. INSPECTION. . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 5.05. TRUST ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . .23
SECTION 5.06. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 5.07. TRUSTEE TO COOPERATE. . . . . . . . . . . . . . . . . . . .27
SECTION 5.08. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . .27
SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES. . .27
SECTION 5.10. MAINTENANCE OF INSURANCE. . . . . . . . . . . . . . . . . .27
ARTICLE SIX THE DEPOSITOR. . . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 6.01. COVENANTS OF THE DEPOSITOR. . . . . . . . . . . . . . . . .28
SECTION 6.02. LIABILITY OF DEPOSITOR; INDEMNITIES . . . . . . . . . . . .29
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, DEPOSITOR; CERTAIN LIMITATIONS. . . . . . .29
SECTION 6.04. LIMITATION ON LIABILITY OF DEPOSITOR AND OTHERS . . . . . .30
SECTION 6.05. DEPOSITOR NOT TO RESIGN . . . . . . . . . . . . . . . . . .30
SECTION 6.06. DEPOSITOR MAY OWN CERTIFICATES. . . . . . . . . . . . . . .30
ARTICLE SEVEN REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 7.01. MONTHLY REPORTS . . . . . . . . . . . . . . . . . . . . . .31
SECTION 7.02. OFFICER'S CERTIFICATE . . . . . . . . . . . . . . . . . . .31
SECTION 7.03. OTHER DATA. . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 7.04. ANNUAL REPORT OF ACCOUNTANTS. . . . . . . . . . . . . . . .31
SECTION 7.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER. . . . . . . .32
SECTION 7.06. MONTHLY STATEMENTS TO CERTIFICATEHOLDERS. . . . . . . . . .32
- i -
<PAGE>
ARTICLE EIGHT SERVICER DEFAULT; SERVICE TRANSFER . . . . . . . . . . . . . .33
SECTION 8.01. SERVICER DEFAULT. . . . . . . . . . . . . . . . . . . . . .33
SECTION 8.02. WAIVER OF SERVICER DEFAULT. . . . . . . . . . . . . . . . .34
SECTION 8.03. SERVICE TRANSFER. . . . . . . . . . . . . . . . . . . . . .34
SECTION 8.04. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF SUCCESSOR
SERVICER. . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 8.05. NOTIFICATION TO CERTIFICATEHOLDERS. . . . . . . . . . . . .36
SECTION 8.06. EFFECT OF TRANSFER. . . . . . . . . . . . . . . . . . . . .36
SECTION 8.07. DATABASE FILE . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 8.08. SUCCESSOR SERVICER INDEMNIFICATION. . . . . . . . . . . . .36
SECTION 8.09. RESPONSIBILITIES OF THE SUCCESSOR SERVICER. . . . . . . . .36
SECTION 8.10. LIMITATION OF LIABILITY OF SERVICER.. . . . . . . . . . . .37
SECTION 8.11. MERGER OR CONSOLIDATION OF SERVICER . . . . . . . . . . . .37
SECTION 8.12. SERVICER NOT TO RESIGN. . . . . . . . . . . . . . . . . . .38
SECTION 8.13. APPOINTMENT OF SUBSERVICER. . . . . . . . . . . . . . . . .38
ARTICLE NINE DISTRIBUTIONS, RESERVE FUND AND . . . . . . . . . . . . . . . .38
YIELD SUPPLEMENT ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 9.01. Monthly Distributions . . . . . . . . . . . . . . . . . . .38
SECTION 9.02. FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 9.03. ADVANCES. . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 9.04. DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 9.05. WITHDRAWAL FROM RESERVE FUND TO COVER A SHORTFALL . . . . .40
SECTION 9.06. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND
WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 9.07. SELLER'S REPURCHASE OPTION. . . . . . . . . . . . . . . . .41
SECTION 9.08. REASSIGNMENT OF REPURCHASED CONTRACTS . . . . . . . . . . .41
SECTION 9.09. YIELD SUPPLEMENT ACCOUNT. . . . . . . . . . . . . . . . . .42
ARTICLE TEN THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 10.01. THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . .42
SECTION 10.02. EXECUTION, AUTHENTICATION AND DELIVER OF CERTIFICATES. . .42
SECTION 10.03. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. . .42
SECTION 10.04. NO CHARGE; DISPOSITION OF VOID CERTIFICATES. . . . . . . .43
SECTION 10.05. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATEs. . . . .43
SECTION 10.06. PERSONS DEEMED OWNERS. . . . . . . . . . . . . . . . . . .43
SECTION 10.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES
AND ADDRESSES. . . . . . . . . . . . . . . . . . . . . . .43
SECTION 10.08. AUTHENTICATING AGENTS. . . . . . . . . . . . . . . . . . .44
SECTION 10.09. BOOK-ENTRY CERTIFICATES. . . . . . . . . . . . . . . . . .44
SECTION 10.10. NOTICES TO CLEARING AGENCY . . . . . . . . . . . . . . . .45
SECTION 10.11. DEFINITIVE CERTIFICATES. . . . . . . . . . . . . . . . . .45
ARTICLE ELEVEN INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . .46
SECTION 11.01. SERVICER INDEMNIFICATION . . . . . . . . . . . . . . . . .46
SECTION 11.02. LIABILITIES TO OBLIGORS. . . . . . . . . . . . . . . . . .46
SECTION 11.03. TAX INDEMNIFICATION. . . . . . . . . . . . . . . . . . . .46
SECTION 11.04. SERVICER'S INDEMNITIES . . . . . . . . . . . . . . . . . .46
SECTION 11.05. OPERATION OF INDEMNITIES . . . . . . . . . . . . . . . . .47
ARTICLE TWELVE THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 12.01. DUTIES OF TRUSTEE. . . . . . . . . . . . . . . . . . . . .47
SECTION 12.02. CERTAIN MATTERS AFFECTING THE TRUSTEE. . . . . . . . . . .49
SECTION 12.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR CONTRACTS . . . . .50
SECTION 12.04. TRUSTEE MAY OWN CERTIFICATES . . . . . . . . . . . . . . .50
SECTION 12.05. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS . . . . . . . .50
- ii -
<PAGE>
SECTION 12.06. THE SERVICER TO PAY TRUSTEE'S EXPENSES . . . . . . . . . .51
SECTION 12.07. ELIGIBILITY REQUIREMENTS FOR TRUSTEE . . . . . . . . . . .51
SECTION 12.08. RESIGNATION OR REMOVAL OF TRUSTEE. . . . . . . . . . . . .51
SECTION 12.09. SUCCESSOR TRUSTEE. . . . . . . . . . . . . . . . . . . . .52
SECTION 12.10. MERGER OR CONSOLIDATION OF TRUSTEE . . . . . . . . . . . .52
SECTION 12.11. TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 12.12. OBLIGOR CLAIMS . . . . . . . . . . . . . . . . . . . . . .53
SECTION 12.13. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. . . . . . .53
SECTION 12.14. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. . . . . . . . .54
SECTION 12.15. PROTECTION OF TITLE. . . . . . . . . . . . . . . . . . . .56
ARTICLE THIRTEEN MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 13.01. SERVICER NOT TO RESIGN . . . . . . . . . . . . . . . . . .57
SECTION 13.02. PROHIBITED TRANSACTIONS WITH RESPECT TO THE ISSUER . . . .57
SECTION 13.03. MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . . .58
SECTION 13.04. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . .58
SECTION 13.05. ACTS OF CERTIFICATEHOLDERS . . . . . . . . . . . . . . . .58
SECTION 13.06. CALCULATIONS . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 13.07. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 13.08. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . .60
SECTION 13.09. MERGER AND INTEGRATION . . . . . . . . . . . . . . . . . .61
SECTION 13.10. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . .61
SECTION 13.11. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . .61
SECTION 13.12. NO INSOLVENCY PETITION . . . . . . . . . . . . . . . . . .61
SECTION 13.13. THIRD PARTY BENEFICIARY. . . . . . . . . . . . . . . . . .61
SECTION 13.14. NO ADDITIONAL SECURITIES . . . . . . . . . . . . . . . . .61
SECTION 13.15. NO ADDITIONAL INDEBTEDNESS BY THE DEPOSITOR. . . . . . . .61
SECTION 13.16. CERTIFICATES NONASSESSABLE AND FULLY PAID. . . . . . . . .62
</TABLE>
- iii -
<PAGE>
EXHIBITS
Exhibit A-l Form of Certificate for Dealer Auto Receivables Grantor Trust
2000-1 Class A Certificates
Exhibit A-2 Form of Certificate for Dealer Auto Receivables Grantor Trust
2000-1 Class B Certificates
Exhibit B Form of Assignment
Exhibit C-1 Form of Closing Certificate of Depositor
Exhibit C-2 Form of Closing Certificate of Servicer/Seller
Exhibit D-1 Form of Opinion of Counsel for Depositor regarding general
corporate matters (including perfection opinion)
Exhibit D-2 Form of Opinion of Counsel for Depositor regarding the "true
sale" nature of the transaction
Exhibit D-3 Form of Opinion of Counsel for Depositor regarding
non-consolidation
Exhibit E Form of Reserve Account Agreement
Exhibit F Form of Certificate of Servicing Officer
Exhibit G Form of Certificate Regarding Repurchased Contracts
Exhibit H List of Contracts
Exhibit I Form of Monthly Report to Certificateholders
Exhibit J Seller's Representations and Warranties
Exhibit K Form of Yield Supplement Agreement
Exhibit L Lockbox Bank and Lockbox Account
- iv -
<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of __________, 2000, among Dealer
Auto Receivables Corp., a Delaware corporation (the "DEPOSITOR"), Premier Auto
Finance, Inc. a Delaware corporation, as Servicer (in such capacity, the
"SERVICER"), and [___________________________________] not in its individual
capacity but solely as Trustee (in such capacity, the "TRUSTEE") of Dealer Auto
Receivables Grantor Trust 2000-1 (the "ISSUER").
WHEREAS the Depositor is willing to sell, transfer and assign a pool of
installment sale contracts relating to new or used automobiles and light-duty
trucks (collectively, the "CONTRACTS") originated or purchased by Premier Auto
Finance, L.P. and subsequently sold by Premier Auto Finance, L.P. to the
Depositor;
WHEREAS, the Servicer is willing to service the contracts pursuant to the
terms hereof;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. GENERAL. For the purpose of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Article include the plural as well as the singular, the words
"HEREIN," "HEREOF" and "HEREUNDER" and other words of similar import refer to
this Agreement as a whole and not to any particular article, section or other
subdivision, and Section references refer to Sections of this Agreement.
SECTION 1.02. SPECIFIC TERMS.
"ADVANCE" means, with respect to any Distribution Date, the amounts, if
any, deposited by the Servicer in the Collection Account for such Distribution
Date pursuant to SECTION 9.03.
"AFFILIATE" of any specified Person means 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" or "CONTROLLED" have meanings
correlative to the foregoing.
"AGREEMENT" means this Pooling and Servicing Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"APPLICANTS" has the meaning assigned in SECTION 10.07.
"AUTHENTICATING AGENT" means any authenticating agent appointed pursuant to
SECTION 10.08.
- 1 -
<PAGE>
"AVAILABLE AMOUNTS" means, with respect to any Distribution Date, the sum
of the Available Interest and the Available Principal for such Distribution
Date.
"AVAILABLE INTEREST" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer on
or in respect of the Contracts during the related Due Period: (i) all payments
received in respect of such Contract allocated to the payment of interest,
including the interest component of all Net Liquidation Proceeds, (ii) the
interest component of the aggregate of the Repurchase Prices for Contracts
repurchased by the Depositor pursuant to SECTION 9.06 as of the last day of the
related Due Period, (iii) the interest component of the aggregate of the
Repurchase Prices for Contracts purchased by the Servicer pursuant to SECTION
5.06(f) as of the last day of the related Due Period, (iv) all Advances made by
the Servicer pursuant to SECTION 9.03 in respect of delinquent interest payment
on the related Determination Date, (v) the interest component of the amount paid
by the Seller in connection with an optional repurchase of the Contracts
pursuant to SECTION 9.07, (vii) all amounts received in respect of interest,
dividends, gains, income and earnings on investment of funds in the Trust
Accounts as contemplated in the last sentence of SECTION 5.05(d) and (vii) the
Yield Supplement Deposit received by the Trustee.
"AVAILABLE PRINCIPAL" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer on
or in respect of the Contracts during the related Due Period: (i) all payments
received in respect of such Contract allocated to the payment of principal,
including the principal component of all Net Liquidation Proceeds, (ii) the
principal component of the aggregate of the Repurchase Prices for Contracts
repurchased by the Depositor pursuant to SECTION 9.06 as of the last day of the
related Due Period, (iii) the principal component of the aggregate of the
Repurchase Prices for Contracts purchased by the Servicer pursuant to SECTION
5.06(f) as of the last day of the related Due Period and (iv) the principal
component of the amount paid by the Seller in connection with an optional
repurchase of the Contracts pursuant to SECTION 9.07.
"BUSINESS DAY" means any day other than (a) a Saturday or a Sunday, or (b)
another day on which banking institutions in the city of Chicago, Illinois,
Wilmington, Delaware or New York, New York are authorized or obligated by law,
executive order, or governmental decree to be closed.
"CERTIFICATEHOLDER" or "HOLDER" means the person in whose name either a
Class A Certificate or a Class B Certificate is registered on the Certificate
Register, except that, solely for the purposes of giving any consent, waiver,
request or demand pursuant to this Agreement, any Certificate registered in the
name of the Depositor or any Affiliate of the Depositor shall be deemed not to
be outstanding and the Fractional Interest evidenced thereby shall not be taken
into account in determining whether the requisite Fractional Interest necessary
to effect any such consent, request, waiver or demand has been obtained;
provided, however, that in determining whether the Trustee shall be protected in
relying upon any such consent, waiver, request or demand only Certificates which
the Trustee knows to be so owned shall be so disregarded.
"CERTIFICATE REGISTER" means the register maintained pursuant to SECTION
10.03(a).
- 2 -
<PAGE>
"CERTIFICATE REGISTRAR" or "REGISTRAR" means the registrar appointed
pursuant to SECTION 10.03.
"CERTIFICATES" means the Class A Certificates and the Class B Certificates.
"CLASS" means all Certificates whose form is identical except for variation
in denomination, principal amount or Holder.
"CLASS A CERTIFICATE" means a Certificate evidencing a Fractional Interest
executed and authenticated by the Trustee substantially in the form of EXHIBIT
A-1.
"CLASS A CERTIFICATE BALANCE" shall initially equal the Class A Initial
Certificate Balance and, on any date thereafter, shall equal the Class A
Certificate Balance, reduced by all amounts previously distributed to Class A
Certificateholders and allocable to principal.
"CLASS A CERTIFICATE FACTOR" means, at any time, the percentage (carried
out to seven decimal places) derived from a fraction, the numerator of which is
the Class A Certificate Balance at such time and the denominator of which is the
Class A Initial Certificate Balance.
"CLASS A DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the sum of the Class A Principal Distributable Amount and the Class A
Interest Distributable Amount.
"CLASS A INITIAL CERTIFICATE BALANCE" means $__________, which is equal to
the aggregate Principal Balance of the Contracts as of the Cutoff Date
multiplied by the Class A Percentage, and with respect to a particular
Certificate means the amount set forth on the face thereof.
"CLASS A INTEREST CARRYOVER SHORTFALL" means, (a) for the initial
Distribution Date, zero, and (b) with respect to any other Distribution Date,
the excess of the Class A Interest Distributable Amount with respect to the
preceding Distribution Date over the amount of interest that was actually
distributed to Class A Certificateholders on such preceding Distribution Date,
plus 30 days of interest on the amount specified herein, to the extent permitted
by law, at the Class A Pass-Through Rate.
"CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date (other than the first Distribution Date), the sum of (i) the
product of (A) one-twelfth (or, with respect to the first Distribution Date, a
fraction, the numerator of which equals the number of days from and including
the Closing Date to but excluding the first Distribution Date and the
denominator of which equals 360) of the Class A Pass-Through Rate and (B) the
Class A Certificate Balance as of the immediately preceding Distribution Date
(after giving effect to distributions of principal made on such immediately
preceding Distribution Date) or, in the case of the first Distribution Date, the
Class A Initial Certificate Balance plus (ii) the Class A Interest Carryover
Shortfall with respect to such Distribution Date.
"CLASS A PASS-THROUGH RATE" means [ ]% per annum computed on the basis of a
360-day year consisting of twelve 30-day months.
"CLASS A PERCENTAGE" means __%.
- 3 -
<PAGE>
"CLASS A POOL FACTOR" means, at any time, the percentage (carried out to
seven decimal places) derived from a fraction, the numerator of which is the
Class A Certificate Balance at such time and the denominator of which is the
aggregate Principal Balance of the Contracts as of the Cutoff Date.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of (i) the Class A Principal Distributable Amount
for the preceding Distribution Date over (ii) the amount of principal that was
actually distributed to Class A Certificateholders on such preceding
Distribution Date.
"CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the product of (a) the Class A Percentage and
(b) the Monthly Principal with respect to such Distribution Date plus (ii) the
Class A Principal Carryover Shortfall with respect to such Distribution Date;
PROVIDED, HOWEVER, that the Class A Principal Distributable Amount on the Final
Scheduled Distribution Date shall not be less than the amount that is necessary
(after giving effect to other amounts to be deposited in the Collection Account
on such Distribution Date and allowable to principal) to reduce the outstanding
principal amount of the Class A Certificates to zero..
"CLASS B CERTIFICATE" means a Certificate evidencing a Fractional Interest
executed and authenticated by the Trustee substantially in the form of EXHIBIT
A-2.
"CLASS B CERTIFICATE BALANCE" shall initially equal the Class B Initial
Certificate Balance and, on any date thereafter, shall equal the Class B
Certificate Balance, reduced by all amounts previously distributed to Class B
Certificateholders and allocable to principal.
"CLASS B CERTIFICATE FACTOR" means, at any time, the percentage (carried
out to seven decimal places) derived from a fraction, the numerator of which is
the Class B Certificate Balance at such time and the denominator of which is the
Class B Initial Certificate Balance.
"CLASS B DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the sum of the Class B Principal Distributable Amount and the Class B
Interest Distributable Amount.
"CLASS B INITIAL CERTIFICATE BALANCE" means $_________, which is equal to
the aggregate Principal Balance of the Contracts as of the Cutoff Date
multiplied by the Class B Percentage, and with respect to a particular
Certificate means the amount set forth on the face thereof.
"CLASS B INTEREST CARRYOVER SHORTFALL" means, (a) for the initial
Distribution Date, zero, and (b) with respect to any Distribution Date, the
excess of the Class B Interest Distributable Amount with respect to the
preceding Distribution Date over the amount of interest that was actually
distributed to Class B Certificateholders on such preceding Distribution Date,
plus 30 days of interest on the amount specified herein, to the extent permitted
by law, at the Class B Pass-Through Rate.
"CLASS B INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date (other than the first Distribution Date), the sum of (i) the
product of (A) one-twelfth (or, with respect to the first Distribution Date, a
fraction the numerator of which equals the number of days from and including the
Closing Date to but excluding the first Distribution Date and the
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denominator of which equals 360) of the Class B Pass-Through Rate and (B) the
Class B Certificate Balance as of the immediately preceding Distribution Date
(after giving effect to distributions of principal made on such immediately
preceding Distribution Date) or, in the case of the first Distribution Date, the
Class B Initial Certificate Balance plus (ii) the Class B Interest Carryover
Shortfall for such Distribution Date.
"CLASS B PASS-THROUGH RATE" means [ ]% per annum computed on the basis of a
360-day year consisting of twelve 30-day months.
"CLASS B PERCENTAGE" means ____%.
"CLASS B POOL FACTOR" means, at any time, the percentage (carried out to
seven decimal places) derived from a fraction, the numerator of which is the
Class B Certificate Balance at such time and the denominator of which is the
aggregate Principal Balance of the Contracts as of the Cutoff Date.
"CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of (i) the Class B Principal Distributable Amount
for the preceding Distribution Date over (ii) the amount of principal that was
actually distributed to Class B Certificateholders on such preceding
Distribution Date.
"CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the product of (A) the Class B Percentage and
(B) the Monthly Principal for such Distribution Date plus (ii) the Class B
Principal Carryover Shortfall for such Distribution Date; PROVIDED, HOWEVER,
that the Class B Principal Distributable Amount on the Final Scheduled
Distribution Date shall not be less than the amount that is necessary (after
giving effect to other amounts to be deposited in the Collection Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal amount of the Class B Certificates to zero.
"CLOSING DATE" means __________, 2000.
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time tot time a Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Closing Agency.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTION ACCOUNT" means a trust account as described in SECTION 5.05
maintained in the name of the Trustee for the benefit of the Certificateholders
and which shall be an Eligible Account.
"COMPUTER DISK" means the computer disk generated by the Servicer which
provides information relating to the Contracts and which was used by the Seller
in selecting the Contracts sold to the Depositor pursuant to the Transfer and
Sale Agreement and by the Depositor in
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selecting the Contracts transferred pursuant to this Agreement, and includes the
master file and the history file as well as servicing information with respect
to the Contracts.
"CONTRACT ASSETS" has the meaning assigned in SECTION 2.01 of the Transfer
and Sale Agreement.
"CONTRACT FILE" means, as to each Contract, (a) the original copy of the
Contract, including the executed installment sale contract or other evidence of
the obligation of the Obligor, (b) the original title certificate to the
Financed Vehicle and, where applicable, the certificate of lien recordation, or,
if such title certificate has not yet been issued, an application for such title
certificate, or other appropriate evidence of a security interest in the covered
Financed Vehicle, (c) the assignments of the Contract, (d) the original copy of
any agreement(s) modifying the Contract including, without limitation, any
extension agreement(s) and (e) documents evidencing the existence of physical
damage insurance covering such Financed Vehicle.
"CONTRACT RATE" means, as to any Contract, the annual rate of interest
specified in the Contract.
"CONTRACTS" means the installment sale contracts described in the List of
Contracts and constituting part of the Trust Corpus, and includes, without
limitation, all related security interests and any and all rights to receive
payments which are collected pursuant thereto on or after the Cutoff Date, but
excluding any rights to receive payments which are collected pursuant thereto
prior to the Cutoff Date.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of the execution of this Agreement is located at the
address set forth in SECTION 13.08.
"CUTOFF DATE" means __________, 2000.
"DEFAULTED CONTRACT" means a Contract with respect to which there has
occurred one or more of the following: (i) all or part of a scheduled payment
under the Contract is 120 days or more than 120 days past due and the Servicer
has not repossessed the related Financed Vehicle, (ii) the Servicer, has in
accordance with its customary servicing procedures, determined that eventual
payment in full is unlikely and has either repossessed and liquidated the
related Financed Vehicle or repossessed and held the related Financed Vehicle in
its repossessed inventory for 90 days, whichever occurs first or (iii) the
relevant Obligor has suffered an Insolvency Event.
"DEFINITIVE CERTIFICATES" has the meaning assigned such term in SECTION
10.09.
"DELINQUENCY AMOUNT" means, as of any Distribution Date, the sum of the
outstanding Principal Balance of all Contracts that were delinquent 60 days or
more as of the close of business on the last day of the related Due Period
(including Contracts which are not Defaulted Contracts in respect of which the
related Financed Vehicles have been repossessed and are still inventory).
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"DELINQUENT INTEREST" means, for each Due Period and each Contract, an
amount equal to the product of (i) the Principal Balance of such Contract as of
the first day of such Due Period and (ii) the stated annual percentage rate of
such Contract and (iii) the number of days in the period between the Due Dates
on such Contract divided by 360 minus the amount of interest received with
respect to such Contract during such Due Period.
"DEPOSITOR" has the meaning assigned such term in the preamble hereunder or
any successor thereto.
"DETERMINATION DATE" means the [ ] Business Day following the conclusion of
a Due Period during the term of this Agreement.
"DISTRIBUTION DATE" means the [ ] day of each calendar month during the
term of this Agreement, or if such day is not a Business Day, the next
succeeding Business Day, with the first such Distribution Date hereunder being
__________, 2000.
"DUE DATE" means, with respect to any Contract, the day of the month on
which each scheduled payment of principal and interest is due on such Contract,
exclusive of days of grace.
"DUE PERIOD" means a calendar month during the term of this Agreement, and
the Due Period related to a Determination Date or Distribution Date shall be the
calendar month immediately preceding such date; provided, however, that with
respect to the Initial Determination Date or Initial Distribution Date, the
related Due Period shall be the period from the Cutoff Date to and including
____________.
"ELIGIBLE ACCOUNT" means an account maintained (i) with the Trustee as long
as the Trustee's short-term unsecured debt obligations have a rating of "P-1" by
Moody's and a rating of "A-1+" by Standard & Poor's (the "REQUIRED DEPOSIT
RATING") or (ii) in a segregated trust account with a depository institution or
trust company organized under the laws of the United States of America, or any
of the States thereof, or the District of Columbia, having a certificate of
deposit, short-term deposit or commercial paper rating of at least "P-1" by
Moody's and "A-1+" by Standard & Poor's.
"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 (or any domestic branch of a foreign
bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; PROVIDED, HOWEVER, that at
the time of the investment or contractual commitment to invest therein, 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) thereof
shall have a credit rating from the Rating Agency in the highest investment
category granted thereby;
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(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from the Rating Agency
in the highest investment category granted thereby;
(d) investments in money market funds having a rating from the Rating
Agency in the highest investment category granted thereby (including funds
for which the Trustee or any of its respective Affiliates is investment
manager or advisor);
(e) bankers' acceptances issued by any depository institution or trust
company referred to in CLAUSE (b); and
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed as to timely payment 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) described in CLAUSE (b).
"EXTENSION FEE" means any extension fee paid by the Obligor on a Contract.
"FINAL SCHEDULED DISTRIBUTION DATE" means __________, ____.
"FINANCED VEHICLE" means a new or used automobile or light-duty truck,
together with all accessions thereto, securing the Obligor's indebtedness under
the related Contract.
"FRACTIONAL INTEREST" means an undivided interest in the Issuer and, as to
a particular Certificateholder, means the undivided interest in the Issuer owned
by that Certificateholder equal to the percentage obtained by dividing (a) the
Certificate Balance of all Certificates held by such Certificateholder at the
time of determination by (b) the aggregate of the Certificate Balance of all of
the Certificates held by all Certificateholders at such time.
"HOLDER" means a Person in whose name a Certificate is registered in the
Certificate Register.
"INSOLVENCY EVENT" means, with respect to a specified Person, (i) the entry
of a decree or order for relief by a court or regulatory authority having
jurisdiction in respect of such Person in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future,
federal or state, bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; (ii) the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and such case is
not dismissed within 60 days; or (iii) the commencement by such Person of a
voluntary case under the federal bankruptcy laws, as now or hereinafter in
effect, or any other present or future federal or state, bankruptcy, insolvency
or similar law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or other similar official for such Person or for any substantial part of its
property, or the making by such Person of an assignment
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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 corporate action by such Person
in furtherance of any the foregoing.
"LATE PAYMENT PENALTY FEES" means any late payment fees paid by Obligors on
Contracts after all sums received have been allocated first to regular
installments due or overdue and all such installments are then paid in full.
"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 Contract by operation of law.
"LIST OF CONTRACTS" means the list identifying each Contract constituting
part of the Trust Corpus, which list (a) identifies each Contract and (b) sets
forth as to each Contract (i) the Principal Balance as of the applicable Cutoff
Date, (ii) the amount of monthly payments due from the Obligor, (iii) the
Contract Rate and (iv) the maturity date, and which list (as in effect on the
Closing Date) is attached to this Agreement as EXHIBIT H.
"LOCKBOX" means the Lockbox maintained by the Lockbox Bank identified on
EXHIBIT L hereto.
"LOCKBOX ACCOUNT" means the account maintained with the Lockbox Bank and
identified on EXHIBIT L hereto.
"LOCKBOX AGREEMENT" means the ________________ dated as of ____________,
__________ by and among the Servicer, the Depositor, the Trustee and
_____________, with respect to the Lockbox Account, unless such agreement shall
be terminated in accordance with its terms, in which even "LOCKBOX AGREEMENT"
shall mean such other agreement, in form and substance acceptable to the
above-described parties.
"LOCKBOX BANK" means the financial institution maintaining the Lockbox
Account and identified on EXHIBIT L hereto or any successor thereto.
"MONTHLY PRINCIPAL" means, as to any Distribution Date, the following
amount calculated as of the related Determination Date: the difference between
(i) the Principal Balance of the Contracts as of the first day of the Due Period
preceding the Due Period in which such Distribution Date occurs (or, in the case
of the first Distribution Date, the Principal Balance of the Contracts as of the
Cutoff Date) and (ii) the Principal Balance of the Contracts as of the first day
of the Due Period in which such Distribution Date occurs; provided, that on the
Final Scheduled Distribution Date, Monthly Principal shall equal the aggregate
of the Class A Certificate Balance and the Class B Certificate Balance.
"MONTHLY REPORT" has the meaning assigned in SECTION 7.06.
"MONTHLY SERVICING FEE" means, as to any Distribution Date, the product of
one-twelfth of 1% and the Principal Balance of the Contracts as of the preceding
Distribution Date.
"MOODY'S" means Moody's Investors Service, Inc. or any successor thereto.
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"NET LIQUIDATION LOSSES" means, as of any Distribution Date, with respect
to a Defaulted Contract, the amount, if any, by which (a) the outstanding
Principal Balance of such Defaulted Contract plus accrued and unpaid interest
thereon at the Contract Rate to the date on which such Defaulted Contract became
a Defaulted Contract exceeds (b) the Net Liquidation Proceeds for such Defaulted
Contract.
"NET LIQUIDATION PROCEEDS" means, as to any Defaulted Contract, the
proceeds realized on the sale or other disposition of the related Financed
Vehicle, including proceeds realized on the repurchase of such Financed Vehicle
by the originating dealer for breach of warranties, and the proceeds of any
insurance relating to such Financed Vehicle, after payment of all reasonable
expenses incurred thereby, together, in all instances, with the expected or
actual proceeds of any recourse rights relating to such Contract as well as any
post-disposition proceeds received by the Servicer.
"OBLIGOR" means such person who owes payments under a Contract.
"OFFICER'S CERTIFICATE" means a certificate signed by the Chairman, the
President, a Vice President, the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
any Person delivering such certificate and delivered to the Person to whom such
certificate is required to be delivered. In the case of an Officer's Certificate
of the Servicer, at least one of the signing officers must be a Servicing
Officer. Unless otherwise specified, any reference herein to an Officer's
Certificate shall be to an Officer's Certificate of the Servicer.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be counsel
to the Depositor or the Servicer) acceptable to the Trustee.
"PAYING AGENT" has the meaning assigned in SECTION 9.01(b).
"PERFORMANCE GUARANTEE" means the Performance Guarantee dated as of the
date hereof by the Performance Guarantor, as amended, supplemented or otherwise
modified from time to time.
"PERFORMANCE GUARANTOR" means Virginia Surety Company, Inc., an Illinois
corporation, or its successor, in its capacity as Performance Guarantor under
the Performance Guarantee.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"POOL BALANCE" means, as of any date, the aggregate Principal Balance of
Contracts as of the close of business on such date.
"PRINCIPAL BALANCE" means, as of the close of business on the last day of
any Due Period, an amount equal to the unpaid principal balance of such Contract
as of the opening of business on the Cutoff Date, reduced by the sum of all
payments received by the Servicer as of such date allocable to principal;
PROVIDED, HOWEVER, that (i) if (x) a Contract is repurchased by the Seller
pursuant to SECTION 5.01 of the Transfer and Sale Agreement or by the
Performance Guarantor
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pursuant to the Performance Guarantee or by the Depositor pursuant to SECTION
9.05 or by the Servicer pursuant to SECTION 5.06(f) as of the last day of such
Due Period, or if (y) the Seller gives notice of its intent to repurchase the
Contracts pursuant to SECTION 5.02 of the Transfer and Sale Agreement and
SECTION 9.07 on the next succeeding Distribution Date, in each case the
Principal Balance of such Contract or Contracts shall be deemed as of the close
of business on the last day of such Due Period and each Due Period thereafter to
be zero and (ii) from and after the Due Period in which a Contract becomes a
Defaulted Contract, the Principal Balance of such Contract shall be deemed to be
zero.
"RATING AGENCY" means each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Certificates; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Certificates, such other
nationally recognized statistical rating organization selected by the Depositor.
"RECORD DATE" means, with respect to any Distribution Date, the last
Business Day of the preceding calendar month.
"REIMBURSEMENT AMOUNT" has the meaning assigned in SECTION 9.03 hereof.
"REPURCHASE PRICE" means, with respect to a Contract to be repurchased
hereunder as of the last day of any Due Period, an amount equal to (a) the
Principal Balance of such Contract as of such day, plus (b) accrued and unpaid
interest at the Contract Rate on such Contract through the end of such Due
Period.
"REQUIRED DEPOSIT RATING" has the meaning assigned in the definition of
"Eligible Account."
"RESERVE AGENT" means the Reserve Agent named in the Reserve Fund
Agreement, and any successor thereto pursuant to the terms of the Reserve Fund
Agreement.
"RESERVE FUND" means the Reserve Fund established and maintained pursuant
to the Reserve Fund Agreement. The Reserve Fund shall in no event be deemed part
of the Trust Corpus.
"RESERVE FUND AGREEMENT" means the Reserve Fund Agreement, dated as of
__________, 2000 among the Depositor, the Reserve Agent and the Trustee (as
amended, supplemented or otherwise modified from time to time).
"RESERVE FUND DEPOSITS" shall have the meaning provided in the Reserve Fund
Agreement.
"RESERVE FUND INITIAL DEPOSIT" means $_________.
"RESERVE FUND REQUISITE AMOUNT" means, with respect to any Distribution
Date, an amount equal to ___________________.
"RESPONSIBLE OFFICER" means, with respect to the Trustee, the chairman and
any vice chairman of the board of directors, the president, the chairman and
vice chairman of any
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executive committee of the board of directors, every vice president, assistant
vice president, the secretary, every assistant secretary, cashier or any
assistant cashier, controller or assistant controller, the treasurer, every
assistant treasurer, every trust officer, assistant trust officer and every
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by persons who at the time shall be such
officers, respectively, or to whom a corporate trust matter is referred because
of knowledge of, familiarity with, and authority to act with respect to a
particular matter.
"SELLER" means Premier Auto Finance, L.P., an Illinois limited partnership,
or its successor, in its capacity as Seller of Contract Assets under the
Transfer and Sale Agreement.
"SERVICER" means Premier Auto Finance, Inc., a Delaware corporation, or its
successor, until any Service Transfer hereunder and thereafter means the
Successor Servicer appointed pursuant to ARTICLE VIII below with respect to the
duties and obligations required of the Servicer under this Agreement.
"SERVICER DEFAULT" has the meaning assigned to such term in SECTION 8.01.
"SERVICE TRANSFER" has the meaning assigned in SECTION 8.03(a).
"SERVICING FEE" means, on any Determination Date, the sum of (a) the
Monthly Servicing Fee payable on the related Distribution Date, (b) Late Payment
Penalty Fees received by the Servicer during the related Due Period, and (c)
Extension Fees received by the Servicer during the related Due Period.
"SERVICING OFFICER" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Trustee by the Servicer, as the same may be amended from time
to time.
"SHORTFALL" means, with respect to a Distribution Date, the sum of (a) the
excess, if any, of the amounts described in clauses (iv) through (v) of SECTION
9.04(b) over the Available Interest for such Distribution Date minus the amounts
payable therefrom pursuant to clauses (i) through (iii) of SECTION 9.04(b) on
such Distribution Date plus (b) the excess, if any, of the amounts described in
clauses (vi) and (vii) of SECTION 9.04(b) over the Available Amounts for such
Distribution Date minus the amounts payable therefrom pursuant to clauses (i)
through (v) of SECTION 9.04(b) on such Distribution Date.
"SIMPLE INTEREST CONTRACT" means any Contract providing for the allocation
of payments made thereunder to principal and interest in accordance with the
Simple Interest Method.
"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 the payment of 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 and
the remainder of such payment is allocated to the payment of principal.
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"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division
of The McGraw Hill Company or any successor thereto.
"TRANSACTION DOCUMENTS" means this Agreement, the Transfer and Sale
Agreement, the Lockbox Agreement, the Reserve Fund Agreement, the Performance
Guarantee and the Yield Supplement Agreement.
"TRANSFER AND SALE AGREEMENT" means the Transfer and Sale Agreement dated
as of __________, 2000 by and between the Depositor and the Seller, as amended,
supplemented or otherwise modified from time to time.
"TRUST ACCOUNTS" means the Collection Account.
"TRUST CORPUS" has the meaning given to such term in SECTION 2.01(b)
hereof. Although the Depositor has pledged the Reserve Fund to the Trustee
pursuant to the Reserve Fund Agreement, the Reserve Fund shall not under any
circumstances be deemed to be a part of or otherwise includable in the Issuer or
the Trust Corpus.
"TRUSTEE'S FEE" means, with respect to any Distribution Date,
_______________.
"UCC" means the Uniform Commercial Code as enacted in Illinois.
"UNCOLLECTIBLE ADVANCE" means with respect to any Determination Date and
any Contract, the amount, if any, if advanced by the Servicer in respect of such
Contract pursuant to SECTION 9.03, which the Servicer has as of such
Determination Date determined in good faith would not be ultimately recoverable
by the Servicer from insurance policies on the related Financed Vehicle, the
related Obligor or out of Net Liquidation Proceeds with respect to such
Contract. The determination by the Servicer that it has made an Uncollectible
Advance shall be evidenced by an Officer's Certificate delivered to the Trustee.
"UNDERWRITERS" means Chase Securities Inc. and Aon Capital Markets.
"YIELD SUPPLEMENT ACCOUNT" shall have the meaning assigned to such term in
SECTION 9.09.
"YIELD SUPPLEMENT AGREEMENT" means the agreement, dated as of the date of
this Agreement, between ____________________, substantially in the form attached
hereto as EXHIBIT K.
"YIELD SUPPLEMENT AMOUNT" means, with respect to any Distribution Date, the
aggregate amount on deposit in the Yield Supplement Account after giving effect
to the withdrawal therefrom of the related Yield Supplement Deposit and without
regard to any amounts on deposit therein in respect of interest or investment
earnings earned on the investment of amounts on deposit therein in Eligible
Investments for any period.
"YIELD SUPPLEMENT DEPOSIT" means, with respect to any Distribution Date,
________________.
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ARTICLE TWO
TRANSFER OF CONTRACTS
SECTION 2.01. CLOSING. There is hereby created by the Depositor, as
settlor, a separate trust which shall be known as the Dealer Auto Receivables
Grantor Trust 2000-1. The Issuer shall be administered pursuant to the
provisions of this Agreement for the benefit of the Certificateholders. The
Trustee is hereby specifically empowered to conduct business dealings on behalf
of the Issuer in accordance with the terms hereof. On the Closing Date, in
consideration of the Trustee's delivery of the Certificates to and upon the
order of the Depositor, the Depositor does hereby sell, transfer, assign, set
over and otherwise convey to the Issuer by execution of an assignment
substantially in the form of EXHIBIT B hereto, without recourse other than as
expressly provided herein, (i) all the right, title and interest of the
Depositor in and to the Contracts listed on the List of Contracts delivered on
the Closing Date (including, without limitation, all security interests and all
rights to receive payments and prepayments which are collected pursuant thereto
on or after the Cutoff Date, including any liquidation proceeds therefrom), (ii)
all security interests in each Financed Vehicle, (iii) all rights of the
Depositor to proceeds from any claims on theft, physical damage, credit life or
disability insurance or other individual insurance policy relating to any such
Contract, an Obligor or a Financed Vehicle securing such Contract, (iv) all
documents contained in the related Contract Files, (v) all rights (but not the
obligations) of the Depositor against any originating dealer or other third
party (i.e. the originators of the Contracts) under any agreements between the
Seller and such originating dealers or third party, (vi) all rights of the
Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to
the extent they relate to the Contracts, (vii) any rebates of premiums and other
amounts relating to insurance policies, extended service contracts, other repair
agreements or any other items financed under such Contract, (viii) all rights
(but not the obligations) of the Depositor under the Transfer and Sale
Agreement, including but not limited to the Depositor's rights under ARTICLE V
thereof, (ix) all rights of the Depositor under the Performance Guarantee, (x)
the remittances, deposits and payments made into the Trust Accounts from time to
time and amounts in the Trust Accounts from time to time (and any investments of
such amounts), and (xi) all proceeds and products of the foregoing (the property
in clauses (i)-(xi) above, being the "TRUST CORPUS"). Although the Depositor and
the Trustee agree that such transfer is intended to be a sale of ownership of
the Trust Corpus, rather than the granting of a security interest to secure a
borrowing, and that the Trust Corpus shall not be property of the Depositor, in
the event such transfer is deemed to be of a mere security interest to secure a
borrowing, the Depositor shall be deemed to have granted the Trustee on behalf
of the Issuer for the benefit of the Certificateholders a perfected first
priority security interest in such Trust Corpus and this Agreement shall
constitute a security agreement under applicable law.
SECTION 2.02. CONDITIONS TO THE CLOSING. On or before the Closing Date,
the Depositor shall deliver or cause to be delivered the following documents to
the Trustee:
(a) The initial List of Contracts, certified by the Chairman of the
Board, President or any Vice President of the Depositor, together with an
assignment substantially in the form of EXHIBIT B hereto.
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(b) A certificate of an officer of the Seller substantially in the
form of EXHIBIT B to the Transfer and Sale Agreement and of an Officer of
the Depositor substantially in the form of EXHIBIT C hereto.
(c) Opinions of counsel for the Seller and the Depositor substantially
in the form of EXHIBITS D-1, D-2 and D-3 hereto (and including as an
addressee thereof each Rating Agency).
(d) A letter or letters from Ernst & Young LLP, or another nationally
recognized accounting firm, addressed to the Seller and the Underwriters
and stating that such firm has reviewed a sample of the Contracts and
performed specific procedures for such sample with respect to certain
contract terms and which identifies those Contracts which do not conform.
(e) Copies of resolutions of the general partner of the Seller and the
Board of Directors of each of the Servicer and the Depositor or of the
Executive Committee of the Board of Directors of each of the Servicer and
the Depositor approving the execution, delivery and performance of this
Agreement and the other Transaction Documents to which any of them is a
party, as applicable, and the transactions contemplated hereunder and
thereunder, certified in each case by the Secretary or an Assistant
Secretary of the general partner of the Seller, the Servicer and the
Depositor.
(f) Officially certified recent evidence of due incorporation and good
standing of each of the Servicer and the Depositor under the laws of
Delaware.
(g) Evidence of proper filing with the appropriate offices in Illinois
of UCC financing statements executed by the Seller, as debtor, naming the
Depositor as secured party (and the Trustee as assignee) and identifying
the Contract Assets as collateral; and evidence of proper filing with the
appropriate offices in Illinois of UCC financing statements executed by the
Depositor, as debtor, (i) naming the Trustee as secured party and
identifying the Trust Corpus as collateral and (ii) naming the Trustee as
secured party and identifying the Reserve Fund Deposits therein as
collateral.
(h) An Officer's Certificate listing the Servicer's Servicing
Officers.
(i) Evidence of deposit in the Collection Account of all funds
received with respect to the Contracts on or after the Cutoff Date to the
second Business Day preceding the Closing Date, together with an Officer's
Certificate from the Seller to the effect that such amount is correct.
(j) The Officer's Certificate of the Seller specified in SECTION
2.02(b) of the Transfer and Sale Agreement.
(k) A fully executed Transfer and Sale Agreement.
(l) A fully executed copy of the Reserve Fund Agreement, together with
evidence of deposit in the Reserve Fund of the Reserve Fund Initial Deposit
by the Depositor in accordance with the Reserve Fund Agreement.
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(m) A fully executed Yield Supplement Agreement, together with
evidence of deposit in the Yield Supplement Account of the Yield Supplement
Deposit by the Depositor in accordance with the Yield Supplement Agreement.
SECTION 2.03. ACCEPTANCE BY TRUSTEE. On the Closing Date, upon the
acceptance by the Depositor of the Certificates, the ownership of the Trust
Corpus will be 100% vested to the Issuer.
SECTION 2.04. TAX TREATMENT. It is the intention of the Depositor that, for
federal income tax purposes, the Issuer will be classified as a grantor trust
and not as an association taxable as a corporation. The Depositor and the
Servicer by entering into this Agreement, and each Certificateholder by the
purchase of a Certificate, agree to report such transactions for federal income
tax purposes in a manner consistent with such characterization.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
The Seller under the Transfer and Sale Agreement has made each of the
representations and warranties set forth in EXHIBIT J hereto and has consented
to the assignment by the Depositor to the Trustee of the Depositor's rights with
respect thereto. Such representations speak as of the execution and delivery of
this Agreement and as of the Closing Date in the case of the Contracts, but
shall survive the sale, transfer and assignment of the Contracts to the Trustee.
Pursuant to SECTION 2.01 of this Agreement, the Depositor has sold, assigned,
transferred and conveyed to the Trustee as part of the Trust Corpus its rights
under the Transfer and Sale Agreement, including without limitation, the
representations and warranties of the Seller therein as set forth in EXHIBIT J
attached hereto, together with all rights of the Depositor with respect to any
breach thereof including any right to require the Seller to repurchase any
Contract in accordance with the Transfer and Sale Agreement. It is understood
and agreed that the representations and warranties set forth or referred to in
this Section shall survive delivery of the Contract Files to the Trustee or any
custodian.
The Depositor hereby represents and warrants to the Trustee and the
Certificateholders that it has entered into the Transfer and Sale Agreement with
the Seller, that the Seller has made the representations and warranties in the
Transfer and Sale Agreement as set forth in EXHIBIT J hereto, that such
representations and warranties run to and are for the benefit of the Depositor,
and that pursuant to SECTION 2.01 of this Agreement the Depositor has
transferred and assigned to the Trustee all rights of the Depositor to cause the
Seller under the Transfer and Sale Agreement to repurchase Contracts in the
event of a breach of such representations and warranties or, in the event of the
Seller's failure to repurchase such Contracts, to cause the Performance
Guarantor pursuant to the Performance Guarantee to repurchase such Contracts.
SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE DEPOSITOR. By
its execution of this Agreement, the Depositor represents and warrants to the
Trustee and the Certificateholders that:
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(a) ASSUMPTION OF SELLER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in EXHIBIT J are true and correct.
(b) ORGANIZATION AND GOOD STANDING. The Depositor is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its
assets and to transact the business in which it is currently engaged. The
Depositor is duly qualified to do BUSINESS as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial
or other) of the Depositor or on the Certificateholders.
(c) AUTHORIZATION; VALID SALE; BINDING OBLIGATIONS. The Depositor has
the power and authority to make, execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to
which it is a party and all of the transactions contemplated under this
Agreement and the other Transaction Documents to which it is a party, and
to create the Issuer and cause it to make, execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to
which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party and to cause the Issuer
to be created. This Agreement, shall effect a valid sale, transfer and
assignment of the Trust Corpus, enforceable against the Depositor and
creditors of and purchasers from the Depositor. This Agreement and the
other Transaction Documents to which the Depositor is a party constitute
the legal, valid and binding obligation of the Depositor enforceable in
accordance with their terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies.
(d) NO CONSENT REQUIRED. The Depositor is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or the other
Transaction Documents to which it is a party.
(e) NO VIOLATIONS. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party by the
Depositor, and the consummation of the transactions contemplated hereby and
thereby, will not violate any provision of any existing law or regulation
or any order or decree of any court or of any Federal or state regulatory
body or administrative agency having jurisdiction over the Depositor or any
of its properties or the Articles of Incorporation or Bylaws of the
Depositor, or constitute a material breach of any mortgage, indenture,
contract or other agreement to which the Depositor is a party or by which
the Depositor or any of the Depositor's properties may be bound, or result
in the creation or imposition of any security interest, lien, charge,
pledge, preference, equity or encumbrance of any kind
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upon any of its properties pursuant to the terms of any such mortgage,
indenture, contract or other agreement, other than as contemplated by the
Transaction Documents.
(f) LITIGATION. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Depositor threatened, against the Depositor or any of
its properties or with respect to this Agreement, the other Transaction
Documents to which it is a party or the Certificates (1) which, if
adversely determined, would in the opinion of the Depositor have a material
adverse effect on the business, properties, assets or condition (financial
or otherwise) of the Depositor or on the Certificateholders or the
transactions contemplated by this Agreement or the other Transaction
Documents to which the Depositor is a party, (2) which might adversely
affect the federal income tax or other federal, state or local tax
attributes of the Certificates, (3) asserting the invalidity of this
Agreement, any other Transaction Document or the Certificates or (4)
seeking to prevent the issuance of the Certificates or the consummation of
the transactions contemplated by the Transaction Documents.
(g) PLACE OF BUSINESS; NO CHANGES. The Depositor's sole place of
business (within the meaning of Article 9 of the UCC) is as set forth in
SECTION 13.08. The Depositor has not changed its name, whether by amendment
of its Articles of Incorporation, by reorganization or otherwise, and has
not changed the location of its place of business, within the four months
preceding the Closing Date.
Such representations 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 Contracts to the Trustee.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER. The
Servicer represents and warrants to the Trustee and the Certificateholders that:
(a) ORGANIZATION AND GOOD STANDING. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its
assets and to transact the business in which it is currently engaged. The
Servicer is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial
or otherwise) of the Servicer or on the Certificateholders. The Servicer is
properly licensed in each jurisdiction to the extent required by the laws
of such jurisdiction to service the Contracts in accordance with the terms
hereof other than such licenses the failure to obtain would not have a
material adverse effect on the business, properties, assets, or condition
(financial or otherwise) of the Servicer or on the ability of the Servicer
to perform its obligations hereunder.
(b) AUTHORIZATION; BINDING OBLIGATIONS. The Servicer has the power and
authority to make, execute, deliver and perform this Agreement and the
other Transaction Documents to which the Servicer is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which the Servicer is a party,
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and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the other Transaction
Documents to which the Servicer is a party. This Agreement and the other
Transaction Documents to which the Servicer is a party constitute the
legal, valid and binding obligation of the Servicer enforceable in
accordance with their terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies.
(c) NO CONSENT REQUIRED. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement and the other
Transaction Documents to which the Servicer is a party.
(d) NO VIOLATIONS. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Servicer is a
party by the Servicer will not violate any provisions of any existing law
or regulation or any order or decree of any court or of any Federal or
state regulatory body or administrative agency having jurisdiction over the
Servicer or any of its properties or the Articles of Incorporation or
Bylaws of the Servicer, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Servicer is a party or
by which the Servicer or any of the Servicer's properties may be bound, or
result in the creation of or imposition of any security interest, lien,
pledge, preference, equity or encumbrance of any kind upon any of its
properties pursuant to the terms of any such mortgage, indenture, contract
or other agreement, other than this Agreement.
(e) LITIGATION. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Servicer threatened, against the Servicer or any of
its properties or with respect to this Agreement, any other Transaction
Document to which the Servicer is a party or the Certificates which, if
adversely determined, would in the opinion of the Servicer have a material
adverse effect on the business, properties, assets or condition (financial
or otherwise) of the Servicer or the Issuer or the transactions
contemplated by this Agreement or any other Transaction Document to which
the Servicer is a party.
ARTICLE FOUR
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
SECTION 4.01. CUSTODY OF CONTRACTS. (a) Subject to the terms and
conditions of this SECTION 4.01, the contents of each Contract File shall be
held in the custody of the Servicer for the benefit of, and as agent for, the
Certificateholders and the Trustee as the owner thereof.
(b) The Servicer agrees to maintain the related Contract Files at its
offices where they are currently maintained, or at such other offices of
the Servicer in the State of Illinois as shall from time to time be
identified to the Trustee by written notice. The Servicer may temporarily
move individual Contract Files or any portion thereof without
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notice as necessary to conduct collection and other servicing activities in
accordance with its customary practices and procedures; PROVIDED, HOWEVER,
that the Servicer will take all action necessary to maintain the perfection
of the Trustee's interest in the Contracts and the proceeds thereof. It is
intended that by the Servicer's agreement pursuant to this SECTION 4.01 the
Trustee shall be deemed to have possession of the Contract Files for
purposes of SECTION 9-305 of the Uniform Commercial Code of the State in
which the Contract Files are located.
(c) As custodian, the Servicer shall have and perform the following
powers and duties:
(i) hold the Contract Files on behalf of the Certificateholders
and the Trustee, maintain accurate records pertaining to each Contract
to enable it to comply with the terms and conditions of this
Agreement, maintain a current inventory thereof, conduct annual
physical inspections of Contract Files held by it under this Agreement
and certify to the Trustee annually that it continues to maintain
possession of such Contract Files;
(ii) implement policies and procedures in writing and signed by a
Servicing Officer with respect to persons authorized to have access to
the Contract Files on the Servicer's premises and the receipting for
Contract Files taken from their storage area by an employee of the
Servicer for purposes of servicing or any other purposes;
(iii) attend to all details in connection with maintaining
custody of the Contract Files on behalf of the Certificateholders and
the Trustee;
(iv) at all times maintain the original of the fully executed
Contract;
(v) clearly identify the assignment of the Contract and the
contemporaneous grant of a security interest therein to the Trustee;
and
(vi) within 30 days of the Closing Date deliver an Officer's
Certificate to the Trustee certifying that as of a date no earlier
than the Closing Date it has conducted an inventory of the Contract
Files and that there exists a Contract File for each Contract and
stating all exceptions to such statement, if any.
(d) The Servicer shall promptly report to the Trustee any failure by
it to hold the Contract Files as herein provided and shall promptly take
appropriate action to remedy any such failure. In acting as custodian of
the Contract Files, the Servicer further agrees not to assert any legal or
beneficial ownership interest in the Contracts or the Contract Files,
except as provided in SECTION 5.06. The Servicer agrees to indemnify the
Certificateholders and the Trustee for any and all liabilities,
obligations, losses, damages, payments, costs, or expenses of any kind
whatsoever which may be imposed on, incurred by or asserted against the
Certificateholders and the Trustee as the result of any act or omission by
the Servicer relating to the maintenance and custody of the Contract Files;
PROVIDED, HOWEVER, that the Servicer will not be liable for any portion of
any such amount resulting from the gross negligence or willful misconduct
of any Certificateholder or the
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Trustee. The Trustee shall have no duty to monitor or otherwise oversee the
Servicer's performance as custodian hereunder.
(e) The Servicer shall make available to the Trustee or its respective
duly authorized representatives, attorneys or auditors, the Contract Files
and the related accounts, records and computer systems maintained by the
Servicer at such times during normal operating hours as the Trustee shall
reasonably instruct which does not unreasonably interfere with the
Servicer's normal operations or customer or employee relations.
(f) Upon instruction from the Trustee, the Servicer shall release any
document in the Contract Files to the Trustee, or its agents or designee at
such place or places as such Person may reasonably designate as soon as
reasonably practicable to the extent it does not unreasonably interfere
with the Servicer's normal operations or customer or employee relations.
The Servicer shall not be responsible for any loss occasioned by the
failure of the Trustee, or its agents or designees, to return any document
or any delay in doing so.
(g) 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 4.01(g) or until this Agreement shall
be terminated. If all of the rights and obligations of the Servicer shall
have been terminated under SECTION 8.03, the appointment of the Servicer as
custodian may be terminated by the Trustee or by Certificateholders holding
Certificates representing more than 50% of the Certificate Balance, in the
same manner as the Trustee or the Certificateholders may terminate the
rights and obligations of the Servicer under SECTION 8.03. As soon as
practicable after any termination of such appointment, the Servicer shall,
at its expense, deliver the Contract Files to the Trustee or the Trustee's
agent at such place or places as the Trustee may reasonably designate.
Notwithstanding the termination of the Servicer as custodian, the Trustee
agrees that upon any such termination, the Trustee shall provide, or cause
its agent to provide, access to the Contract Files to the Servicer for the
purpose of carrying out its duties and responsibilities with respect to the
servicing of the Contracts hereunder.
SECTION 4.02. FILING. On or prior to the Closing Date, the Servicer shall
cause the UCC financing statement(s) referred to in SECTION 2.02(g) hereof to be
filed and from time to time the Servicer shall take and cause to be taken such
actions and execute such documents as are necessary or desirable or as the
Trustee may reasonably request to perfect and protect the Trustee's first
priority perfected interest in the Trust Corpus against all other persons,
including, without limitation, the filing of financing statements, amendments
thereto and continuation statements, the execution of transfer instruments and
the making of notations on or taking possession of all records or documents of
title.
SECTION 4.03. NAME CHANGE OR RELOCATION. (a) During the term of this
Agreement, neither the Seller nor the Depositor shall change its name, identity
or structure or relocate its chief executive office without first giving at
least 30 days' prior written notice to the Trustee.
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(b) If any change in either the Seller's or the Depositor's name,
identity or structure or other action would make any financing or
continuation statement or notice of lien filed under this Agreement
seriously misleading within the meaning of applicable provisions of the UCC
or any title statute, the Servicer, no later than five days after the
effective date of such change, shall file such amendments as may be
required to preserve and protect the Trustee's interests in the Trust
Corpus and the proceeds thereof. In addition, neither the Seller nor the
Depositor shall change its place of business (within the meaning of Article
9 of the UCC) from the location specified in SECTION 13.08 below unless it
has first taken such action as is advisable or necessary to preserve and
protect the Trustee's interest in the Trust Corpus. Promptly after taking
any of the foregoing actions, the Servicer shall deliver to the Trustee an
opinion of counsel reasonably acceptable to the Trustee stating that, in
the opinion of such counsel, all financing statements or amendments
necessary to preserve and protect the interests of the Trustee in the Trust
Corpus have been filed, and reciting the details of such filing.
SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this Agreement,
the Depositor will maintain its chief executive office in one of the States of
the United States, except Louisiana, Tennessee, Colorado, Kansas, New Mexico,
Oklahoma, Utah or Wyoming.
SECTION 4.05. COSTS AND EXPENSES. The Servicer agrees to pay all reasonable
costs and disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of the Trustee's right, title and
interest in and to the Contracts (including, without limitation, the security
interest in the Financed Vehicles granted thereby).
ARTICLE FIVE
SERVICING OF CONTRACTS
SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION. The Servicer will
have the sole obligation to manage, administer, service and make collections on
the Contracts and perform or cause to be performed all contractual and customary
undertakings of the holder of the Contracts to the Obligor. The Trustee, at the
written request of a Servicing Officer, shall furnish the Servicer with any
powers of attorney or other documents necessary or appropriate in the opinion of
the Trustee to enable the Servicer to carry out its servicing and administrative
duties hereunder. The Servicer is hereby appointed the servicer hereunder until
such time as any Service Transfer may be effected under ARTICLE VIII.
SECTION 5.02. STANDARD OF CARE. In managing, administering, servicing and
making collections on the Contracts pursuant to this Agreement, the Servicer
will exercise that degree of skill and care consistent with the skill and care
that the Servicer exercises with respect to similar contracts serviced by the
Servicer for itself and others, and, in any event, no less degree of skill and
care than would be exercised by a prudent servicer of motor vehicle retail
installment sales contracts; PROVIDED, HOWEVER, that notwithstanding the
foregoing, the Servicer shall not release or waive the right to collect the
unpaid balance on any Contract.
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SECTION 5.03. RECORDS. The Servicer shall, during the period it is servicer
hereunder, maintain such books of account and other records as will enable the
Trustee to determine the status of each Contract.
SECTION 5.04. INSPECTION. (a) At all times during the term hereof, the
Servicer shall afford the Trustee and its authorized agents reasonable access
during normal business hours to the Servicer's records relating to the Contracts
and will cause its personnel to assist in any examination of such records by the
Trustee, or such authorized agents and allow copies of the same to be made. The
examination referred to in this Section will be conducted in a manner which does
not unreasonably interfere with the Servicer's normal operations or customer or
employee relations. Without otherwise limiting the scope of the examination the
Trustee may, using generally accepted audit procedures, verify the status of
each Contract and review the Computer Disk and records relating thereto for
conformity to Monthly Reports prepared pursuant to ARTICLE VII and compliance
with the standards represented to exist as to each Contract in this Agreement.
(b) At all times during the term hereof, the Servicer shall keep
available a copy of the List of Contracts at its principal executive office
for inspection by the Trustee.
SECTION 5.05. TRUST ACCOUNTS. (a) On or before the Closing Date, the
Trustee shall establish the Collection Account in the name of the Trustee for
the benefit of the Certificateholders. The Trustee is hereby required to ensure
that each of the Trust Accounts is established and maintained as an Eligible
Account.
(b) The Trustee shall deposit (or the Servicer shall deposit, with
respect to payments by or on behalf of the Obligors and Net Liquidation
Proceeds received directly by the Servicer), without deposit into any
intervening account, into the Collection Account as promptly as practical
(but in any case not later than the second Business Day following the
receipt thereof):
(i) All payments on the Contracts (as well as Late Payment
Penalty Fees and Extension Fees) received by the Servicer on or after
the Cutoff Date (which for the purpose of this paragraph (b)(i) shall
include those monies deposited in the Lockbox Account allocable to
principal and interest on the Contracts);
(ii) All Net Liquidation Proceeds related to the Contracts;
(iii) The aggregate of the Repurchase Prices for Contracts
repurchased by the Depositor as described in SECTION 9.06 which
amounts shall be funded with amounts coming from the Seller pursuant
to SECTION 5.01 of the Transfer and Sale Agreement or from the
Performance Guarantor pursuant to the Performance Guarantee;
(iv) The aggregate of the Repurchase Prices for Contracts
purchased by the Servicer as described in SECTION 5.06(f);
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(v) All Advances made by the Servicer pursuant to SECTION 9.03;
(vi) All amounts paid by the Seller in connection with an
optional repurchase of the Contracts described in SECTION 9.07;
(vii) All amounts received in respect of interest, dividends,
gains, income and earnings on investments of funds in the Collection
Account as contemplated herein.
(c) If the Servicer so directs, in writing, the Trustee shall in its
capacity as Trustee hereunder, invest the amounts in the Collection Account
in Eligible Investments that mature not later than one Business Day prior
to the next succeeding Distribution Date. Once such funds are invested, the
Trustee shall not change the investment of such funds. Any loss on such
investments shall be deposited in the Collection Account by the Servicer
out of its own funds immediately as realized. Funds in the Collection
Account not so invested must be insured to the extent permitted by law by
the Bank Insurance Fund or the Savings Association Insurance Fund of the
Federal Deposit Insurance Corporation. Subject to the restrictions herein,
the Trustee may purchase an Eligible Investment from itself or an
Affiliate. Subject to the other provisions hereof, the 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 Trustee or its agent, together with each
document of transfer, if any, necessary to transfer title to such
investment to the Trustee in a manner which complies with this SECTION
5.05(c). All interest, dividends, gains upon sale and other income from, or
earnings on, investments of funds in the Collection Account shall be
deposited in the Collection Account pursuant to SECTION 5.05(b) and
distributed on the next Distribution Date pursuant to SECTION 9.04(b). The
Depositor and the Trustee agree and acknowledge that the Trustee is to have
"CONTROL" (within the meaning of Section 8-102 of the UCC as enacted in
Illinois) of collateral comprised of "INVESTMENT PROPERTY" (within the
meaning of Section 9-115 of the UCC as enacted in Illinois) for all
purposes of this Agreement.
(d) Notwithstanding anything to the contrary herein, the Servicer may
remit payments on the Contracts and Net Liquidation Proceeds to the
Collection Account in next-day funds or immediately available funds no
later than ____ a.m., Central time, on the Business Day prior to the next
succeeding Distribution Date, but only for so long as (a)(i) the short-term
certificate of deposit ratings of the Servicer are at least P-1 by Moody's
and "A-1" by Standard & Poor's or (ii) the Rating Agency shall have
notified the Servicer and the Trustee, in writing, that monthly remittances
of collections will not result in reduction or withdrawal of any then
outstanding rating of any outstanding Note or Certificate and (b) the
Servicer is Premier Auto Finance, Inc.
(e) The Servicer shall apply collections received in respect of a
Contract as follows:
(i) First, to reimburse any outstanding Advances made by the
Servicer with respect to such Contract;
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(ii) Second, to interest accrued on such Contract as of such date
and then to principal to the extent due and owing under such Contract;
(iii) Third, to pay any unpaid late charges or extension fees (if
any) due and owing under such Contract; and
(iv) Fourth, to prepay the principal of such Contract.
(f) The Servicer will, from time to time as provided herein, be
permitted to withdraw from the Collection Account any amount deposited
therein that, based on the Servicer's good-faith determination, was
deposited in error or required to be repaid to the related Obligor.
SECTION 5.06. ENFORCEMENT. (a) The Servicer will, consistent with SECTION
5.02, act with respect to the Contracts in such manner as will maximize the
receipt of all payments called for under the terms of the Contracts. The
Servicer shall use its best efforts to cause Obligors to make all payments on
the Contracts directly to the Lockbox Account. The Servicer will act in a
commercially reasonable manner with respect to the repossession and disposition
of a Financed Vehicle following a default under the related Contract with a view
to realizing proceeds at least equal to the Financed Vehicle's fair market
value. If the Servicer determines that eventual payment in full of a Contract is
unlikely, the Servicer will follow its normal practices and procedures to
recover all amounts due upon that Contract, including repossessing and disposing
of the related Financed Vehicle at a public or private sale or taking other
action permitted by applicable law. The Servicer will be entitled to recover all
reasonable out-of-pocket expenses incurred by it in liquidating a Contract and
disposing of the related Financed Vehicle.
(b) The Servicer may sue to enforce or collect upon Contracts, in its
own name, if possible, or as agent for the Trustee. If the Servicer elects
to commence a legal proceeding to enforce a Contract, the act of
commencement shall be deemed to be an automatic assignment of the Contract
to the Servicer for purposes of collection only. If, however, in any
enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Contract on the ground that it is not a real party in interest or
a holder entitled to enforce the Contract, the Trustee shall, at the
Servicer's expense, take such steps as the Servicer deems reasonably
necessary to enforce the Contract, including bringing suit in its name.
(c) The Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Contract in accordance with the
Servicer's usual practice. In exercising recourse rights, the Servicer is
authorized on the Issuer's behalf to reassign the Defaulted Contract or the
related Financed Vehicle to the Person against whom recourse exists at the
price set forth in the document creating the recourse; PROVIDED, HOWEVER,
the Servicer in exercising recourse against any third persons as described
in the immediately preceding sentence shall do so in such manner as to
maximize the aggregate recovery with respect to the Contract; and PROVIDED
FURTHER, HOWEVER, that notwithstanding the foregoing the Servicer in its
capacity as such may exercise such recourse only if such Contract (i) was
not required to be repurchased by the Seller pursuant to the Transfer and
Sale Agreement or (ii) was required to be repurchased by
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the Seller and the Seller has defaulted on such repurchase obligation and
the Performance Guarantor has defaulted on its obligation to repurchase
such Contract pursuant to the Performance Guarantee.
(d) The Servicer will not permit any rescission or cancellation of any
Contract due to the acts or omissions of the Depositor.
(e) The Servicer may grant to the Obligor on any Contract an extension
of payments due under such Contract; PROVIDED that (i) the Servicer
believes in good faith that such extension is necessary to avoid
liquidation of the Contract and will maximize the amount received under the
Contract, (ii) such extension is consistent with the Servicer's customary
servicing procedures and is consistent with SECTION 5.02, (iii) such
extension does not extend the maturity date of the Contract beyond the
month preceding the Final Scheduled Distribution Date and (iv) such
extension does not modify the terms of the Contract in a manner which
constitutes a cancellation of the Contract and the creation of a new
contract for federal income tax purposes.
(f) The Servicer may agree to modify or amend any Contract if such
modification or amendment is consistent with the Servicer's customary
servicing procedures and is consistent with SECTION 5.02; PROVIDED that the
Servicer hereby covenants that it will not (i) release the Lien on a
Financed Vehicle granted in such Contract, (ii) undertake any action which
would materially and adversely impact the rights of the Trustee in such
Contract, (iii) modify, alter or change the Contract Rate of such Contract,
(iv) modify, alter or change the number of installment payments the related
Obligor is obligated to make under such Contract or (v) increase the
Principal Balance of such Contract. The Servicer hereby agrees that it
shall purchase a Contract (together with all related Contract Assets) as of
the last day of the immediately preceding Due Period, at its Repurchase
Price, not later than the second Distribution Date after the Servicer
becomes aware, or should have become aware, or receives written notice from
the Depositor or the Trustee of any breach of a covenant of the Servicer
set forth in clauses (i) through (iv) above or in SECTION 5.06(e) above
that materially adversely affects the interest of the Certificateholders in
such Contract or the collectibility of the Contract (without regard to the
benefits of the Reserve Fund) and which breach has not been cured.
(g) The Servicer will not add to the outstanding Principal Balance of
any Contract the premium of any physical damage or other individual
insurance on a Financed Vehicle securing such Contract it obtains on behalf
of the Obligor under the terms of such Contract, but may create a separate
Obligor obligation with respect to such premium if and as provided by the
Contract.
(h) If the Servicer shall have repossessed a Financed Vehicle on
behalf of the Issuer, the Servicer shall either (i) maintain at its expense
physical damage insurance with respect to such Financed Vehicle or (ii)
indemnify the Issuer against any damage to such Financed Vehicle prior to
resale or other disposition. The Servicer shall not allow such repossessed
Financed Vehicles to be used in an active trade or business, but rather
shall
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dispose of the Financed Vehicle in a reasonable time in accordance with the
Servicer's normal business practices.
SECTION 5.07. TRUSTEE TO COOPERATE. Upon payment in full on any Contract,
the Servicer will notify the Trustee and the Depositor on the next succeeding
Distribution Date by certification of a Servicing Officer (which certification
shall include a statement to the effect that all amounts received in connection
with such Contract which are required to be deposited in the Collection Account
pursuant to SECTION 5.05 have been so deposited) and shall (if the Servicer is
not then in possession of the Contracts and Contract Files) request delivery of
the Contract and Contract File to the Servicer. Upon receipt of such delivery
and request, the Trustee shall promptly release or cause to be released such
Contract and Contract File to the Servicer. Upon receipt of such Contract and
Contract File, each of the Depositor and the Servicer is authorized to execute
an instrument in satisfaction of such Contract and to do such other acts and
execute such other documents as the Servicer deems necessary to discharge the
Obligor thereunder and eliminate the security interest in the Financed Vehicle
related thereto. The Servicer shall determine when a Contract has been paid in
full; to the extent that insufficient payments are received on a Contract
credited by the Servicer as prepaid or paid in full and satisfied, the shortfall
shall be paid by the Servicer out of its own funds. From time to time as
appropriate for servicing and repossession in connection with any Contract, if
the Servicer is not then in possession of the Contracts and Contract Files, the
Trustee shall, upon written request of a Servicing Officer and delivery to the
Trustee of a receipt signed by such Servicing Officer, cause the original
Contract and the related Contract File to be released to the Servicer and shall
execute such documents as the Servicer shall deem reasonably necessary to the
prosecution of any such proceedings. Such receipt shall obligate the Servicer to
return the original Contract and the related Contract File to the Trustee when
the need by the Servicer has ceased unless the Contract shall be repurchased as
described in SECTION 9.07. Upon request of a Servicing Officer, the Trustee
shall perform such other acts as reasonably requested by the Servicer and
otherwise cooperate with the Servicer in the enforcement of the
Certificateholders' rights and remedies with respect to the Contracts.
SECTION 5.08. COSTS AND EXPENSES. All costs and expenses incurred by the
Servicer in carrying out its duties hereunder, fees and expenses of accountants
and payments of all fees and expenses incurred in connection with the
enforcement of Contracts (including enforcement of Defaulted Contracts and
repossessions of Financed Vehicles securing such Contracts) and all other fees
and expenses not expressly stated hereunder to be for the account of the Issuer
shall be paid by the Servicer and the Servicer shall not be entitled to
reimbursement hereunder except as otherwise provided in SECTION 5.06(a).
SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES. The
Servicer shall take such steps as are necessary to maintain continuous
perfection and the first priority of the security interest created by each
Contract in the related Financed Vehicle. The Trustee hereby authorizes the
Servicer to take such steps as are necessary to perfect such security interest
and to maintain the first priority thereof in the event of a relocation of a
Financed Vehicle or for any other reason.
SECTION 5.10. MAINTENANCE OF INSURANCE. The Servicer shall, at its own
cost and expense, during the term of its service as Servicer maintain in force
an insurance policy or
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financial guarantee bond to protect against losses due to errors and omissions
by the Servicer in the performance of its duties hereunder. Such insurance
policy or financial guarantee bond shall be in form and in an amount as is
generally customary among Persons which service a portfolio of automobile retail
installment sale contracts and which are generally regarded as servicers
acceptable to institutional investors.
ARTICLE SIX
THE DEPOSITOR
SECTION 6.01. COVENANTS OF THE DEPOSITOR.
(a) CORPORATE EXISTENCE. During the term of this Agreement, the
Depositor 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 other
Transaction Documents and each other instrument or agreement necessary or
appropriate to the proper administration of this Agreement and the
transactions contemplated hereby.
(b) ARM'S LENGTH TRANSACTIONS. During the term of this Agreement, all
transactions and dealings between the Depositor and its Affiliates will be
conducted on an arm's-length basis.
(c) NO OTHER BUSINESS. The Depositor shall not engage in any business
other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Agreement and the other
Transaction Documents and activities incidental thereto.
(d) NO BORROWING. The Depositor shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for any Indebtedness permitted by or arising under the
Transaction Documents. The proceeds of the Certificates shall be used
exclusively to fund the Depositor's purchase of the Contracts and the other
assets specified in this Agreement and to pay the transactional expenses of
the Depositor.
(e) GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES. Except as
otherwise contemplated by the Transaction Documents, the Depositor shall
not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuming 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, any other interest in, or make
any capital contribution to, any other Person.
(f) CAPITAL EXPENDITURES. The Depositor shall not make any expenditure
(by long-term or operating lease or otherwise) for capital assets (either
realty or personalty).
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(g) RESTRICTED PAYMENTS. Except as permitted by the Transaction
Documents, the Depositor 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 any
owner of an equity interest in the Depositor, (ii) redeem, purchase, retire
or otherwise acquire for value any such equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose.
SECTION 6.02. LIABILITY OF DEPOSITOR; INDEMNITIES. The Depositor shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Depositor under this Agreement.
The Depositor shall indemnify, defend and hold harmless the Trustee and the
Servicer from and against any taxes that may at any time be asserted against any
such Person with respect to the transactions contemplated herein and in the
other Transaction Documents, including any sales, gross receipts, general
corporation, tangible personal property, Illinois personal property replacement
privilege or license taxes (but, in the case of the Trustee, not including any
taxes asserted with respect to, and as of the date of, the transfer of the
Contracts to the Trustee or the issuance and original sale of the Certificates,
or asserted with respect to ownership of the Contracts, or federal or other
income taxes arising out of distributions on the Certificates) and costs and
expenses in defending against the same.
The Depositor shall indemnify, defend and hold harmless the Trustee and the
Certificateholders from and against any loss, liability or expense incurred by
reason of the Depositor'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.
The Depositor shall indemnify, defend and hold harmless the Trustee from
and against all costs, expenses, losses, claims, damages and liabilities arising
out of or incurred in connection with the acceptance or performance of the
trusts and duties herein, except to the extent that such cost, expense, loss,
claim, damage or liability shall be due to the willful misfeasance, bad faith or
negligence of the Trustee or shall arise from the breach by the Trustee of any
of its representations or warranties set forth herein.
Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Depositor 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 Depositor without interest.
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, DEPOSITOR; CERTAIN LIMITATIONS.
Notwithstanding any other provision in this Section and any provision of
law, the Depositor shall not do any of the following:
(i) engage in any business or activity other than as set forth in
its Articles of Incorporation;
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(ii) without the affirmative vote of a majority of the members of the
Board of Directors of the Depositor (which must include the affirmative
vote of at least one duly appointed Independent director) (A) dissolve or
liquidate, in whole or in part, or institute proceedings to be adjudicated
bankrupt or insolvent, (B) consent to the institution of bankruptcy or
insolvency proceedings against it, (C) file a petition seeking or consent
to reorganization or relief under any applicable federal or state law
relating to bankruptcy, (D) consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the corporation or a substantial part of its property, (E) make a general
assignment for the benefit of creditors, (F) admit in writing its inability
to pay its debts generally as they become due, or (G) take any corporate
action in furtherance of the actions set forth in clauses (A) through (F)
above; PROVIDED, HOWEVER, that no director may be required by any
shareholder of the Depositor to consent to the institution of bankruptcy or
insolvency proceedings against the Depositor so long as it is solvent; or
(iii) merge or consolidate with any other corporation, company or
entity or sell all or substantially all of its assets or acquire all or
substantially all of the assets or capital stock or other ownership
interest of any other corporation, company or entity.
SECTION 6.04. LIMITATION ON LIABILITY OF DEPOSITOR AND OTHERS. The
Depositor and any director or officer or employee or agent of the Depositor may
rely in good faith on any document of any kind, prima facie properly executed
and submitted by any Person respecting any matters arising hereunder. The
Depositor and any director or officer or employee or agent of the Depositor
shall be reimbursed by the Trustee for any contractual damages, liability or
expense incurred by reason of the Trustee's willful misfeasance, bad faith or
negligence (except errors in judgment) in the performance of their respective
duties hereunder, or by reason of reckless disregard of their respective
obligations and duties hereunder. The Depositor 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 6.05. DEPOSITOR NOT TO RESIGN. Subject to the provisions of
SECTION 6.03, the Depositor shall not resign from the obligations and duties
hereby imposed on it as Depositor hereunder.
SECTION 6.06. DEPOSITOR MAY OWN CERTIFICATES. The Depositor and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates with the same rights as it would have if it were not
the Depositor or an Affiliate thereof, except as expressly provided herein or in
any Transaction Document. Certificates so owned by or pledged to the Depositor
or such Affiliate shall have an equal and proportionate benefit under the
provisions of this Agreement, without preference, priority or distinction as
among all of the Certificates, as the case may be.
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ARTICLE SEVEN
REPORTS
SECTION 7.01. MONTHLY REPORTS. No later than 10:00 a.m. Chicago, Illinois
time on each Determination Date, the Servicer shall cause the Trustee and each
Rating Agency to receive a "MONTHLY REPORT" substantially in the form of EXHIBIT
I hereto.
SECTION 7.02. OFFICER'S CERTIFICATE. On or before [ _____________ ] of each
year, the Servicer shall deliver the Trustee and Rating Agency a certificate of
a Servicing Officer substantially in the form of EXHIBIT F, certifying the
accuracy of the Monthly Reports delivered during the preceding year and that no
Servicer Default or event that with notice or lapse of time or both would become
an Servicer Default has occurred, or if such event has occurred and is
continuing, specifying the event and its status.
SECTION 7.03. OTHER DATA. In addition, the Depositor and the Servicer
shall, on request of the Trustee, Moody's or Standard & Poor's, furnish the
Trustee, Moody's or Standard & Poor's, as the case may be, such underlying data
as may be reasonably requested.
SECTION 7.04. ANNUAL REPORT OF ACCOUNTANTS.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "INDEPENDENT ACCOUNTANTS"),
who may also render other services to the Servicer or to the Depositor, to
deliver to the Trustee and each Rating Agency, on or before March 31 (or 90
days after the end of the Servicer's fiscal year, if other than December
31) of each year, beginning on __________, 2000, with respect to the twelve
months ended the immediately preceding December 31 (or other applicable
date), a statement (the "ACCOUNTANT'S REPORT") addressed to the Board of
Directors of the Servicer to the Trustee to the effect that such firm has
audited the financial statements of the direct or indirect parent of the
Servicer and issued its report thereon and that such audit
(1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered
necessary in the circumstances;
(2) included an examination of documents and records relating to
the servicing of motor vehicle retail installment sales contracts
under pooling and servicing agreements substantially similar to one
another (such statement to have attached thereto a schedule setting
forth the pooling and servicing agreements covered thereby, including
this Agreement);
(3) included an examination of the delinquency and loss
statistics relating to Servicer's portfolio of motor vehicle retail
installment sales contracts; and
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(4) except as described in the statement, disclosed no exceptions
or errors in the records relating to motor vehicle loans serviced for
others that, in the firm's opinion, generally accepted auditing
standards requires such firm to report.
The Accountant's Report shall further state that
(1) a review in accordance with agreed upon procedures was made of one
randomly selected Monthly Report; and
(2) except as disclosed in the Report, no exceptions or errors in the
Monthly Report so examined were found.
(b) The Accountant's Report shall also indicate that the firm is
independent of the Seller and the Servicer and the Servicer's direct or
indirect parent within the meaning of the Code of Professional Ethics of
the American Institute of Certified Public Accountants.
SECTION 7.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER. The Servicer
will deliver to the Trustee and each of the Rating Agencies, on or before
January 31 of each year commencing January 31, 2001, an Officer's Certificate
stating that (a) a review of the activities of the Servicer during the prior
calendar year and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to such officer's
knowledge, based on such review, the Servicer has fully performed all its
obligations under this Agreement, or, if there has been a default in the
performance of any such obligation, specifying each such default known to such
officer and the nature and status thereof. A copy of such certificate may be
obtained by any Certificateholder by a request in writing to the Trustee.
SECTION 7.06. MONTHLY STATEMENTS TO CERTIFICATEHOLDERS. (a) On or before
each Determination Date, the Servicer shall prepare and, concurrently with each
distribution to Certificateholders, deliver to the Trustee and the Trustee shall
cause to be delivered and mailed to each Certificateholder at the address
appearing on the Certificate Register a statement as of the related Distribution
Date setting forth (the "MONTHLY REPORT"):
(i) the Class A Principal Distributable Amount and the Class
B Principal Distributable Amount;
(ii) the Class A Interest Distributable Amount and the Class B
Interest Distributable Amount;
(iii) the amount of the Class A and Class B Principal and
Interest Carryover Shortfalls, if any, for the next succeeding
Distribution Date and the change in the Class A and Class B Principal
and Interest Carryover Shortfalls from such Distribution Date;
(iv) the amount distributable on such date and allocable to the
Yield Supplement Deposit;
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(v) the Pool Balance as of the close of business on the last day
of the related Due Period;
(vi) the amount of fees payable on such Distribution Date,
separately identifying the Monthly Servicing Fee and the Trustee Fee;
(vii) the amount otherwise distributable to the Class B
Certificateholders that will be distributed to the Class A
Certificateholders on such Distribution Date;
(viii) the remaining Class A Certificate Balance and Class B
Certificate Balance after giving effect to the distribution of
principal to be made on such Distribution Date;
(ix) the Class A Pool Factor, the Class A Certificate Factor, the
Class B Pool Factor and the Class B Certificate Factor immediately
before and immediately after such Distribution Date;
(x) the amount of Advances made by the Servicer in respect of the
related Contracts and the related Due Period and the amount of
unreimbursed Advances in respect of the related Contracts determined
by the Servicer to be a Defaulted Contract;
(xi) the amounts on deposit in the Yield Supplement Account;
(xii) the Reserve Fund Requisite Amount; and
(xiii) the amount of the distributions described in (i) or (ii)
above payable with funds withdrawn from the Reserve Fund and the
amount remaining in the Reserve Fund after giving effect to all
deposits and withdrawals from the Reserve Fund on such date.
(b) Within the prescribed period of time for tax reporting purposes
after the end of each calendar year, the Servicer shall prepare and the
Trustee shall mail to each Certificateholder of record at any time during
such year a report as to the aggregate amounts reported pursuant to
subsections (a)(i), (ii) and (viii) of this SECTION 7.06, attributable to
such Certificateholder.
ARTICLE EIGHT
SERVICER DEFAULT; SERVICE TRANSFER
SECTION 8.01. SERVICER DEFAULT. "SERVICER DEFAULT" means the occurrence
of any of the following:
(a) Any failure by the Servicer (i) to make any payment or deposit
required to be made hereunder or (ii) to direct the Trustee to make any
payment or distribution required to be made hereunder and the continuance
of such failure for a period of five (5)
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Business Days after receipt of written notice from the Trustee or discovery
by the Servicer thereof;
(b) Failure on the Servicer's part to observe or perform in any
material respect any covenant or agreement set forth herein (other than a
covenant or agreement, the breach of which is specifically addressed
elsewhere in this Agreement) which (i) materially and adversely affects the
rights of the Certificateholders and (ii) continues unremedied for thirty
(30) days after receipt of written notice from the Trustee or by
Certificateholders with aggregate Fractional Interests representing 25% or
more of the Issuer;
(c) An involuntary case under any applicable bankruptcy, insolvency or
other similar law shall have been commenced in respect of the Servicer and
shall not have been dismissed within 60 days, or a court having
jurisdiction in the premises shall have entered a decree or order for
relief in respect of the Servicer in an involuntary case under any
applicable 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 Servicer, or for any substantial
liquidation or winding up of its affairs;
(d) The Servicer shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have consented to the entry of an order for relief in an
involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of the
Servicer or for any substantial part of its property, or shall have made
any general assignment for the benefit of its creditors, or shall have
failed to, or admitted in writing its inability to, pay its debts as they
become due, or shall have taken any corporate action in furtherance of the
foregoing;
(e) Any representation, warranty or statement of the Servicer made in
this Agreement, or any certificate, report or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as of
the time when the same shall have been made and the incorrectness of such
representation, warranty or statement has a material adverse effect on the
Certificateholders and, within 30 days after written notice thereof shall
have been given to the Servicer by either the Trustee or by the
Certificateholders with aggregate Fractional Interests representing 25% or
more of the Issuer, the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured.
SECTION 8.02. WAIVER OF SERVICER DEFAULT. Certificateholders with aggregate
Fractional Interests representing more than 50% or more of the Issuer, may, by
written notice delivered to the parties hereto, waive any Servicer Default other
than a Servicer Default described in SECTION 8.01(a).
SECTION 8.03. SERVICE TRANSFER. (a) If a Servicer Default has occurred
and is continuing and has not been waived pursuant to SECTION 8.02, (x)
Certificateholders with aggregate Fractional Interests representing more than
50% of the Issuer or (y) the Trustee may, by written
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notice delivered to the parties hereto, terminate all (but not less than all) of
the Servicer's management, administrative, servicing, custodial and collection
functions (such termination being herein called a "SERVICE TRANSFER").
(b) Upon receipt of the notice required by SECTION 8.03(a) (or, if
later, on a date designated therein), all rights, benefits, fees,
indemnities, authority and power of the Servicer under this Agreement,
whether with respect to the Contracts, the Contract Files or otherwise,
shall pass to and be vested in the Trustee (the "SUCCESSOR SERVICER")
pursuant to and under this SECTION 8.03; and, without limitation, the
Successor Servicer is authorized and empowered to execute and deliver on
behalf of the Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do any and all acts or things
necessary or appropriate to effect the purposes of such notice of
termination. The Servicer agrees to cooperate with the Successor Servicer
in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the transfer to the
Successor Servicer for administration by it of all cash amounts which shall
at the time be held by the Servicer for deposit, or have been deposited by
the Servicer, in the Collection Account, or for its own account in
connection with its services hereafter or thereafter received with respect
to the Contracts. The Servicer shall transfer to the Successor Servicer (i)
all records held by the Servicer relating to the Contracts in such
electronic form as the Successor Servicer may reasonably request and (ii)
any Contract Files in the Servicer's possession. In addition, the Servicer
shall permit access to its premises (including all computer records and
programs) to the Successor Servicer or its designee, and shall pay the
reasonable transition expenses of the Successor Servicer. Upon a Service
Transfer, the Successor Servicer shall also be entitled to receive the
Monthly Servicing Fee for performing the obligations of the Servicer.
SECTION 8.04. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF SUCCESSOR SERVICER.
On and after a Service Transfer pursuant to SECTION 8.03, the Successor Servicer
shall be the successor in all respects to the Servicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof, and
the terminated Servicer shall be relieved of such responsibilities, duties and
liabilities arising after such Service Transfer; PROVIDED, HOWEVER, that (i) the
Successor Servicer will not assume any obligations of the Servicer described in
SECTION 8.08 and (ii) the Successor Servicer shall not be liable for any acts or
omissions of the Servicer occurring prior to such Service Transfer or for any
breach by the Servicer of any of its representations and warranties contained
herein or in any related document or agreement. Notwithstanding the above, if
the Successor Servicer is legally unable or unwilling to act as Servicer, it may
appoint or petition a court of competent jurisdiction to appoint an established
financial institution (x) having a net worth of not less than $100,000,000 as of
the last day of the most recent fiscal quarter for such institution and (y)
whose regular business shall include the servicing of automobile receivables, to
act as Servicer. As compensation therefor, the Successor Servicer shall be
entitled to receive reasonable compensation equal to the Monthly Servicing Fee.
The Trustee and such Successor Servicer shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. To the
extent the terminated Servicer has made Advances, it shall be entitled to
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reimbursement of the same notwithstanding its termination hereunder, to the same
extent as if it had continued to service the Contracts hereunder.
SECTION 8.05. NOTIFICATION TO CERTIFICATEHOLDERS. (a) Promptly following
the occurrence of any Servicer Default, the Servicer shall give written notice
thereof to the Trustee, the Depositor, and each Rating Agency at the addresses
described in SECTION 13.08. The Trustee shall give written notice thereof to the
Certificateholders at their respective addresses appearing on the Certificate
Register.
(b) Within 10 days following any termination or appointment of a
Successor Servicer pursuant to this ARTICLE VIII, the Trustee shall give
written notice thereof to each Rating Agency and the Depositor at the
addresses described in SECTION 13.08, and to the Certificateholders at
their addresses appearing on the Certificate Register.
SECTION 8.06. EFFECT OF TRANSFER. (a) After a Service Transfer, the
terminated Servicer shall have no further obligations with respect to the
management, administration, servicing, custody or collection of the Contracts
and the Successor Servicer appointed pursuant to SECTION 8.04 shall have all of
such obligations, except that the terminated Servicer will transmit or cause to
be transmitted directly to the Successor Servicer for its own account, promptly
on receipt and in the same form in which received, any amounts (properly
endorsed where required for the Successor Servicer to collect them) received as
payments upon or otherwise in connection with the Contracts.
(b) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the
Servicer), other than those relating to the management, administration,
servicing, custody or collection of the Contracts.
SECTION 8.07. DATABASE FILE. The Servicer will provide the Successor
Servicer with a magnetic tape containing the database file for each Contract (i)
as of the Cutoff Date, (ii) thereafter, as of the last day of the preceding Due
Period on each Determination Date prior to a Servicer Default and (iii) on and
as of the Business Day before the actual commencement of servicing functions by
the Successor Servicer following the occurrence of a Servicer Default.
SECTION 8.08. SUCCESSOR SERVICER INDEMNIFICATION. The Servicer shall
defend, indemnify and hold the Successor Servicer and any officers, directors,
employees or agents of the Successor Servicer harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments and any other costs, fees, and expenses that the Successor Servicer
may sustain in connection with the claims asserted at any time by third parties
against the Successor Servicer which result from (i) any willful or grossly
negligent act taken or omission by the Servicer or (ii) a breach of any
representations of the Servicer in SECTION 3.02 hereof. The indemnification
provided by this SECTION 8.08 shall survive the termination of this Agreement.
SECTION 8.09. RESPONSIBILITIES OF THE SUCCESSOR SERVICER. The Successor
Servicer will not be responsible for delays attributable to the Servicer's
failure to deliver information, defects in the information supplied by the
Servicer or other circumstances beyond the control of the Successor Servicer.
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The Successor Servicer will make arrangements with the Servicer for the
prompt and safe transfer of, and the Servicer shall provide to the Successor
Servicer, all necessary servicing files and records, including (as deemed
necessary by the Successor Servicer at such time): (i) microfiche loan
documentation, (ii) servicing system tapes, (iii) Contract payment history, (iv)
collections history and (v) the trial balances, as of the close of business on
the day immediately preceding conversion to the Successor Servicer, reflecting
all applicable loan information.
The Successor Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information. The
Successor Servicer shall have no responsibility, shall not be in default and
shall incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Depositor or the Trustee or for any inaccuracy or
omission in a notice or communication received by the Successor Servicer from
any third party or (ii) which is due to or results from the invalidity,
unenforceability of any Contract with applicable law or the breach or the
inaccuracy of any representation or warranty made with respect to any Contract.
SECTION 8.10. LIMITATION OF LIABILITY OF SERVICER.
(a) Neither the Servicer nor any of the directors, officers, employees
or agents of the Servicer shall be under any liability to the Trustee or
the Certificateholders, except as provided under this Agreement, for any
action taken or for refraining from the taking of any action pursuant to
this Agreement or for errors in judgment; PROVIDED, HOWEVER, that this
provision shall not protect the Servicer or any such person against any
liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of
reckless disregard of obligations and duties under this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement.
(b) 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 Contracts in
accordance with this Agreement, and that in its opinion may cause it to
incur any expense or liability; PROVIDED, HOWEVER, that the Servicer may
undertake any reasonable action that it may deem necessary or desirable in
respect of the Transaction Documents and the rights and duties of the
parties to the Transaction Documents and the interests of the
Certificateholders. In such event, the legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Servicer and the Servicer will not be entitled to be
reimbursed therefor.
SECTION 8.11. MERGER OR CONSOLIDATION OF SERVICER. Any Person into
which the Servicer may be merged or consolidated, or any corporation, or
other entity resulting from any merger
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conversion or consolidation to which the Servicer shall be a party, or any
Person succeeding to all or substantially of the business of the Servicer (which
Person assumes the obligations of the Servicer), shall be the successor of the
Servicer hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Servicer shall give prior written notice of any such merger
or consolidation to which it is a party to the Trustee and the Rating Agencies.
SECTION 8.12. SERVICER NOT TO RESIGN. Subject to the provisions of SECTION
8.03, Servicer shall not resign from the obligations and duties hereby imposed
on it as Servicer under this Agreement except upon determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law. Notice of any such determination permitting the
resignation of Servicer shall be communicated to the Trustee at the earliest
practicable time (and, if such communication is not in writing, shall be
confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee concurrently with or promptly after such notice. No
such resignation shall become effective until the Trustee shall have assumed the
responsibilities and rights of the predecessor Servicer in accordance with
SECTION 8.04.
SECTION 8.13. APPOINTMENT OF SUBSERVICER. So long as Premier Auto Finance,
Inc. acts as the Servicer, the Servicer may at any time without notice or
consent (a) subcontract substantially all its duties under this Agreement to any
corporation more than 50% of the voting stock of which is owned, directly or
indirectly, by Aon Corporation or (b) perform specific duties as servicer under
this Agreement through other subcontractors; PROVIDED, HOWEVER, that, in each
case, no such delegation or subcontracting shall relieve the Servicer of its
responsibilities with respect to such duties as to which the Servicer shall
remain primarily responsible with respect thereto.
ARTICLE NINE
DISTRIBUTIONS, RESERVE FUND AND
YIELD SUPPLEMENT ACCOUNT
SECTION 9.01. Monthly Distributions. (a) Each Certificateholder as of the
related Record Date shall be paid on the next succeeding Distribution Date by
check mailed first-class, postage prepaid, to such Person's address as it
appears on the Certificate Register on such Record Date, except that, unless
Definitive Certificates have been issued pursuant to Section 10.09, with respect
to the Certificates 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, except for the final installment of principal payable with
respect to such Certificate on a Distribution Date or on the related Final
Scheduled Distribution Date, as the case may be, which shall be payable as
provided below.
(b) The Trustee shall serve as the paying agent hereunder (the "Paying
Agent") and shall make the distributions to the Certificateholders required
hereunder. The Trustee hereby agrees that all amounts held by it for
distribution hereunder will be held in trust for the benefit of the
Certificateholders.
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SECTION 9.02. FEES. The Trustee shall be paid the Trustee's Fee and the
Servicer shall be paid the Monthly Servicing Fee, each of which shall be paid
solely from the monies and in accordance with the priorities described in
SECTION 9.04(b). No recourse may be had to the Seller, Depositor, Trustee,
Servicer, or any of their respective Affiliates in the event that amounts
available under SECTION 9.04(b) are insufficient for payment of the Trustee Fee
and the Monthly Servicing Fee.
SECTION 9.03. ADVANCES. On each Determination Date, the Servicer shall
compute the amount of Delinquent Interest for the immediately preceding Due
Period. Not later than each Determination Date, the Servicer shall advance
(each, an "ADVANCE") Delinquent Interest for such Due Period by depositing such
amount in the Collection Account, PROVIDED, HOWEVER, that the Servicer shall be
obligated to advance in respect of a Contract only to the extent that the
Servicer, in its sole discretion, expects that such advance would not be an
Uncollectible Advance. The Servicer shall indicate on each Monthly Report (i)
the amount of Delinquent Interest, if any, for the related Due Period and (ii)
the amount of the Advance, if any, made by the Servicer in respect of the
Delinquent Interest pursuant to this SECTION 9.03. If the amount of such Advance
is less than the amount of the Delinquent Interest, the relevant Monthly Report
shall be accompanied by a certificate of a Servicing Officer setting forth in
reasonable detail the basis for the determination by the Servicer that the
portion of the Delinquent Interest not advanced would be an Uncollectible
Advance. By each Determination Date, the Servicer shall determine the amount of
prior unreimbursed Advances for which it shall be entitled to be reimbursed
(such amount, the "REIMBURSEMENT AMOUNT"). The Servicer shall be entitled to be
reimbursed for an Advance made in respect of a delinquent payment under a
Contract on the earlier of (i) the Distribution Date following the Due Period in
which that delinquent payment was paid and (ii) the Distribution Date following
the Due Period in which that Contract became a Defaulted Contract.
SECTION 9.04. DISTRIBUTIONS. (a) On each Distribution Date, the Servicer
shall determine the amount of the Available Amounts for the related Distribution
Date and shall calculate the Available Interest, the Available Principal, the
Class A Distributable Amount, the Class B Distributable Amount, and all other
distributions to be made on the related Distribution Date.
(b) On each Distribution Date, the Trustee will, based on the
information in the Monthly Report, distribute the following amounts in the
following order of priority:
(i) from Available Interest, the Reimbursement Amount to the
Servicer;
(ii) from Available Interest, the Servicing Fee for the related
Due Period to the Servicer;
(iii) from Available Interest, any accrued and unpaid Trustee Fee
with respect to one or more prior Due Periods;
(iv) to the Class A Certificateholders of record, from Available
Interest, an amount equal to the Class A Interest Distributable Amount
for such Distribution Date and, if such Available Interest is
insufficient, the Class A
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Certificateholders will receive such shortfall first, from monies on
deposit in the Reserve Fund and second, if such amounts are still
insufficient, from the Class B Percentage of Available Principal;
(v) to the Class B Certificateholders of record, from Available
Interest, an amount equal to the Class B Interest Distributable Amount
for such Distribution Date and, if such Available Interest is
insufficient, the Class B Certificateholders will receive such
shortfall from monies on deposit in the Reserve Fund;
(vi) to the Class A Certificateholders of record, from Available
Amounts, an amount equal to the Class A Principal Distributable Amount
for such Distribution Date and, if such Available Amounts are
insufficient, the Class A Certificateholders will receive such
shortfall from monies on deposit in the Reserve Fund;
(vii) to the Class B Certificateholders of record, from Available
Amounts, an amount equal to the Class B Principal Distributable Amount
for such Distribution Date and, if such Available Amounts are
insufficient, the Class B Certificateholders will receive such
shortfall from monies on deposit in the Reserve Fund; and
(viii) any remaining Available Amounts after the payments
described in clauses (i) through (vii) above shall be paid to the
Reserve Agent for deposit in the Reserve Fund.
Notwithstanding anything herein to the contrary, no amount shall be paid to
the Certificateholders in respect of any Yield Supplement Deposit with respect
to a Contract, except to the extent of amounts withdrawn from the Yield
Supplement Account and deposited in the Collection Account or paid to the
Collection Account by the Depositor pursuant to the Yield Supplement Agreement;
PROVIDED, HOWEVER, that, if an insufficiency of funds in the Yield Supplement
Account would result in a shortfall of interest, the amount of such shortfall
shall be withdrawn from the Reserve Fund and deposited in the Collection Account
prior to such Distribution Date.
Any monies intended for the payment of Class A Distributable Amounts or
Class B Distributable Amounts but which remain unclaimed by Certificateholders
for a period of two years after the Final Scheduled Distribution Date shall,
upon the written request of the Depositor, be paid to the Depositor, and such
Certificateholders shall thereafter look only to the Depositor for payment, and
then only to the extent of the amounts so received without interest thereon;
PROVIDED, HOWEVER, that within thirty days prior to the expiration of the
two-year period mentioned above, the Trustee, before being required to make any
such repayment, may, at the expense of the Depositor, cause to be published in a
financial journal a notice that after a date named therein said monies will be
returned to the Depositor.
SECTION 9.05. WITHDRAWAL FROM RESERVE FUND TO COVER A SHORTFALL. On the
Business Day immediately preceding each Distribution Date, the Servicer shall
instruct the Trustee in
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writing (based on the information contained in the Monthly Report delivered on
the related Determination Date pursuant to SECTION 7.06) on such Distribution
Date to withdraw from the Reserve Account an amount equal to the Shortfall with
respect to such Distribution Date and apply such funds in the following order of
priority: first, to the amount of such Shortfall relating to the Class A
Certificate Interest Distributable Amount, second, to the amount of such
Shortfall relating to the Class A Certificate Interest Distributable Amount;
third, to the amount of such Shortfall relating to the Class B Certificate
Principal Distributable Amount; and fourth, to the amount of such Shortfall
relating to the Class B Certificate Principal Distributable Amount. On each
Distribution Date, the Trustee shall withdraw funds from the Reserve Fund and
apply them in accordance with the Servicer's instructions.
SECTION 9.06. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND
WARRANTIES. Upon a discovery by the Servicer, the Depositor or the Trustee of a
breach of a representation or warranty of the Depositor as set forth in SECTION
3.01(a) or of the Seller as set forth in EXHIBIT J hereto that materially
adversely affects the Certificateholder's interest in such Contract (without
regard to the benefits of the Reserve Fund), the party discovering the breach
shall give prompt written notice to the other parties PROVIDED, that the Trustee
shall have no duty or obligation to inquire or to investigate the breach by the
Seller of any of such representations or warranties. Unless the breach shall
have been cured by the last day of the Due Period following the Due Period in
which the Depositor becomes aware, or should have become aware, or receives
written notice from the Trustee or Servicer of such breach, the Depositor in
accordance with this SECTION 9.06, shall repurchase such Contract as of the last
day of such Due Period at its Repurchase Price, by depositing such Repurchase
Price in the Collection Account on the related Distribution Date. The repurchase
obligation described in this SECTION 9.06 is in no way to be satisfied with
monies in the Reserve Fund.
SECTION 9.07. SELLER'S REPURCHASE OPTION. As provided in the Transfer and
Sale Agreement, on written notice to the Indenture Trustee at least 20 days
prior to a Distribution Date, and provided that the aggregate unpaid principal
balance of the Class A Certificates and the Class B Certificates on such
Distribution Date is less than 10% of the aggregate Principal Balance as of the
Cutoff Date, the Seller, through the Depositor, may (but is not required to)
repurchase on that Distribution Date pursuant to the Transfer and Sale Agreement
all outstanding Contracts (and related Contract Assets) at a price equal to the
aggregate unpaid principal balance of the Class A Certificates and the Class B
Certificates as of that Distribution Date plus the aggregate of the Certificate
Interest Distributable Amount for the current Distribution Date, the
Reimbursement Amount (if any) as well as accrued and unpaid Monthly Servicing
Fees and the Trustee Fees to the date of such repurchase. Such price will be
deposited in the Collection Account not later than one (1) Business Day before
such Distribution Date, against the Trustee's release of the Contracts and the
Contract Files to the Seller.
SECTION 9.08. REASSIGNMENT OF REPURCHASED CONTRACTS. Upon receipt by the
Trustee for deposit in the Collection Account of the Repurchase Price as
described in SECTION 9.06 or SECTION 9.07, and upon receipt of a certificate of
a Servicing Officer in the form attached hereto as EXHIBIT G, the Trustee shall
assign to the Seller all of the Issuer's right, title and interest in the
repurchased Contract without recourse, representation or warranty, except as to
the absence of liens, charges or encumbrances created by or arising as a result
of actions of the Trustee.
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SECTION 9.09. YIELD SUPPLEMENT ACCOUNT. Pursuant to the Yield Supplement
Agreement, the Depositor shall establish and maintain with the Trustee for the
benefit of the Certificateholders a separate trust account in the name of the
Trustee (the "YIELD SUPPLEMENT ACCOUNT"), or such other account as may be
acceptable to the Rating Agencies. The Yield Supplement Account (or such other
account acceptable to the Rating Agencies) shall not be part of the Trust
Corpus. Subject to the limitations set forth in the Yield Supplement Agreement,
the Depositor hereby conveys and transfers to the Trustee the Yield Supplement
Account, all funds on deposit therein and all proceeds thereof.
ARTICLE TEN
THE CERTIFICATES
SECTION 10.01. THE CERTIFICATES. The Certificates shall be substantially in
the form of EXHIBIT A. Certificates shall be issued in denominations of $1,000
and any integral multiple of $1,000 in excess thereof, except that one
Certificate may be issued in a denomination representing the remainder of the
Class A Initial Certificate Balance and the remainder of the Class B Initial
Certificate Balance. Each Certificate shall be executed by the Trustee on behalf
of the Issuer by the manual or facsimile signature of a duly authorized
Responsible Officer or authorized signatory of the Trustee. Certificates bearing
the signatures of individuals who were at any time the proper officers or
authorized signatories of the Trustee shall bind the Issuer, notwithstanding
that such individuals or any of them have ceased to hold such offices or
positions prior to the authentication and delivery of such Certificates or did
not hold such offices or positions at the date of such Certificates. No
Certificate shall entitle the Certificateholder to any benefit under this
Agreement, or shall be valid for any purpose, unless there shall appear on such
Certificate an authentication substantially in the form set forth in Exhibit A-1
or A-2 hereto as applicable, executed by the Trustee by manual or facsimile
signature; such authentication shall constitute conclusive evidence that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
SECTION 10.02. EXECUTION, AUTHENTICATION AND DELIVER OF CERTIFICATES. The
Trustee shall deliver to, or upon the order of, the Depositor, in exchange for
the Contract Assets, the other assets of the Issuer and the pledge of the
Reserve Fund and Yield Supplement Account and amounts on deposit therein,
simultaneously with the sale, assignment and transfer to the Trustee of the
Contracts, the constructive delivery to the Trustee of the Contract Files and
the delivery to the Trustee of the other components of the Issuer, Certificates
duly executed by the Trustee, on behalf of the Issuer, and authenticated by the
Trustee in authorized denominations equaling in the aggregate the Pool Balance
as of the Cutoff Date, and evidencing the entire ownership of the Issuer.
SECTION 10.03. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a)
The Trustee shall keep at the office or agency to be maintained by it in
accordance with SECTION 13.03 a "CERTIFICATE REGISTER" in which the Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee initially appoints
itself to be the "CERTIFICATE REGISTRAR" and transfer agent for the purpose of
registering Certificates and transfers and exchanges of Certificates as provided
herein. The Trustee will
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give prompt written notice to Certificateholders and the Servicer of any change
in the Certificate Registrar.
(b) At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of authorized denominations of a like
aggregate original denomination, upon surrender of the Certificates to be
exchanged at the office of the Trustee referred to in Subsection (a) above.
Whenever any Certificates are so surrendered for exchange, the Trustee
shall execute, authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall be duly
endorsed by, or shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly
executed by, the holder thereof or his or her attorney duly authorized in
writing, which signature on such assignment must be guaranteed by a
commercial bank or trust company or a member firm of a national securities
exchange.
SECTION 10.04. NO CHARGE; DISPOSITION OF VOID CERTIFICATES. No service
charge shall be made to a Certificateholder for any transfer or exchange of
Certificates, but the Certificate Registrar or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates. All
Certificates surrendered for transfer and exchange shall be disposed of in a
manner approved by the Trustee.
SECTION 10.05. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a)
any mutilated Certificate is surrendered to the Certificate Registrar, or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (b) the Certificateholder delivers to the
Certificate Registrar, the Depositor and the Trustee (at the expense of the
Certificateholder) such security or indemnity as may be required by each to save
it harmless, then in the absence of notice to the Certificate Registrar or the
Trustee that such Certificate has been acquired by a protected purchaser, within
the meaning of Section 8-303 of the UCC, the Trustee shall execute, authenticate
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Certificate, a new Certificate of like tenor and original
denomination. Upon the issuance of any new Certificate under this SECTION 10.05,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto. Any duplicate
Certificate issued pursuant to this SECTION 10.04 shall constitute complete and
indefeasible evidence of ownership of the related Fractional Interest, as if
originally issued, whether or not the mutilated, destroyed, lost or stolen
Certificate shall be found at any later time.
SECTION 10.06. PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Paying Agent and the
Certificate Registrar may treat the person in whose name any Certificate is
registered on the Certificate Register as the owner of such Certificate for the
purpose of receiving remittances pursuant to SECTION 9.01 and for all other
purposes whatsoever, and none of the Trustee, the Certificate Registrar, the
Paying Agent or any agent of the Trustee or the Certificate Registrar shall be
affected by notice to the contrary.
SECTION 10.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Certificate Registrar will furnish to the Trustee, the Depositor and the
Servicer, within five days
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after receipt by the Certificate Registrar of a request therefor from the
Trustee or the Certificateholder in writing, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Certificateholders as
of the most recent Record Date. If, at such time, if any, as Definitive
Certificates have been issued, Certificateholders with aggregate Fractional
Interests representing 25% or more of the Issuer, (hereinafter referred to as
"APPLICANTS") apply in writing to the Trustee, and such application states that
the Applicants desire to communicate with other Certificateholders with respect
to their rights under this Agreement or under the Certificates and is
accompanied by a copy of the communication which such Applicants propose to
transmit, then the Trustee shall, within five Business Days after the receipt of
such application, afford such Applicants access during normal business hours to
the most recent list of Certificateholders held by the Trustee. If such list is
as of a date more than 90 days prior to the date of receipt of such Applicants'
request, the Trustee shall promptly request from the Certificate Registrar a
current list as provided above, and shall afford such Applicants access to such
list promptly upon receipt. Every Certificateholder, by receiving and holding a
Certificate, agrees with the Certificate Registrar and the Trustee that none of
the Depositor, the Certificate Registrar or the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders hereunder, regardless of the source from
which such information was derived.
SECTION 10.08. AUTHENTICATING AGENTS. By written instrument, the Trustee
may appoint one or more Authenticating Agents (each, an "AUTHENTICATING AGENT")
with power to act on its behalf and subject to its direction in the
authenticating of the Certificates. For all purposes of this Agreement, the
authentication of Certificates by an Authenticating Agent pursuant to this
SECTION 10.08 shall be deemed to be the authentication of Certificates "by the
Trustee."
SECTION 10.09. BOOK-ENTRY CERTIFICATES. The Class A Certificates and the
Class B Certificates, upon original issuance, will be issued in the form of
typewritten Certificates representing the Book-Entry Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency (or a
custodian therefor), by, or on behalf of, the Depositor. The Class A
Certificates and the Class B Certificates delivered to The Depository Trust
Company, shall initially be registered on the Certificate Register in the name
of Cede & Co., the nominee of the initial Clearing Agency, and no
Certificateholder will receive a definitive certificate representing such
Certificate Owner's interest in the Class A Certificates or the Class B
Certificates, except as provided in SECTION 10.11. Unless and until definitive,
fully registered Certificates (the "DEFINITIVE CERTIFICATES") have been issued
to Certificateholders pursuant to SECTION 10.11:
(i) the provisions of this SECTION 10.09 shall be in full
force and effect;
(ii) the Depositor, the Servicer, the Certificate Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including the
making of distributions on the Class A Certificates and the Class B
Certificates) as the authorized representative of the Certificateholders;
(iii) to the extent that the provisions of this SECTION 10.09 conflict
with any other provisions of this Agreement, the provisions of this SECTION
10.09 shall control;
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(iv) the rights of Certificateholders shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificateholders and the Clearing Agency and/or
the Clearing Agency Participants and all references in this Agreement to
actions by Certificateholders shall refer to actions taken by the Clearing
Agency upon instructions from the Clearing Agency Participants, and all
references in this Agreement to distributions, notices, reports and
statements to Certificateholders shall refer to distributions, notices,
reports and statements to the Clearing Agency, as registered holder of the
Certificates, as the case may be, for distribution to the beneficial owners
of the Certificates in accordance with the procedures of the Clearing
Agency. Pursuant to the Depository Agreement, unless and until Definitive
Certificates are issued pursuant to SECTION 10.11, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and
interest on the Class A Certificates and the Class B 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 evidencing a Fractional
Interest, the Clearing Agency shall be deemed to represent such Fractional
Interest only to the extent that it has received instructions to such
effect from Certificateholders and/or Clearing Agency Participants owning
or representing, respectively, such required percentage of the Certificates
and has delivered such instructions to the Trustee. The Trustee shall have
no obligation to ascertain whether the Clearing Agency has in fact received
any such instructions.
SECTION 10.10. NOTICES TO CLEARING AGENCY. Whenever notice or other
communication to the Class A Certificateholders or the Class B
Certificateholders are required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificateholders pursuant to
SECTION 10.11, the Trustee and the Servicer shall give all such notices and
communications specified herein to be given to Holders of the Class A
Certificates and the Class B Certificates to the Clearing Agency.
SECTION 10.11. DEFINITIVE CERTIFICATES. If (i)(A) the Depositor advises the
Trustee in writing that the Clearing Agency is no longer willing or able
properly to discharge its responsibilities, and (B) the Trustee is unable to
locate a qualified successor, (ii) the Trustee, at its option, elects to
terminate the book-entry system through the Clearing Agency, or (iii) after the
occurrence of a Servicer Default, Certificateholders representing beneficial
interests aggregating not less than a majority of the Class A Certificate
Balance or Class B Certificate Balance, as applicable, advise the Trustee and
the Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Certificateholders of such class, then the Trustee
shall notify all Certificateholders of such class of the occurrence of any such
event and of the availability of Definitive Certificates to Certificateholders
of such class requesting the same. Upon surrender to the Trustee of the
Certificates of such class by the Clearing Agency, accompanied by registration
instructions from the Clearing Agency for registration, the Trustee shall
execute and authenticate the applicable Definitive Certificates of such class
and deliver
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such Definitive Certificates in accordance with the instructions of the Clearing
Agency. Neither the Depositor, the Certificate Registrar nor the Trustee shall
be liable for any delay in delivery of such instructions and each may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
ARTICLE ELEVEN
INDEMNITIES
SECTION 11.01. SERVICER INDEMNIFICATION. The Servicer agrees to defend
and indemnify the Trustee, the Paying Agent, the Certificateholders and any
agents of the Trustee, and the Certificateholders against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees
and expenses of counsel and expenses of litigation arising out of or
resulting from this Agreement or any of the related Transaction Documents, or
the use, ownership or operation of any Financed Vehicle by the Servicer or
any Affiliate of the Servicer or any breach of the Servicer's covenants set
forth in clauses (i) through (iv) of SECTION 5.06(f) or in SECTION 5.06(e).
Notwithstanding any other provision of this Agreement, the obligation of the
Servicer described in this SECTION 11.01 shall not terminate or be deemed
released upon a Service Transfer pursuant to ARTICLE VIII and shall survive
any termination of this Agreement.
SECTION 11.02. LIABILITIES TO OBLIGORS. No obligation or liability to any
Obligor under any of the Contracts is intended to be assumed by the Issuer or
the Certificateholders under or as a result of this Agreement and the
transactions contemplated hereby and, to the maximum extent permitted and valid
under mandatory provisions of law, the Issuer and the Certificateholders
expressly disclaim any such assumption.
SECTION 11.03. TAX INDEMNIFICATION. As provided in the Transfer and Sale
Agreement, the Seller has agreed to pay, and to indemnify, defend and hold
harmless the Issuer, the Trustee and the Certificateholders from any taxes which
may at any time be asserted with respect to, and as of the date of, the transfer
of the Contracts to the Issuer, including, without limitation, any sales, gross
receipts, general corporation, personal property, privilege or license taxes
(but not including any federal, state or other taxes arising out of the creation
of the Issuer and the issuance of the Certificates) and costs, expenses and
reasonable counsel fees in defending against the same, whether arising by reason
of the acts to be performed by the Depositor, the Seller or the original
Servicer under this Agreement or imposed against a Certificateholder or
otherwise. Notwithstanding any other provision of this Agreement, the obligation
of the Seller described in this SECTION 11.03 shall not terminate or be deemed
released upon a Service Transfer pursuant to ARTICLE VIII and shall survive any
termination of this Agreement.
SECTION 11.04. SERVICER'S INDEMNITIES. The Servicer shall defend and
indemnify the Trustee and the Certificateholders against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation, in respect of any action taken
by such Servicer with respect to any Contract or incurred by reason of the
Servicer's willful misfeasance, bad faith or gross negligence (other than errors
in judgement) in the performance of its duties under this Agreement, or by
reason of reckless disregard of its obligations and duties under this Agreement.
This indemnity shall survive any Service Transfer (but the original Servicer's
obligations under this SECTION 11.04 shall not relate
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to any actions of any subsequent Servicer after a Service Transfer) and any
payment of the amount owing under, or any repurchase by the Seller of, any such
Contract and shall survive any termination of this Agreement.
SECTION 11.05. OPERATION OF INDEMNITIES. Indemnification under this ARTICLE
XI shall include, without limitation, reasonable fees and expenses of counsel
and expenses of litigation. If the Servicer has made any indemnity payments to
the Trustee pursuant to this ARTICLE XI and the Trustee thereafter collects any
of such amounts from others, the Issuer will repay such amounts collected to the
Servicer, without interest.
ARTICLE TWELVE
THE TRUSTEE
SECTION 12.01. DUTIES OF TRUSTEE. The Trustee, prior to the occurrence of a
Servicer Default and after the curing of all Servicer Defaults which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If a Servicer Default has occurred
(which has not been cured), the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs; PROVIDED, HOWEVER, that if the
Trustee shall assume the duties of the Servicer pursuant to SECTION 8.04, the
Trustee in performing such duties shall use the degree of skill and attention
customarily exercised by a servicer with respect to automobile and light-duty
truck receivables that it services for itself.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement and shall promptly
notify the Servicer and each Certificateholder of any failure of any of the
foregoing to so conform.
Subject to SECTION 12.03, no provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act (including actions or omissions within its control
resulting in the failure of Certificateholders to receive timely payment of
either the Class A Distributable Amount or the Class B Distributable Amount) or
its own misconduct; PROVIDED, HOWEVER, that:
(a) Prior to the occurrence of a Servicer Default, and after the
curing of all such Servicer Defaults which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming
to the requirements of this Agreement;
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(b) The Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(c) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Certificateholders with aggregate
Fractional Interests representing 25% or more of the Issuer relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Agreement; and
(d) The Trustee shall not be charged with knowledge of any event
referred to in SECTION 8.01 unless a Responsible Officer of the Trustee at
the Corporate Trust Office obtains actual knowledge of such event or the
Trustee receives written notice of such event from the Seller, the
Depositor, the Servicer or the Certificateholders with aggregate Fractional
Interests representing 25% or more of the Issuer.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it,
PROVIDED, HOWEVER, that nothing contained herein shall relieve the Trustee of
the obligations, upon the occurrence of a Servicer Default (which has not been
cured), to exercise such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
None of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Seller, the Depositor or the Servicer under
this Agreement.
Without limiting the generality of this SECTION 12.01, the Trustee shall
have no duty (i) to see to any recording, filing or depositing of this Agreement
or any agreement referred to herein or any financing statement 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 re-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 Issuer, (iv) to confirm or verify the contents of any
reports or certificates delivered to the Trustee pursuant to this 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 or observance of any of the
Seller's or the Servicer's representations, warranties or covenants or the
Servicer's duties and obligations as Servicer and as custodian of the Contract
Files under this Agreement.
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SECTION 12.02. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise
provided in SECTION 12.01 and provided the Paying Agent shall also benefit from
the provisions of this SECTION 12.02:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of a Servicing Officer, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) The Trustee may consult with counsel and any opinion of any
counsel for the Seller, the Depositor or the Servicer shall be full and
complete authorization and protection in respect of any action taken or
suffered or omitted by the Trustee hereunder in good faith and in
accordance with such opinion of counsel;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation hereunder or in relation hereto, at the request,
order or direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby;
PROVIDED, HOWEVER, that nothing contained herein shall relieve the Trustee
of the obligations, upon the occurrence of a Servicer Default (which has
not been cured), to exercise such of the rights and powers vested in it by
this Agreement, and to use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs;
(d) Prior to the occurrence of a Servicer Default and after the curing
of all Servicer Defaults which may have occurred, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing so to do by Certificateholders with aggregate
Fractional Interests representing 25% or more of the Issuer; 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
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 Servicer or, if paid
by the Trustee, shall be reimbursed by the Servicer upon demand; and
(e) 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 co-trustees or a custodian and shall not be liable for any
acts or omissions of such agents, attorneys or co-trustees or custodians if
appointed by it with due care hereunder; PROVIDED, HOWEVER, if the Servicer
is acting as custodian, the Servicer is deemed by all parties to have been
appointed with due care.
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SECTION 12.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR CONTRACTS. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein or in the Certificates (other than the Trustee's execution and
authentication thereof). The Trustee makes no representations as to the validity
or sufficiency of this Agreement, the Issuer or of the Certificates (other than
its execution and authentication thereof) or of any Contract, Contract File or
related document. The Trustee shall not be accountable for the use or
application by the Servicer or the Seller of funds paid to the Seller in
consideration of conveyance of the Contracts to the Depositor or deposited in or
withdrawn from the Collection Account by the Servicer.
SECTION 12.04. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its individual
or other capacity may become the owner or pledgee of Certificates representing
less than all the beneficial interest in the Issuer with the same rights as it
would have if it were not Trustee.
SECTION 12.05. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Issuer, nor entitle the Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Issuer, nor otherwise affect the rights, obligations, and liabilities of the
parties to this Agreement or any of them.
No Certificateholder shall have any right to vote (except as provided in
SECTION 8.01, SECTION 8.02, SECTION 8.03, SECTION 8.04, SECTION 10.08, SECTION
12.02, SECTION 12.05, SECTION 13.07 and this SECTION 12.05) or in any manner
otherwise control the operation and management of the Issuer, or the obligations
of the parties to this Agreement, nor shall anything set forth in this Agreement
or contained in the terms of the Certificates, be construed so as to constitute
the Holders as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken pursuant to any provision of this Agreement.
No Certificateholder shall have any right by virtue or by availing itself
of any provision of this Agreement to institute any suit, action, or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also
Certificateholders with aggregate Fractional Interests representing 25% or more
of the Issuer shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee under this Agreement and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Trustee, for 30 days after its receipt of such notice, request, and
offer of indemnity, shall have either neglected or refused to institute any such
action, suit or proceeding; no one or more Holders of Certificates shall have
any right in any manner whatever by virtue or by availing itself or themselves
of any provisions of this Agreement to affect, disturb, or prejudice the rights
of the Holders of any other of the Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right,
under this Agreement, except in the manner provided in this Agreement and for
the equal, ratable, and common benefit of all Certificateholders For the
protection and enforcement of the provisions of this SECTION 12.05, each
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
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SECTION 12.06. THE SERVICER TO PAY TRUSTEE'S EXPENSES. The Servicer agrees
to indemnify the Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on the Trustee's
part, arising out of or in connection with the acceptance or administration of
this trust and its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.
This SECTION 12.06 shall be for the benefit of the Trustee in its
capacities as Trustee, Paying Agent, and Certificate Registrar hereunder, and
shall not terminate or be deemed released upon a Service Transfer pursuant to
ARTICLE VIII and shall survive the termination of this Agreement.
SECTION 12.07. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee hereunder
shall at all times be a financial institution organized and doing business under
the laws of the United States of America or any state, authorized under such
laws to exercise corporate trust powers, whose long term unsecured debt is rated
at least Baa3 by Moody's and shall have a combined capital and surplus of at
least $50,000,000 or shall be a member of a bank holding system the aggregate
combined capital and surplus of which is $50,000,000 and subject to supervision
or examination by Federal or state authority, PROVIDED that the Trustee's
separate capital and surplus shall at all times be at least the amount required
by SECTION 310(a)(2) of the Trust Indenture Act of 1939, as amended. If such
Person publishes reports of condition at least annually, pursuant to law or to
the requirements of a supervising or examining authority, then for the purposes
of this SECTION 12.07, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this SECTION 12.07, the Trustee
shall resign immediately in the manner and with the effect specified in SECTION
12.08.
SECTION 12.08. RESIGNATION OR REMOVAL OF TRUSTEE. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Servicer with a copy to the Depositor, the Seller, and the
Certificateholders. Upon receiving such notice of resignation, the Depositor
shall promptly appoint a successor Trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to each of the Servicer and the
Seller and one copy to the successor Trustee. If no successor Trustee shall have
been so appointed and shall have accepted such appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of SECTION 12.07 and shall fail to resign after written request
therefor by the Depositor, or if at any time the Trustee shall be legally unable
to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Depositor may remove
the Trustee. If the Depositor shall have removed the Trustee under the authority
of the immediately preceding sentence, the Depositor shall promptly appoint a
successor Trustee by written instrument one copy of which
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instrument shall be delivered to the Trustee so removed, the Depositor and the
Seller and one copy to the successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this SECTION 12.08 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in SECTION 12.09.
Any resigning or removed Trustee shall be entitled to payment of all
Trustee's Fees earned and reimbursement for all expenses incurred by it up to
the date of resignation. All indemnification obligations of the Servicer and the
Seller shall survive such resignation or removal.
SECTION 12.09. SUCCESSOR TRUSTEE. Any successor Trustee appointed as
provided in SECTION 12.08 shall execute, acknowledge and deliver to the
Servicer, the Depositor and to its predecessor Trustee, an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee. The predecessor Trustee shall deliver
or cause to be delivered to the successor Trustee the Contracts and the Contract
Files (if any such Contracts and Contract Files are in the Trustee's possession)
and any related documents and statements held by it hereunder; and, if the
Contracts are then held by a custodian pursuant to a custodial agreement, the
predecessor Trustee and the custodian shall amend such custodial agreement to
make the successor Trustee the successor to the predecessor Trustee thereunder;
and the Servicer, the Depositor and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this SECTION
12.09 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of SECTION 12.07.
Upon acceptance of appointment by a successor Trustee as provided in this
SECTION 12.09, the Servicer shall cause notice of the succession of such Trustee
hereunder to be mailed to each Rating Agency and to each Certificateholder at
their addresses as shown in the Certificate Register. If the Servicer fails to
mail such notice within ten days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Servicer.
SECTION 12.10. MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Person shall be eligible under the provisions of SECTION 12.07,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding. Upon
such occasion, the Servicer shall cause notice thereof to be mailed to each
Rating Agency and each Certificateholder. If the Servicer
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fails to mail such notice within ten days after such succession, the successor
Trustee shall cause such notice to be mailed at the expense of the Servicer with
a copy to each Certificateholder.
SECTION 12.11. TAX RETURNS.
(a) The Servicer, on behalf of the Issuer, shall request that the
Trustee furnish the Servicer with all such information in the Trustee's
possession as may be reasonably required in connection with the preparation
of all tax returns of the Issuer and the Trustee shall, upon such request,
furnish such information and execute such returns; and
(b) As directed by the Servicer in writing, the Trustee shall take all
action specified in such writing relating to (i) certain withholding
requirements applicable to non-U.S. persons; (ii) backup withholding
requirements; and (iii) certain taxpayer certification requirements
relating to clauses (i) and (ii) above.
SECTION 12.12. OBLIGOR CLAIMS. In connection with any offset defenses, or
affirmative claims for recovery, asserted in legal actions brought by Obligors
under one or more Contracts based upon provisions therein complying with, or
upon other rights or remedies arising from, any legal requirements applicable to
the Contracts, including, without limitation, the Federal Trade Commission's
Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses
(16 C.F.R. Section 433) as amended from time to time:
(a) The Trustee is not, and shall not be deemed to be, either in any
individual capacity, as trustee hereunder or otherwise, a creditor, or a
joint venturer with or an Affiliate of, or acting in concert or cooperation
with, any seller of motor vehicles, in the arrangement, origination or
making of Contracts. The Trustee is the holder of the Contracts only as
trustee on behalf of the Certificateholders, and not as a principal or in
any individual or personal capacity;
(b) The Trustee shall not be personally liable for or obligated to pay
Obligors any affirmative claims asserted thereby, or responsible to
Certificateholders for any offset defense amounts applied against Contract
payments pursuant to such legal actions;
(c) The Trustee will pay, solely from available monies of the Issuer,
affirmative claims for recovery by Obligors only pursuant to final judicial
orders or judgments, or judicially approved settlement agreements,
resulting from such legal actions; and
(d) The Servicer has agreed to indemnify, hold harmless and defend the
Trustee and Certificateholders from and against any and all liability,
loss, costs and expenses of the Trustee and Certificateholders resulting
from any affirmative claims for recovery asserted or collected by Obligors
under the Contracts. Notwithstanding any other provision of this Agreement,
the obligation of the Servicer described in this SECTION 12.12(d) shall not
terminate or be deemed released upon a Service Transfer pursuant to ARTICLE
VIII and shall survive termination of this Agreement.
SECTION 12.13. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any
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jurisdiction having authority over the Issuer, the Contracts or the Obligors,
the Servicer and Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Issuer, and to
vest in such Person or Persons, in such capacity, such title to the Issuer, or
any part thereof, and, subject to the other provisions of this SECTION 12.13,
such powers, duties, obligations, rights and trusts as the Servicer and the
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
to do so, or in case an Servicer Default shall have occurred and be continuing,
the Trustee alone shall have the power to make such appointment. No co-trustee
or separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under SECTION 12.07 hereunder and no notice to
Certificateholders of the appointment of co-trustee(s) or separate trustee(s)
shall be required under SECTION 12.09 hereof.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this SECTION 12.13, 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 co-trustee or separate trustee jointly, except
to the extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee hereunder or as successor to the
Servicer hereunder), 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 Issuer or any portion thereof in any such
jurisdiction) shall be exercised and performed by such co-trustee or separate
trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then co-trustees and separate trustees, as
effectively as if given to each of them. Every instrument appointing any
co-trustee or separate trustee shall refer to this Agreement and the conditions
of this ARTICLE XII. Each co-trustee and separate 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 Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any co-trustee or separate 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
Agreement on its behalf and in its name. If any co-trustee or separate trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 12.14. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee,
solely in its capacity as Trustee, makes the following representations and
warranties:
(a) The Trustee is duly organized and validly existing as a(n)
__________ banking corporation in good standing under the laws of the State
of __________, with trust powers and with power and authority to own its
properties and to conduct its
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business as such properties shall be currently owned and such business is
presently conducted.
(b) The Trustee has the power and authority to execute and deliver
this Agreement and to carry out its terms; and the execution, delivery, and
performance of this Agreement has been duly authorized by the Trustee by
all necessary corporate action.
(c) This Agreement constitutes a legal, valid, and binding obligation
of the Trustee, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights in
general and by general principles of equity, regardless of whether such
enforceability shall be considered in a proceeding in equity or at law.
(d) The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms hereof, do not conflict with,
result in any breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the charter or
by-laws of the Trustee or any indenture, agreement, or other instrument to
which the Trustee 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
terms of any such indenture, agreement, or other instrument; nor violate
any law or any order, rule, or regulation applicable to the Trustee of any
court or of any Federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over the Trustee or
its properties.
(e) There are no proceedings or investigations pending or, to the best
knowledge of the Trustee, threatened before any court, regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over the Trustee or its properties (i) asserting the
invalidity of this Agreement, or (ii) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement, or (iii) seeking
any determination or ruling that might materially and adversely affect the
performance by the Trustee of its obligations under, or the validity or
enforceability of, this Agreement.
(f) In no event shall the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer, or any other party, under this Agreement except that Trustee
solely in its capacity as Successor Servicer shall perform and be
responsible for such obligations during such time, if any, as the Successor
Servicer shall be the successor to, and be vested with the rights, powers,
duties and privileges of the Servicer in accordance with the terms of the
Agreement.
(g) The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Agreement, the Trust
Corpus or the Certificates, it shall not be accountable for the Depositor's
use of the proceeds from the Certificates, and it shall not be responsible
for any statement of the Depositor in the Agreement or in any document
issued in connection with the sale of the Certificates or in the
Certificates other than the Trustee's certificate of authentication.
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SECTION 12.15. PROTECTION OF TITLE.
(a) The Servicer shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such
manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of the Certificateholders and the Trustee
in the Contracts and in the proceeds thereof. The Servicer shall deliver
(or cause to be delivered) to the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Seller, the Depositor 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 SECTION 4.02 seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Trustee at
least 30 days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
(c) The Seller, the Depositor and the Servicer shall give the Trustee
at least 30 days' prior written notice of any relocation of the principal
executive office of Premier Auto Finance, Inc., the Depositor and the
Servicer (in the case of notice provided by the Servicer) if, as a result
of such relocation, the applicable provisions of the UCC would require
filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any
such amendment or new financing statement. The Servicer shall at all times
maintain each office from which it shall service Contracts, and its
principal executive office, within the United States.
(d) The Servicer shall maintain or cause to be maintained accounts and
records as to each Contract accurately and in sufficient detail to permit
(i) the reader thereof to know at any time the status of such Contract,
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 Contract and the amounts from time to time deposited in or
credited to the Collection Account in respect of each Contract.
(e) The Servicer shall maintain or cause to be maintained its computer
systems so that, from and after the time of sale under this Agreement of
the Contracts, the Servicer's master computer records (including any backup
archives) that shall refer to a Contract indicate clearly that such
Contract is owned by the Issuer. Indication of the Issuer's ownership of a
Contract shall be deleted from or modified on the Servicer's computer
systems when, and only when, the related Contract shall have been
paid in full or repurchased or shall have become a Defaulted Contract.
(f) If at any time the Depositor or the Servicer shall propose to
sell, grant a security interest in, or otherwise transfer any interest in
motor vehicle retail installment
- 56 -
<PAGE>
sale contracts to any prospective purchaser, lender or other transferee,
the Servicer shall give or cause to be given to such prospective purchaser,
lender or other transferee computer tapes, records or print-outs (including
any restored from back-up archives) that, if they shall refer in any manner
whatsoever to any Contract, shall indicate clearly that such Contract has
been sold and is owned by the Issuer.
(g) The Servicer shall permit the Trustee and its agents, at any time
during normal business hours, to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Contract.
(h) Upon request, the Servicer shall furnish to the Trustee, within
five Business Days, a list of all Contracts then held as part of the Trust
Estate, together with a reconciliation of such list to the List of
Contracts and to each of the Monthly Reports furnished before such request
indicating removal of Contracts from the Issuer.
(i) The Servicer shall deliver to the Trustee and each Rating Agency
upon the execution and delivery of this Agreement and promptly after the
execution and delivery of each amendment hereto, an Opinion of Counsel
either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been executed and filed that
are necessary fully to preserve and protect the interest of the Trustee and
reciting the details of each filings or referring to prior Opinions of
Counsel in which such details are given, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. SERVICER NOT TO RESIGN. The Servicer shall not resign from
the obligations and duties hereby imposed on it except upon a determination that
the performance of its duties hereunder is no longer permissible under
applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced by an opinion of counsel for the Servicer to such
effect delivered to the Trustee. No such resignation shall become effective
until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with SECTION 8.03.
SECTION 13.02. PROHIBITED TRANSACTIONS WITH RESPECT TO THE ISSUER. Neither
the Servicer nor the Depositor shall:
(a) Provide credit to any Certificateholder for the purpose of
enabling such Certificateholder to purchase Certificates;
(b) Purchase any Certificates in an agency or trustee capacity; or
(c) Except as provided herein, lend any money to the Issuer.
- 57 -
<PAGE>
SECTION 13.03. MAINTENANCE OF OFFICE OR AGENCY. The Trustee shall maintain
an office or agency in [New York, New York] where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee in respect of the Certificates and this Agreement
may be served. On the date hereof the Trustee's office for such purposes is
located at the address set forth in SECTION 13.08. The Trustee will give prompt
written notice to Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 13.04. TERMINATION. This Agreement shall terminate (after
distribution of all Class A Distributable Amounts and Class B Distributable
Amounts due to Certificateholders pursuant to SECTIONS 9.01 and 9.04) on the
Distribution Date on which the Class A Certificate Balance and Class B
Certificate Balance is reduced to zero; PROVIDED, that in no event shall the
trust created hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the Court of St. James, living on the date
hereof, and PROVIDED, FURTHER, that the Servicer's and the Depositor's
representations and warranties and the indemnities by the Seller and Servicer
shall survive termination. Upon such termination, the Trustee shall provide each
Rating Agency written notice of such termination. Additionally, upon such
termination any amounts remaining in the Collection Account after distribution
of all amounts payable to the Certificateholders in respect of Class A
Distributable Amounts and Class B Distributable Amounts and payment of all other
amounts owed to the Certificateholders shall be paid to the Depositor.
SECTION 13.05. ACTS OF CERTIFICATEHOLDERS. (a) Except as otherwise
specifically provided herein, whenever Certificateholder approval,
authorization, direction, notice, consent, waiver or other action is required
hereunder, such approval, authorization, direction, notice, consent, waiver or
other action shall be deemed to have been given or taken on behalf of, and shall
be binding upon, all Certificateholders if agreed to by Certificateholders with
aggregate Fractional Interests representing more than a majority of the Issuer.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such
Certificateholders in person or by an agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee
and, where required, to the Servicer. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Agreement and (subject to SECTION 12.01) conclusive
in favor of the Trustee, the Servicer, the Depositor and the Seller if made
in the manner provided in this SECTION 13.05.
(c) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(d) The ownership of Certificates shall be proved by the Certificate
Register, absent manifest error.
- 58 -
<PAGE>
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be
done by the Trustee, the Servicer or the Depositor in reliance thereon,
whether or not notation of such action is made upon such security.
(f) The Trustee may require such additional proof of any matter
referred to in this SECTION 13.05 as it shall deem necessary.
SECTION 13.06. CALCULATIONS. Except as otherwise provided in this
Agreement, all interest rate and basis point calculations under this Agreement
will be made on the basis of a 360-day year comprised of twelve 30-day months
and will be carried out to at least three decimal places.
SECTION 13.07. AMENDMENT. (a) This Agreement may be amended from time to
time by the Servicer, the Depositor and the Trustee, collectively, with notice
to each Rating Agency, but without the consent of any of the Certificateholders,
to correct manifest error, to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein or
in any other Transaction Document, as the case may be, or to add, modify or
eliminate any other provisions with respect to matters or questions arising
under this Agreement; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel for the Depositor, have a material adverse
effect on the Certificateholders.
(b) This Agreement may also be amended from time to time by the Servicer,
the Depositor and the Trustee, with the consent of Certificateholders with
aggregate Fractional Interests representing more than 50% of the Issuer, 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 Certificateholders; PROVIDED, HOWEVER, that no such amendment or waiver
described above shall (x) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on the Contracts or
distributions which are required to be made on any Certificate, (y) change the
Pass Through Rate on any Certificates which such change adversely affects the
priority of payments of principal or interest made to the Certificateholders,
(z) reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the holders of all Certificates then outstanding (c)
modify the manner of application of collections of payments on the Contracts or
distributions which are required to be made on any Certificate, (d) impair the
right of any Certificateholder to sue to enforce the obligation to make the
distributions which are required to be made on any Certificate, (e) permit the
creation of any lien on Collateral that ranks prior to or on a parity with the
lien on Collateral granted hereunder, (f) adversely affect the manner of
determining outstanding Certificates for voting purposes and PROVIDED, FURTHER,
that no such amendment or consent shall be effective unless each Rating Agency
delivers written confirmation that such amendment or consent will not cause its
then-current rating on any Class of Certificates to be qualified, reduced or
withdrawn.
(c) Promptly after the execution of any amendment or consent pursuant to
this SECTION 13.07, the Trustee shall furnish written notification of the
substance of such amendment or consent, together with a copy thereof, to each
Rating Agency.
- 59 -
<PAGE>
(d) Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder. It shall not be necessary for the consent of
Certificateholders pursuant to SECTION 13.07(b) to approve the particular form
of any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization by Certificateholders of the execution thereof
shall be subject to such reasonable requirements as the Trustees may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement or otherwise.
(f) Upon the execution of any amendment or consent pursuant to this SECTION
13.07, this Agreement shall be modified in accordance therewith, and such
amendment or consent shall form a part of this Agreement for all purposes, and
every Certificateholder theretofore or thereafter issued hereunder shall be
bound thereby.
SECTION 13.08. NOTICES. All communications and notices pursuant hereto to
the Servicer, the Depositor, the Servicer, the Trustee, the Seller, Standard &
Poor's and Moody's shall be in writing and delivered or mailed to it at the
appropriate following address:
If to the Servicer: Premier Auto Finance, Inc.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
If to the Depositor: Dealer Auto Receivables Corp.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
If to the Trustee: [_______________________]
[_______________________]
[_______________________]
Attention: [_________________]
If to the Seller: Premier Auto Finance, L.P.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
If to Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
- 60 -
<PAGE>
If to Standard & Poor's: Standard & Poor's Ratings Services, a
division of The McGraw Hill Company, 25 Broadway
New York, New York 10004
Attention: Asset Backed Securities Surveillance
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder shall
be in writing and delivered or mailed at the address shown in the Certificate
Register.
SECTION 13.09. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 13.10. HEADINGS. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
SECTION 13.11. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Illinois.
SECTION 13.12. NO INSOLVENCY PETITION. The Trustee and the Servicer hereby
covenant and agree that, prior to the date which is one year and one day after
the payment in full of the Certificates, they will not institute against, or
join with any other Person in instituting against the Depositor or the Issuer
any involuntary insolvency proceedings under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or requesting the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official), or for the substantial liquidation of their
respective affairs. This SECTION 13.12 shall survive the termination of this
Agreement.
SECTION 13.13. THIRD PARTY BENEFICIARY. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and the Certificateholders and
their respective successors and permitted assigns. Except as otherwise provided
in this ARTICLE XIII, no other Person shall have any right or obligation
hereunder.
SECTION 13.14. NO ADDITIONAL SECURITIES. Notwithstanding anything to the
contrary contained herein, the Issuer shall not issue any additional
Certificates or issue any other form of securities. Moreover, except as provided
for in SECTION 5.05(c), the Issuer will not purchase, or otherwise obtain any
assets after the Closing Date or reinvest amounts received with respect to the
assets of the Issuer.
SECTION 13.15. NO ADDITIONAL INDEBTEDNESS BY THE DEPOSITOR. The Depositor
hereby covenants that it shall not incur any indebtedness other than
indebtedness necessary to meet its obligations under the Transaction Documents
or any other similar documentation relating to any future grantor trusts in
which the Depositor participates.
- 61 -
<PAGE>
SECTION 13.16. CERTIFICATES NONASSESSABLE AND FULLY PAID. The interests
represented by the Certificates shall be nonassessable for any losses or
expenses of the Issuer or for any reason whatsoever, and, upon authentication
thereof by the Trustee pursuant to SECTION 10.02, each Certificate shall be
deemed fully paid.
[signature pages follow]
- 62 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
DEALER AUTO RECEIVABLES CORP.,
as Depositor
By
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PREMIER AUTO FINANCE, INC., as Servicer
By
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[---------------------------------------]
a(n) ________________ banking corporation,
not in its individual capacity but solely
as Trustee
By
---------------------------------------
Name:
----------------------------------
Title:
- 63 -
<PAGE>
EXHIBIT A-1
[Form of Class A Certificate]
Dealer Auto Receivables Grantor Trust 2000-1
_____% Certificate, Class A
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE 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.
This Class A Certificate does not represent an obligation of or an interest
in Dealer Auto Receivables Corp., Premier Auto Finance, Inc. or any affiliate
thereof, except to the extent set forth in the Agreement.
The principal represented by this Class A Certificate is payable in
installments, as described herein and in the Agreement. Accordingly, the unpaid
Class A Certificate Balance of this Class A Certificate may be less than that
set forth below. Anyone acquiring this Class A Certificate may ascertain the
current unpaid Class A Certificate Balance represented by this certificate by
inquiry of the Trustee.
No. Class A Initial Certificate Principal Balance: $_________
Fractional Interest: ______%
This certifies that ____________________________ is the registered owner of the
undivided Fractional Interest represented by the Class A Initial Certificate
Principal Balance set forth above in Dealer Auto Receivables Grantor Trust
2000-1 (the "TRUST"), which includes among its assets a pool of motor vehicle
retail installment sale contracts (including, without limitation, all security
interests and any and all rights to receive payments which are collected
pursuant thereto on or after the Cutoff Date) (the "CONTRACTS"). The Issuer has
been created pursuant to a Pooling and Servicing Agreement (the "AGREEMENT"),
dated as of _________, 2000, by and among Dealer Auto Receivables Corp., as
depositor (the "DEPOSITOR"), Premier Auto Finance, Inc., as servicer (in such
capacity, the "SERVICER") and _____________, as Trustee of the Trust (in such
capacity, the "TRUSTEE"). This Class A Certificate is one of the Class A
Certificates described in the Agreement and is issued, together with the Class B
Certificates, pursuant and subject to the Agreement. By acceptance of this Class
A Certificate the holder assents to and becomes bound by the Agreement. The
Agreement provides that the holder of a Class A Certificate agrees to report the
income on the Class A Certificate in a manner consistent with the intended
characterization of the Issuer as a grantor trust. To the extent not defined
herein, all capitalized
A-1-1
<PAGE>
terms have the meanings assigned to such terms in the Agreement and all Section
references, unless otherwise specified, are to Sections of the Agreement.
It is contemplated by the Transaction Documents that the proceeds from the
issuance of the Certificates will be used in their entirety by the Depositor to
purchase Contracts.
The Agreement contemplates, subject to its terms, payment on the [_______]
day (or if such day is not a Business Day, the next succeeding Business Day)
(each, a "DISTRIBUTION DATE") of each calendar month commencing _________, 2000,
so long as the Agreement has not been terminated, by check from funds drawn from
the Collection Account to the registered Class A Certificateholder at the
address appearing on the Certificate Register (or by wire transfer if the Class
A Certificateholder delivers written instructions to the Trustee at least ten
days prior to such Distribution Date) as of the last Business Day of the
immediately preceding calendar month (each such month during the term of the
Agreement constituting a "DUE PERIOD"), an amount equal to the Class A
Certificateholder's Fractional Interest of the Class A Principal Distributable
Amount and the Class A Interest Distributable Amount. The final scheduled
Distribution Date of this Certificate is __________, _____.
This Class A Certificate does not represent an obligation of or an interest
in the Depositor, the Servicer or the Trustee and the Trustee in its individual
capacity is not personally liable to the Class A Certificateholder for any
amounts payable under this Class A Certificate or the Agreement, or except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
Reference is hereby made to the further provisions of this Class A
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 authentication hereon shall have been executed by an authorized
officer of the Trustee or an authenticating agent acting on behalf of the
Trustee, by manual signature, this Class A Certificate shall not entitle the
holder hereof to any benefit under the Agreement or be valid for any purpose.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Trustee, on behalf of the Dealer Auto Receivables
Grantor Trust 200__ has caused this Certificate to be duly executed.
DEALER AUTO RECEIVABLES
GRANTOR TRUST 20____
By: [NAME OF TRUSTEE],
By:
Authorized Officer
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
[NAME OF TRUSTEE]
By:
Authorized Officer
or
as Authenticating Agent
for the Trustee
By:
Authorized Officer
A-1-3
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_____________________________________________ the within ____% Certificate,
Class A for Dealer Auto Receivables Grantor Trust 2000-1, and does hereby
irrevocably constitute and appoint _____________________________________
Attorney to transfer the said certificate on the Certificate Register maintained
by the Trustee, with full power of substitution in the premises.
--------------------------------
Signature
Signature Guaranteed:
*
--------------------------------
*NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a commercial bank or trust company or a member firm of a national
securities exchange.
A-1-4
<PAGE>
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement at any time by the Servicer, the Depositor, and the Trustee
with the consent of the Certificateholders with Fractional Interests
representing more than 50% of the Trust. Any such consent by the holder of this
Class A Certificate shall be conclusive and binding on such holder and upon all
future holders of this Class A Certificate and of any Class A Certificate issued
upon the transfer hereof or in exchange herefore or in lieu hereof whether or
not notation of such consent is made upon this Class A Certificate. The
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of any of the Certificateholders.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Class A Certificate is registrable in the
Certificate Register of the Certificate Registrar upon surrender of this Class A
Certificate for registration of transfer at the office or agency maintained by
the Trustee in [New York, New York] as previously described, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder thereof or his or her attorney
duly authorized in writing, which signature on such assignment must be
guaranteed by a commercial bank or trust company or a member firm of a national
securities exchange, and thereupon one or more new Class A Certificates
evidencing the same aggregate Fractional Interest will be issued to the
designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein set
forth, Class A Certificates are exchangeable for new Class A Certificates of
authorized denominations evidencing the same aggregate Fractional Interest as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Certificate Registrar
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The Depositor, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Depositor, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Issuer created thereby shall terminate (after distribution of all Class A
Distributable Amounts and Class B Distributable Amounts) on the Distribution
Date on which the Class A Certificate Balance and Class B Certificate Balance is
reduced to zero; PROVIDED, that in no event shall the trust created thereby
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late Ambassador of the United
States to the Court of St. James, living on the date hereof.
A-1-5
<PAGE>
EXHIBIT A-2
[Form of Class B Certificate]
Dealer Auto Receivables Grantor Trust 2000-1
_____% Certificate, Class B
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE 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.
This Class B Certificate is subordinated in right of payment to the Class A
Certificates as described in the Agreement (as described herein).
This Class B Certificate does not represent an obligation of or an interest
in Dealer Auto Receivables Corp., Premier Auto Finance, Inc. or any affiliate
thereof, except to the extent set forth in the Agreement.
The principal represented by this Class B Certificate is payable in
installments, as described herein and in the Agreement. Accordingly, the unpaid
Class B Certificate Balance of this Class B Certificate may be less than that
set forth below. Anyone acquiring this Class B Certificate may ascertain the
current unpaid Class B Certificate Balance represented by this certificate by
inquiry of the Trustee.
No. Class B Initial Certificate Principal Balance: $_________
Fractional Interest: ______%
This certifies that ____________________________ is the registered owner of the
undivided Fractional Interest represented by the Class B Initial Certificate
Principal Balance set forth above in Dealer Auto Receivables Grantor Trust
2000-1 (the "TRUST"), which includes among its assets a pool of motor vehicle
retail installment sale contracts (including, without limitation, all security
interests and any and all rights to receive payments which are collected
pursuant thereto on or after the Cutoff Date) (the "CONTRACTS"). The Issuer has
been created pursuant to a Pooling and Servicing Agreement (the "AGREEMENT"),
dated as of _________, 2000, by and among Dealer Auto Receivables Corp., as
depositor (the "DEPOSITOR"), Premier Auto Finance, Inc., as servicer (in such
capacity, the "SERVICER") and _____________, as Trustee of the Trust (in such
capacity, the "TRUSTEE"). This Class B Certificate is one of the Class B
Certificates described in the Agreement and is issued, together with the Class A
Certificates, pursuant and subject to the Agreement. By acceptance of this Class
B Certificate the holder assents to and becomes bound by the Agreement. The
Agreement provides that the holder of a Class B Certificate agrees to
A-2-1
<PAGE>
report the income on the Class B Certificate in a manner consistent with the
intended characterization of the Issuer as a grantor trust. To the extent not
defined herein, all capitalized terms have the meanings assigned to such terms
in the Agreement and all Section references, unless otherwise specified, are to
Sections of the Agreement.
It is contemplated by the Transaction Documents that the proceeds from the
issuance of the Certificates will be used in their entirety by the Depositor to
purchase Contracts.
The Agreement contemplates, subject to its terms, payment on the [_______]
day (or if such day is not a Business Day, the next succeeding Business Day)
(each, a "DISTRIBUTION DATE") of each calendar month commencing _________, 2000,
so long as the Agreement has not been terminated, by check from funds drawn from
the Collection Account to the registered Class B Certificateholder at the
address appearing on the Certificate Register (or by wire transfer if the Class
B Certificateholder delivers written instructions to the Trustee at least ten
days prior to such Distribution Date) as of the last Business Day of the
immediately preceding calendar month (each such month during the term of the
Agreement constituting a "DUE PERIOD"), an amount equal to the Class B
Certificateholder's Fractional Interest of the Class B Principal Distributable
Amount and the Class B Interest Distributable Amount. The final scheduled
Distribution Date of this Certificate is __________, _____.
Pursuant to the Agreement distributions of interest and principal on the
Class B Certificates will be subordinated in priority of payment to interest and
principal due on the Class A Certificates in the event of defaults and
delinquencies on the Contracts. The Class B Certificateholders will not receive
any distributions of interest on any Distribution Date until the full amount of
interest on the Class A Certificates on such Distribution Date has been set
aside to pay interest on the Class A Certificates, and the Class B
Certificateholders will not receive any distributions of principal on any
Distribution Date until the full amount of interest on and principal of the
Class A Certificates on such Distribution Date has been set aside as set forth
in the Agreement.
This Class B Certificate does not represent an obligation of or an interest
in the Depositor, the Servicer or the Trustee and the Trustee in its individual
capacity is not personally liable to the Class B Certificateholder for any
amounts payable under this Class B Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
Reference is hereby made to the further provisions of this Class B
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 authentication hereon shall have been executed by an authorized
officer of the Trustee or an authenticating agent acting on behalf of the
Trustee, by manual signature, this Class B Certificate shall not entitle the
holder hereof to any benefit under the Agreement or be valid for any purpose.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Trustee, on behalf of the Dealer Auto Receivables
Grantor Trust 20__ has canceled this Certificate to be duly executed.
DEALER AUTO RECEIVABLES
GRANTOR TRUST 20____
By: [NAME OF TRUSTEE],
By:
Authorized Officer
This is one of the Class B Certificates referred to in the within-mentioned
Agreement.
[NAME OF TRUSTEE]
By:
Authorized Officer
or
as Authenticating Agent
for the Trustee
By:
Authorized Officer
A-2-3
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_____________________________________________ the within ____% Certificate,
Class B for Dealer Auto Receivables Grantor Trust 2000-1, and does hereby
irrevocably constitute and appoint _____________________________________
Attorney to transfer the said certificate on the Certificate Register maintained
by the Trustee, with full power of substitution in the premises.
--------------------------------
Signature
Signature Guaranteed:
*
--------------------------------
*NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a commercial bank or trust company or a member firm of a national
securities exchange.
A-2-4
<PAGE>
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement at any time by the Servicer, the Depositor, and the Trustee
with the consent of the Certificateholders with Fractional Interests
representing more than 50% of the Trust. Any such consent by the holder of this
Class B Certificate shall be conclusive and binding on such holder and upon all
future holders of this Class B Certificate and of any Class B Certificate issued
upon the transfer hereof or in exchange herefore or in lieu hereof whether or
not notation of such consent is made upon this Class B Certificate. The
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of any of the Certificateholders.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Class B Certificate is registrable in the
Certificate Register of the Certificate Registrar upon surrender of this Class B
Certificate for registration of transfer at the office or agency maintained by
the Trustee in [New York, New York] as previously described, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder thereof or his or her attorney
duly authorized in writing, which signature on such assignment must be
guaranteed by a commercial bank or trust company or a member firm of a national
securities exchange, and thereupon one or more new Class B Certificates
evidencing the same aggregate Fractional Interest will be issued to the
designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein set
forth, Class B Certificates are exchangeable for new Class B Certificates of
authorized denominations evidencing the same aggregate Fractional Interest as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Certificate Registrar
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The Depositor, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Depositor, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Issuer created thereby shall terminate (after distribution of all Class B
Distributable Amounts and Class B Distributable Amounts) on the Distribution
Date on which the Class B Certificate Balance and Class B Certificate Balance is
reduced to zero; PROVIDED, that in no event shall the trust created thereby
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late Ambassador of the United
States to the Court of St. James, living on the date hereof.
A-2-5
<PAGE>
EXHIBIT B
[Form of Assignment]
In accordance with the Pooling and Servicing Agreement (the "POOLING AND
SERVICING AGREEMENT") dated as of [ ], 2000 made by and between the
undersigned, as Depositor ("DEPOSITOR"), Premier Auto Finance, Inc., as
Servicer and [ ], as Trustee, the undersigned does hereby sell, transfer,
convey and assign, set over and otherwise convey to Dealer Auto Receivables
Grantor Trust 2000-1 (the "TRUST") (i) all the right, title and interest of
the Depositor in and to the Contracts listed on the List of Contracts in
effect on the Closing Date (including, without limitation, all security
interests and all rights to receive scheduled payments and prepayments which
are collected pursuant thereto on or after the Cutoff Date, including any
liquidation proceeds therefrom, but excluding any rights to receive scheduled
payments due on or after, but received prior to, the Cutoff Date), (ii) all
security interests in each Financed Vehicle, (iii) all rights of the
Depositor to proceeds from any claims on theft, physical damage, credit life
or disability insurance or other individual insurance policy relating to any
such Contract, an Obligor or a Financed Vehicle securing such Contract, (iv)
all documents contained in the related Contract Files, (v) all rights (but
not the obligations) of the Depositor against any originating dealer or third
party (i.e. the originators of the Contracts) under any agreements between
the Seller and such originating dealers or other third party, (vi) all rights
of the Depositor in the Lockbox, the Lockbox Account and related Lockbox
Agreement to the extent they relate to such Contracts, (viii) any rebates of
premiums and other amounts relating to insurance policies, extended service
contracts, other repair agreements or any other items financed under such
Contract, (vii) all rights (but not the obligations) of the Depositor under
the Transfer and Sale Agreement, including but not limited to the Depositor's
rights under ARTICLE V thereof, (ix) all rights of Depositor under the
Performance Guarantee, (x) the remittances, deposits and payments made into
the Trust Accounts from time to time and amounts in the Trust Accounts (other
than the Reserve Fund) from time to time (and any investments of such
amounts), and (xi) all proceeds and products of the foregoing.
This Assignment is made pursuant to and in reliance upon the representation
and warranties on the part of the undersigned contained in ARTICLE III of the
Pooling and Servicing Agreement and no others.
Capitalized terms used herein but not otherwise defined shall have the
meanings assigned to such terms in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this _____ day of [___________], 2000.
DEALER AUTO RECEIVABLES CORP.
By:
-----------------------------------------------
Printed Name:
Title:
B-1
<PAGE>
EXHIBIT C-1
[Form of Closing Certificate of Depositor]
DEALER AUTO RECEIVABLES CORP.
PRESIDENT'S CERTIFICATE
[Reserved]
<PAGE>
EXHIBIT C-2
[Form of Closing Certificate of Servicer/Seller]
PREMIER AUTO FINANCE, INC.
PRESIDENT'S CERTIFICATE
[Reserved]
C-2-1
<PAGE>
EXHIBIT D-1
[Form of Opinion of Counsel for Depositor
Regarding General Corporate Matters
(Including Perfection Opinion)]
[Reserved]
D-1-1
<PAGE>
EXHIBIT D-2
[Form of Opinion of Counsel for Trust
Depositor Regarding the "TRUE SALE" Nature
of the Transaction]
[Reserved]
D-2-1
<PAGE>
EXHIBIT D-3
[Form of Opinion of Counsel for Trust
Depositor Regarding Non-consolidation]
[Reserved]
D-3-1
<PAGE>
EXHIBIT E
[Form of Reserve Account Agreement]
This Reserve Fund Agreement is dated as of __________, 2000 by and among
Dealer Auto Receivables Corp. (the "DEPOSITOR"), _________________, as Reserve
Agent for the benefit of the Trustee and the Issuer (as defined below) (together
with its permitted successors hereunder, the "RESERVE AGENT"), and
_____________, not in its individual capacity but as Trustee (the "TRUSTEE") of
Dealer Auto Receivables Grantor Trust 2000-1 (the "TRUST").
The Depositor, a wholly owned subsidiary of Premier Auto Finance, Inc.
("PREMIER") has purchased from Premier Auto Finance, L.P. (the "SELLER") a pool
of installment sale contracts and certain related assets and property rights
(the "CONTRACT ASSETS") pursuant to a Transfer and Sale Agreement dated as of
________, 2000, and has concurrently established the Issuer by transferring and
conveying the Contract Assets and certain other rights and assets to the Issuer
pursuant to a Pooling and Servicing Agreement (the "POOLING AND SERVICING
AGREEMENT") dated as of ________, 2000 by and among the Depositor, Premier, as
Servicer and the Trustee. Upon the establishment of the Issuer in accordance
with the terms of the Pooling and Servicing Agreement, the Trustee will issue
to, or upon the order of, the Depositor, certificates (the "CERTIFICATES")
representing undivided fractional interests in the Trust. In order to facilitate
the sale of the Certificates by the Depositor to investor(s), as well as the
Depositor's simultaneous purchase of the Contract Assets from the Seller, and in
consideration of its ongoing right to receive the Excess Amounts, the Depositor
is entering into this Agreement relating to the establishment and maintenance of
a Reserve Fund for the benefit of the Certificateholders. In connection
therewith, the Depositor is transferring to the Reserve Agent, concurrently with
the execution and delivery of this Agreement by the parties hereto, the Reserve
Fund Initial Deposit for deposit into the Reserve Fund established hereunder.
SECTION 1. DEFINITIONS. All capitalized terms used herein (including in the
preamble above) and not otherwise defined herein shall have the meanings
assigned to them in the Pooling and Servicing Agreement and, in addition, the
following terms shall have the following meanings:
"ELIGIBLE INVESTMENTS" has the meaning given such term in the Pooling and
Servicing Agreement, but with references, respectively, to the Trustee and the
Issuer in the definition thereof contained therein being deemed, for purposes of
this Agreement, to be references to, respectively, the Reserve Agent and the
Reserve Fund.
"EXCESS AMOUNTS" means as of any Distribution Date those Reserve Fund
Deposits in the Reserve Fund in excess of the Reserve Fund Requisite Amount
(after giving effect to any additions to and withdrawals from the Reserve Fund
on such Distribution Date).
"RESERVE FUND" shall have the meaning ascribed to it in SECTION 3(a).
"RESERVE FUND DEPOSITS" shall mean all moneys deposited in the Reserve Fund
from time to time including, but not limited to, the Reserve Fund Initial
Deposit and the Reserve Fund Additional Deposits as well as any monies deposited
therein pursuant to SECTION 9.04(b)(vii) of
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<PAGE>
the Pooling and Servicing Agreement; all investments and reinvestments thereof;
earnings thereon; and proceeds of the foregoing, whether now or hereafter
existing.
"RESERVE FUND ELIGIBLE INVESTMENTS" means Eligible Investments acquired by
the Reserve Agent in its name and in the capacity of Reserve Agent hereunder,
which are held by the Reserve Agent in the Reserve Fund and with respect to
which (a) the Reserve Agent has noted the Certificateholder's interest therein
on its books and records, and (b) the Reserve Agent has purchased such
investments for value without notice of any adverse claim thereto (and, if such
investments are securities or other financial assets or interests therein,
within the meaning of Section 8-102 of the UCC as enacted in Illinois, without
acting in collusion with a securities intermediary in violating such securities
intermediary's obligations to entitlement holders in such assets, under Section
8-504 of such UCC, to maintain a sufficient quantity of such assets in favor of
such entitlement holders), and (c) either (i) such investments are in the
possession of the Reserve Agent, or (ii) such investments, (A) if certificated
securities and in bearer form, have been delivered to the Reserve Agent, or in
registered form, have been delivered to the Reserve Agent and either registered
by the issuer in the name of the Reserve Agent or endorsed by effective
endorsement to the Reserve Agent or in blank; (B) if uncertificated securities,
the ownership of which has been registered to the Reserve Agent on the books of
the issuer thereof (or another person, other than a securities intermediary,
either becomes the registered owner of the uncertified security on behalf of the
Reserve Agent or, having previously become the registered owner, acknowledges
that it holds for the Reserve Agent); or (C) if securities entitlements (within
the meaning of Section 8-102 of the UCC as enacted in Illinois) representing
interests in securities or other financial assets (or interests therein) held by
a securities intermediary (within the meaning of said Section 8-102), a
securities intermediary indicates by book entry that a security or other
financial asset has been credited to the Reserve Agent's securities account with
such securities intermediary. Any such Reserve Fund Eligible Investment may be
purchased by or through the Reserve Agent or any of its affiliates.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor
represents and warrants that as of the Closing Date:
(a) ORGANIZATION AND GOOD STANDING. The Depositor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Illinois and has the corporate power to own its assets and to
transact the business in which it is currently engaged. The Depositor is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial
or other) of the Depositor.
(b) AUTHORIZATION; BINDING OBLIGATIONS. The Depositor has the power
and authority to make, execute, deliver and perform this Agreement and all
of the transactions contemplated under this Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement. This Agreement constitutes the legal, valid
and binding obligation of the Depositor enforceable in accordance with its
terms, except as enforcement of such terms may be limited by
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<PAGE>
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable remedies.
(c) NO CONSENT REQUIRED. The Depositor is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
(d) NO VIOLATIONS. The execution, delivery and performance of this
Agreement by the Depositor will not violate any provision of any existing
law or regulation or any order or decree of any court or the Articles of
Incorporation or Bylaws of the Depositor, or constitute a material breach
of any mortgage, indenture, contract or other agreement to which the
Depositor is a party or by which the Depositor or any of the Depositor's
properties may be bound.
(e) LITIGATION. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Depositor, threatened against the Depositor or any of
its properties or with respect to this Agreement which, if adversely
determined, would have a material adverse effect on the transactions
contemplated by this Agreement.
(f) PLACE OF BUSINESS; NO CHANGES. The Depositor's sole "place of
business" (within the meaning of Section 9-103 of the Uniform Commercial
Code) is at the location set forth in Section 6(c) below. The Depositor has
not changed its name, whether by amendment of its Articles of
Incorporation, by reorganization or otherwise, and has not changed the
location of its place of business, within the four months preceding the
Closing Date.
SECTION 3. ESTABLISHMENT OF RESERVE FUND AND PLEDGE OF RESERVE FUND
DEPOSITS. (a) ESTABLISHMENT OF RESERVE FUND. On or prior to the Closing Date,
the Depositor shall direct the Reserve Agent to establish, and the Reserve Agent
shall establish, in its name and at its office, a segregated trust account
referred to herein as the "RESERVE FUND," (which shall be an Eligible Account)
and deposit into the Reserve Fund the Reserve Fund Initial Deposit as and when
received from the Depositor, in immediately Available Amounts. The Reserve Fund
is separate from the Issuer and any amount on deposit therein will not
constitute a part of the property of the Trust. Any amounts held on deposit in
the Reserve Fund and any investment earnings thereon are owned by, and will be
taxable to, the Depositor for federal income tax purposes. The Reserve Fund
shall be maintained by the Reserve Agent at all times separate and apart from
any other account of the Depositor or the Trust. Amounts shall be withdrawn from
the Reserve Fund only in accordance with the provisions of this SECTION 3 and
SECTION 9.05 of the Pooling and Servicing Agreement. No passbook, certificate of
deposit or other similar instrument evidencing the Reserve Fund shall be issued,
and all contracts, receipts and other papers governing or evidencing the Reserve
Fund or any of the Reserve Fund Deposits shall be maintained and held by the
Reserve Agent for the benefit of the Certificateholders. On termination of this
Agreement, as provided in SECTION 3(g), any amount remaining in the Reserve Fund
shall be released to the Depositor.
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<PAGE>
(b) GRANT OF SECURITY INTEREST BY DEPOSITOR. The Depositor hereby pledges,
assigns, hypothecates, transfers and delivers to the Reserve Agent, and hereby
grants to the Reserve Agent, for the benefit of the Certificateholders, a
security interest in all of the Depositor's right, title, interest and power,
free and clear of any other interest, in, to and with respect to, the Reserve
Fund, the Reserve Fund Deposits and the Reserve Fund Eligible Investments and
the proceeds thereof, up to the Reserve Fund Requisite Amount. Such grant is
made in trust, to secure the obligation and agreement of the Depositor to make
the payments provided for in SECTION 3(e) below as contemplated in SECTION 9.04
of the Pooling and Servicing Agreement from time to time, subject to the limit
of the amount available in the Reserve Fund.
The Reserve Agent acknowledges and accepts the grant of the security
interest in the Reserve Fund, the Reserve Fund Deposits and the Reserve Fund
Eligible Investments and the proceeds thereof under this SECTION 3(b), for the
benefit of the Certificateholders in accordance with the terms hereof.
The Depositor shall maintain, at all times during the term of this
Agreement, the lien on, or security interest in, the Reserve Fund, the Reserve
Fund Deposits and the Reserve Fund Eligible Investments and the proceeds
thereof, as a valid and perfected security interest of first priority under
applicable law (including without limitation the Uniform Commercial Code) in
order to secure the full and timely performance of the obligations of the
Depositor pursuant to this Agreement. Amounts representing Excess Amounts
properly paid to the Depositor pursuant to SECTION 3(c) below, and amounts
properly withdrawn by the Reserve Agent and paid to the Depositor pursuant to
SECTION 3(f), shall be deemed released from the provisions of this SECTION 3(b)
and the security interest established by this SECTION 3(b), and the Depositor
shall in no event be required to refund any such distributed amount. The
Depositor agrees and acknowledges that the Reserve Agent is to have "control"
(within the meaning of Section 8-102 of the UCC as enacted in Illinois) of any
of the above-described collateral comprised of "Investment Property" (within the
meaning of Section 9-115 of the UCC as enacted in Illinois) for all purposes of
this Agreement.
(c) APPLICATION OF RESERVE FUND DEPOSITS. On each Distribution Date to the
extent monies are available pursuant to SECTION 9.04(b)(vii) of the Pooling and
Servicing Agreement, the Trustee shall pay the entire amount of such monies to
the Reserve Agent. The Reserve Agent shall deposit such amount into the Reserve
Fund; PROVIDED, HOWEVER, that on the Distribution Date, if any, on which Reserve
Fund Deposits would cause the amount held in the Reserve Fund to exceed the
Reserve Fund Requisite Amount (after giving effect to all withdrawals from the
Reserve Fund on such Date), the Reserve Agent shall deposit into the Reserve
Fund only that amount necessary to cause the amount held in the Reserve Fund to
equal the Reserve Fund Requisite Amount (after giving effect to all withdrawals
from the Reserve Fund on such Date); any excess monies shall be paid by the
Reserve Agent to the Depositor ("EXCESS AMOUNTS").
(d) INVESTMENT OF RESERVE FUND DEPOSITS. The Reserve Agent shall at the
written direction of the Servicer invest the funds in the Reserve Fund in
Reserve Fund Eligible Investments. Funds in the Reserve Fund shall be invested
in investments that mature on or before the Business Day prior to each
Distribution Date. Once such funds are invested, the Reserve Agent shall not
change the investment of such funds prior to maturity. Upon any such investment,
the Reserve Agent shall (i) consistent with the definition of Reserve Fund
Eligible Investment herein, make an appropriate notation of the
Certificateholders' security interest in such Reserve Fund Eligible
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<PAGE>
Investment on the Reserve Agent's records, by book entry or otherwise, and (ii)
send the Trustee a written confirmation of the Certificateholders' security
interest in such Reserve Fund Eligible Investment. All income and gain realized
from any such investments as well as any interest earned on Reserve Fund
Deposits shall be deposited and retained in the Reserve Fund (subject to SECTION
3(f) below). Losses, if any, realized on amounts in the Reserve Fund invested
pursuant to this paragraph shall first be credited against undistributed
investment earnings on amounts in the Reserve Fund invested pursuant to this
paragraph, and shall thereafter be deemed to reduce the amount on deposit in the
Reserve Fund. The Depositor and the Reserve Agent shall not be liable for the
amount of any loss incurred in respect of any investment, or lack of investment,
of funds held in the Reserve Fund. All income or loss on funds held in the
Reserve Fund shall be taxable to the Depositor.
(e) PAYMENT OF SHORTFALL. If the Monthly Report delivered pursuant to
SECTION 7.01 of the Pooling and Servicing Agreement indicates a Shortfall, on
the instruction of the Trustee pursuant to SECTION 9.05 of the Pooling and
Servicing Agreement, the Reserve Agent, subject to the limit of the amount
available in the Reserve Fund, shall transfer the amount of the Shortfall from
the Reserve Fund Deposits in accordance with SECTION 9.04 of the Pooling and
Servicing Agreement. The Depositor hereby agrees and authorizes that such
transfer is to be made as described above.
(f) RELEASE OF THE RESERVE FUND DEPOSITS. If on any Distribution Date, the
amount of the Reserve Fund Deposits exceeds the Reserve Fund Requisite Amount
immediately following the payment to Certificateholders on such Distribution
Date, the Reserve Agent shall withdraw the amount of such excess from the
Reserve Fund and distribute such amount to the Depositor.
(g) TERMINATION. This Agreement shall terminate (after distribution of any
Reserve Fund Deposits remaining in the Reserve Fund pursuant to the following
sentence) on the termination of the Pooling and Servicing Agreement in
accordance with SECTION 13.04 thereof. On the final Distribution Date, any
Reserve Fund Deposits remaining in the Reserve Fund, after payment of any
amounts into the Collection Account pursuant to SECTION 3(e) shall be
distributed to the Depositor.
(h) NATURE OF OBLIGATIONS. The obligations of the Depositor to make, or
cause or permit to be made, the payments in respect of Shortfalls provided for
in SECTION 3(e) above shall be unconditional, irrevocable and shall not
terminate upon, or otherwise be affected by, a Service Transfer pursuant to
ARTICLE VIII of the Pooling and Servicing Agreement.
SECTION 4. APPOINTMENT OF RESERVE AGENT. (a) Subject to the terms and
conditions herein, the Trustee on behalf of the Certificateholders hereby
appoints the Reserve Agent and the Reserve Agent hereby accepts such
appointment, as its agent to maintain, and to act on the Certificateholders'
behalf with respect to, the Reserve Fund, moneys deposited therein, and the
Reserve Fund Eligible Investments and proceeds thereof, and the Reserve Agent in
accepting such appointment affirms that it is not acting as an agent for Premier
or the Depositor for such purposes.
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<PAGE>
(b) The Reserve Agent shall maintain records that accurately reflect the
funds on deposit in the Reserve Fund. On each Determination Date, the Reserve
Agent shall advise the Servicer as to the amount of funds on deposit in the
Reserve Fund.
(c) For its services under this Agreement, the Reserve Agent shall be
entitled to a fee on each Distribution Date, payable by the Trustee from the
Trustee Fee.
(d) The Reserve Agent may at any time resign from its obligations and
duties under this Agreement by giving written notice thereof to the Trustee with
a copy to the Depositor and the Servicer. Upon receiving such notice of
resignation, the Trustee shall promptly appoint a successor Reserve Agent by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the successor Reserve Agent and one copy to each of the Depositor
and Servicer. Notwithstanding anything in this SECTION 4 to the contrary, in no
event shall a Reserve Agent resignation be effective until a replacement Reserve
Agent shall be in place. If no successor Reserve Agent shall have been so
appointed and shall have accepted such appointment within 30 days after the
giving of such notice of resignation, the resigning Reserve Agent may petition
any court of competent jurisdiction for the appointment of a successor Reserve
Agent.
A replacement Reserve Agent shall meet the eligibility requirements for a
trustee described in SECTION 12.07 of the Pooling and Servicing Agreement.
If at any time the Reserve Agent shall cease to be an institution which
meets the conditions provided in the provisions of SECTION 12.07 of the Pooling
and Servicing Agreement and shall fail to resign after written request therefor
by the Trustee, or if at any time the Reserve Agent shall be legally unable to
act, or shall be adjudged a bankrupt or insolvent, or a receiver of the Reserve
Agent or of its property shall be appointed, or any public officer shall take
charge or control of the Reserve Agent or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then the Trustee may
remove the Reserve Agent. If the Trustee shall have removed the Reserve Agent
under the authority of the immediately preceding sentence, the Trustee shall
promptly appoint a successor Reserve Agent by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Reserve Agent so removed,
the Depositor and the Servicer, and one copy to the successor Reserve Agent.
Any resigning or removed Reserve Agent shall be entitled to payment of all
fees earned by it up to the effective date of resignation or removal. All
indemnification obligations of the Servicer and the Seller shall survive such
resignation or removal.
SECTION 5. COVENANTS OF DEPOSITOR. The Depositor covenants and agrees as
follows:
(a) FILING. On or prior to the Closing Date, Depositor shall cause
appropriate UCC financing statement(s) to be filed and from time to time
Depositor shall take and cause to be taken such actions and execute such
documents as are necessary or desirable or as the Reserve Agent may
reasonably request to perfect and protect the Reserve Agent's security
interest in the Reserve Fund Deposits and other collateral against all
other persons, including, without limitation, the filing of financing
statements, amendments thereto and continuation statements, the execution
of transfer instruments and the making of notations on or taking possession
of all records or documents of title.
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<PAGE>
(b) NAME CHANGE OR RELOCATION. (i) During the term of this Agreement,
Depositor shall not change its name, identity or structure or relocate its
place of business or chief executive office without first giving at least
30 days' prior written notice to the Trustee. (ii) If any change in
Depositor's name, identity or structure or other action would make any
financing or continuation statement or notice of ownership interest or lien
filed under this Agreement seriously misleading within the meaning of
applicable provisions of the UCC or any title statute, Depositor, no later
than five days after the effective date of such change, shall file such
amendments as may be required to preserve and protect the Reserve Agent's
interests in the Reserve Fund, Reserve Fund Deposits, and the Reserve Fund
Eligible Investments and proceeds thereof. In addition, Depositor shall not
change its place of business (if it has only one place of business) or its
chief executive office (if it has more than one place of business) (within
the meaning of Article 9 of the UCC) from the location specified in SECTION
6(c) below unless it has first taken such action as is advisable or
necessary to preserve and protect the Reserve Agent's interest in the
Reserve Fund, the Reserve Fund Deposits, and the Reserve Fund Eligible
Investments. Promptly after taking any of the foregoing actions, Depositor
shall deliver to the Reserve Agent and Trustee an opinion of counsel
stating that, in the opinion of such counsel, all financing statements or
amendments necessary to preserve and protect the interests of the Reserve
Agent in the Reserve Fund, the Reserve Fund Deposits and Reserve Fund
Eligible Investments have been filed, and reciting the details of such
filing.
(c) CHIEF EXECUTIVE OFFICE. During the term of this Agreement,
Depositor will maintain its chief executive office in one of the States of
the United States, except Louisiana, Tennessee, Colorado, Kansas, New
Mexico, Oklahoma, Utah or Wyoming.
(d) COSTS AND EXPENSES. Depositor agrees to pay all reasonable costs
and disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of the Reserve Agent's right,
title and interest in and to the Reserve Fund, the Reserve Fund Deposits,
and the Reserve Fund Eligible Investments.
SECTION 6. MISCELLANEOUS. (a) AMENDMENT. (i) This Agreement may be amended
from time to time by the Reserve Agent, the Depositor and the Trustee,
collectively, with notice to each Rating Agency, but without the consent of any
of the Certificateholders, to correct manifest error, to cure any ambiguity, to
correct or supplement any provisions herein which may be inconsistent with any
other provisions herein or in any other Transaction Document, as the case may
be, or to add any other provisions with respect to matters or questions arising
under this Agreement which shall not be inconsistent with the provisions of this
Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an
Opinion of Counsel for the Depositor, have a material adverse effect on the
Certificateholders.
(ii) This Agreement may also be amended from time to time by the Reserve
Agent, the Depositor and the Trustee, with the consent of Certificateholders
with aggregate Fractional Interests representing more than 50% of the Trust, 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 Certificateholders; PROVIDED, HOWEVER, that no such amendment or waiver
described above shall (A) reduce in any manner the amount of, or delay the
timing of, distributions which are required to be made on any Certificate or (B)
reduce the aforesaid
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<PAGE>
percentage required to consent to any such amendment, without the consent of the
holders of all Certificates then outstanding and PROVIDED, FURTHER, that no such
amendment or consent shall be effective unless each Rating Agency delivers
written confirmation that such amendment or consent will not cause its
then-current rating on any Class of Certificates to be qualified, reduced or
withdrawn.
(b) NOTICES. All communications and notices pursuant hereto to the
Depositor, the Reserve Agent and the Trustee shall be in writing and delivered
or mailed to it at the appropriate following address:
If to the Servicer: Premier Auto Finance, Inc.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
If to the Depositor: Dealer Auto Receivables Corp.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
If to the Trustee: [_______________________]
[_______________________]
[_______________________]
Attention: [___________________]
If to the Reserve Agent: [_______________________]
[_______________________]
[_______________________]
Attention: [___________________]
If to the Seller: Premier Auto Finance, L.P.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
If to Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
If to Standard & Poor's: Standard & Poor's Ratings Services, a
division of The McGraw Hill Company,
25 Broadway
New York, New York 10004
Attention: Asset Backed Securities Surveillance
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
E-8
<PAGE>
All communications and notices pursuant hereto to a Certificateholder shall
be in writing and delivered or mailed at the address shown in the Certificate
Register.
(d) MERGER AND INTEGRATION. Except as specifically stated otherwise herein,
this Agreement, together with the Pooling and Servicing Agreement, sets forth
the entire understanding of the parties relating to the subject matter hereof,
and all prior understandings, written or oral, are superseded by this Agreement
together with the Pooling and Servicing Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
(e) BENEFIT OF THE AGREEMENT. The Agreement shall be binding upon the
parties hereto and their permitted successors and shall be for the direct
benefit of each present and future Certificateholder without any further action
on the part of any such Certificateholder.
(f) NONPETITION COVENANT. Notwithstanding any prior termination of this
Agreement, each of the parties hereto agrees that it shall not, prior to one
year and one day after the Final Scheduled Distribution Date, acquiesce,
petition or otherwise invoke or cause the Depositor to invoke the process of the
United States of America, any State or other political subdivision thereof or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government for the purpose of
commencing or sustaining a case by or against the Depositor or the Issuer under
a Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Depositor or the Issuer or all or any part of its
property or assets or ordering the winding up or liquidation of the affairs of
the Depositor or the Trust. The parties agree that damages will be an inadequate
remedy for breach of this covenant and that this covenant may be specifically
enforced.
(g) HEADINGS. The headings herein are for purposes of reference only and
shall not otherwise affect the meaning or interpretation of any provision
hereof.
(h) GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Illinois.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
[signature page follows]
E-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
_______________________, as Trustee
By
-------------------------------------------
Printed Name:
-------------------------------
Title:
---------------------------------------
DEALER AUTO RECEIVABLES CORP.
By
-------------------------------------------
Printed Name:
-------------------------------
Title:
---------------------------------------
_______________________, as Reserve Agent
By
-------------------------------------------
Printed Name:
-------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT F
[Form of Certificate of Servicing Officer]
The undersigned certifies that s/he is a ___________________ of Premier
Auto Finance, Inc., a Delaware corporation (the "SERVICER"), and that as such is
duly authorized to execute and deliver this certificate on behalf of the
Servicer pursuant to SECTION 7.02 of the Pooling and Servicing Agreement (the
"AGREEMENT") dated as of _______ [ ], 2000 by and among Dealer Auto Receivables
Corp., as Depositor, the Servicer and ___________, as Trustee of Dealer Auto
Receivables Grantor Trust 2000-1 (all capitalized terms used herein without
definition having the respective meanings specified in the Agreement), and
further certifies that:
1. The Monthly Report for the period from ____________ to ___________
attached to this certificate is complete and accurate in accordance with
the requirements of SECTIONS 7.01 and 7.02 of the Agreement; and
2. As of the date hereof, no Servicer Default or event that with
notice or lapse of time or both would become a Servicer Default has
occurred.
In Witness Whereof, I have affixed hereunto my signature this ______ day of
_____________, 20__.
Premier Auto Finance, Inc.
By
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
F-1
<PAGE>
Exhibit G
[Form of Certificate Regarding Repurchased Contracts]
Premier Auto Finance, Inc.
Certificate Regarding Repurchased Contracts
The undersigned certifies that he is the [______________] of Premier Auto
Finance, Inc., a Delaware corporation (the "SERVICER"), and that as such is duly
authorized to execute and deliver this certificate on behalf of the Servicer
pursuant to SECTION 9.07 of the Pooling and Servicing Agreement (the
"AGREEMENT") dated as of [______________], 2000 by and among Dealer Auto
Receivables Corp., as Depositor, the Servicer, [______________], as Trustee of
Dealer Auto Receivables Grantor Trust 2000-1 (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement),
and further certifies that:
1. The Contracts on the attached schedule are to be repurchased by the
[Depositor/Seller] on the date hereof pursuant to [SECTION 9.05 or
SECTION 9.07] of the Agreement and [SECTION 5.01 or SECTION 5.02] of
the Transfer and Sale Agreement.
2. Upon deposit of the Repurchase Price for such Contracts, such
Contracts may, pursuant to [SECTION 9.06 or SECTION 9.07] of the
Agreement, be assigned by the Issuer to the Seller.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ______ day of
- -------------.
Premier Auto Finance, Inc.
By:
---------------------------------------
Printed Name:
Title:
G-1
<PAGE>
EXHIBIT H
[List of Contracts]
H-1
<PAGE>
EXHIBIT I
[Form of Monthly Report to Certificateholders]
Dealer Auto Receivables Grantor Trust 2000-1
$[______________] [______]% Dealer Auto Receivables Asset- Backed Certificates
Class A
$[______________] [______]% Dealer Auto Receivables Asset- Backed Certificates
Class B
Monthly Report
For the [ ] Distribution Date
<TABLE>
<S><C>
A. Calculation of Available Amounts
1. Available Principal (as defined in Article I of the Pooling
and Servicing Agreement) $___________
2. Available Interest (as defined in Article I of the Pooling
and Servicing Agreement) $___________
3. Available Amounts (l. plus 2.) $___________
B. Calculation of Class A Principal Distributable Amount
1. Monthly Principal for such Distribution Date multiplied by
the Class A Percentage $___________
2. Class A Principal Carryover Shortfall for such Distribution
Date $___________
3. Class A Principal Distributable Amount (the sum of 1 and 2) $___________
C. Calculation of Class B Principal Distributable Amount
1. Monthly Principal for such Distribution Date multiplied by
the Class B Percentage $___________
2. Class B Principal Carryover Shortfall for such Distribution
Date $___________
3. Class B Principal Distributable Amount (the sum of 1 and 2) $___________
D. Calculation of Class A Interest Distributable Amount
I-1
<PAGE>
1. Class A Pass-Through Rate ___%
2(a). One-twelfth of the Class A Pass-Through Rate times the
Class A Certificate Balance on the immediately preceding
Distribution Date, after giving effect to all payments of
principal to the Class A Certificateholders and such
preceding Distribution Date (or in case of the first
Distribution Date on the Class A Initial Certificate
Balance) based on a 360-day year of 12 months of 30 days
each. $___________
2(b). Class A Interest Carryover Shortfall $___________
3. for such Distribution Date Class A Interest Distributable
Amount (sum of 2(a) and 2(b)) $___________
E. Calculation of Class B Interest Distributable Amount
1. Class B Pass-Through Rate ___%
2(a). One-twelfth of the Class B Pass- Through Rate times the
Class B Certificate Balance on the immediately preceding
Distribution Date, after giving effect to all payments of
principal to the Class B Certificateholders and such
preceding Distribution Date (or in case of the first
Distribution Date on the Class B Initial Certificate
Balance) based on a 360-day year of 12 months of 30 days
each. $___________
2(b). Class B Interest Carryover Shortfall for such Distribution
Date $___________
3. Class B Interest Distributable Amount (sum of 2(a) and
2(b)) $___________
F. Calculation of Class A Distributable Amount (sum of B.4 and D.3) $___________
G. Calculation of Class B Distributable Amount (sum of C.4 and E.3) $___________
H. Fees
I-2
<PAGE>
1. The Monthly Servicing Fee for such Distribution Date (1/12
of the product of 1% and the Principal Balance of the
Contracts as of the beginning of the related Due Period) $___________
2. Late Payment Penalty Fees for such Distribution Date $___________
3. Extension Fees for such Distribution Date $___________
4. Trustee Fee for such Distribution Date excluding expense
component [___] of the product of .[ ]% and the Principal
Balance of the Contracts as of the beginning of the related
Due Period $___________
I. Calculation of the Available Reserve Monies for such Distribution
Date $___________
1. The amount of funds deposited into the Collection Account
pursuant to SECTION 5.05(b) of the Pooling and Servicing
Agreement with respect to the related Due Period $___________
a. All amounts received by the Trustee or the
Servicer with respect to principal and interest on the
Contracts, as well as Late Payment Penalty Fees and
Extension Fees for the related Due Period $___________
b. All Net Liquidation Proceeds $___________
c. The aggregate of the Repurchase Prices for
Contracts required to be repurchased by the Depositor as
described in SECTION 9.06 of the Pooling and Servicing
Agreement $___________
d. The aggregate of the Repurchase Prices for
Contracts required to be repurchased by the Servicer as
described in SECTION 5.06(f) of the Pooling and
Servicing Agreement $___________
</TABLE>
I-3
<PAGE>
<TABLE>
<S><C>
e. All Advances made by Servicer pursuant to
SECTION 9.03 of the Pooling and Servicing Agreement $___________
f. All amounts paid by the Seller in connection
with an optional repurchase of the Contracts described
in SECTION 9.07 of the Pooling and Servicing Agreement $___________
g. All amounts received in respect of interest,
dividends, gains, income and earnings on investments of
funds in the Trust Accounts as contemplated in SECTION
5.05 of the Pooling and Servicing Agreement $___________
h. Total amount of funds deposited into the
Collection Account pursuant to SECTION 5.05 (the sum of
a. through f.) $___________
2. The amount of funds permitted to be withdrawn from the
Collection Account pursuant to clauses (i) through (iii) of
SECTION 9.04(b) of the Pooling and Servicing Agreement with
respect to the related Due Period
a. Amounts to be paid to the Servicer as the
Reimbursement Amount in accordance with SECTION
9.04(b)(i) of the Pooling and Servicing Agreement $___________
b. Amounts to be paid to the Servicer in respect
to the Servicing Fee for the related Due Period $___________
c. Amounts to be paid to the Trustee in respect
of the Trustee Fee for the related Due Period $___________
d. Total amount of funds permitted to be
withdrawn from the Collection Account pursuant to
clauses (i) through (iii) of SECTION 9.04(b) of the
Pooling and Servicing Agreement with respect to the
related Due Period (sum of a. through c.) $___________
I-4
<PAGE>
3. The Available Interest (not including amounts from Reserve
Fund Account) for such Distribution Date available to pay
the Class A Certificate Interest Distributable Amount and
the Class B Certificate Interest Distributable Amount $___________
4. Available Interest and Available Principal (not including
amounts from Reserve Fund Account) for such Distribution
Date available to pay the Class A Certificate Principal
Distributable Amount and the Class B Certificate Principal
Distributable Amount $___________
J. 1. The shortfall of Available Interest for such Distribution
Date to pay the Class A Certificate Interest Distributable
Amount and the Class B Certificate Interest Distributable
Amount $___________
2. The shortfall of Available Principal for such Distribution
Date to pay the Certificate Principal Distributable Amount
(the Available Principal for such Distribution Date minus the
Certificate Principal Distributable Amounts as set forth in
B and C.) $___________
K. The amount to be withdrawn from the Reserve Fund on such Distribution
Date to cover the Class A Certificate Interest Distributable Amount $___________
L. The amount to be withdrawn from the Reserve Fund on such Distribution
Date to cover the Class B Certificate Interest Distributable Amount $___________
M. The amount to be withdrawn from the Reserve Fund on such Distribution
Date to cover the Class A Certificate Principal Distributable Amount $___________
N. The amount to be withdrawn from the Reserve Fund on such Distribution
Date to cover the Class B Certificate Principal Distributable Amount $___________
O. Interest Earnings on the Reserve Fund. $___________
P. The amount on deposit in the Reserve Fund after giving effect to
deposits and withdrawals therefrom on such Distribution Date $___________
Q. The Specified Reserve Fund Amount for such Distribution Date will be
an amount equal to [______________] $___________
R. The Pool Factor
1. The Class A Certificate Factor immediately before such
Distribution Date $___________
2. The Class B Certificate Factor immediately before such
Distribution Date $___________
3. The Class A Certificate Factor immediately after such
Distribution Date $___________
I-5
<PAGE>
4. The Class B Certificate Factor immediately after such
Distribution Date $___________
5. The Class A Pool Factor immediately before such Distribution
Date $___________
6. The Class B Pool Factor immediately before such Distribution
Date $___________
7. The Class A Pool Factor immediately after such Distribution
Date $___________
8. The Class B Pool Factor immediately after such Distribution
Date $___________
S. Delinquent Contracts
1. 31-59 Days #______ $___________
2. 60-89 Days #______ $___________
3. 90 or More Days #______ $___________
T. Defaulted Contracts
1. Total Defaulted Contracts #______ $___________
2. Identity (attach)
3. Liquidation proceeds for the Due Period $___________
4. Liquidation expenses for the Due Period $___________
5. Net Liquidation Proceeds for the Due Period $___________
6. Net Liquidation Losses for the Due Period $___________
U. Advances
1. Unreimbursed Advances prior to such Distribution Date $___________
I-6
<PAGE>
2. Amount paid to Servicer on such Distribution Date to
reimburse Servicer for such unreimbursed Advances $___________
3. Amount of Delinquent Interest for such Distribution Date $___________
4. Amount of new Advances on such Distribution Date (if such
amount is less than the amount of Delinquent Interest,
attach the certificate required by SECTION 8.03 of the
Pooling and Servicing Agreement) $___________
5. Total of unreimbursed Advances after new Advances on such
Distribution Date $___________
V. Repurchased Contracts
1. Number of Contracts to be repurchased by the Seller pursuant
to SECTIONS 9.06 and 9.07 of the Pooling and Servicing
Agreement $___________
2. Principal Amount of such Contracts $___________
3. Related Repurchase Price of such Contracts $___________
W. Contracts
1. Number of Contracts as of beginning of Due Period $___________
2. Principal Balance of Contracts as of beginning of Due
Period $___________
3. The weighted average Contract Rate of the Contracts as of
the beginning of the Due Period $___________
4. The weighted average remaining term to maturity of the
Contracts as of the beginning of the Due Period $___________
5. Number of Contracts as of end of Due Period $___________
6. Principal Balance of Contracts as of end of Due Period $___________
I-7
<PAGE>
7. The weighted average Contract Rate of the Contracts as
of the end of the Due Period $___________
8. The weighted average remaining term to maturity of the
Contracts as of the end of the Due Period $___________
</TABLE>
I-8
<PAGE>
EXHIBIT J
[Seller's Representations and Warranties]
REPRESENTATIONS AND WARRANTIES REGARDING EACH CONTRACT. The Seller
represents and warrants as to each Contract as of the Closing Date that:
(a) LIST OF CONTRACTS. The information set forth in the List of
Contracts is true, complete and correct in all material respects as of the
Cutoff Date.
(b) PAYMENTS. As of the Cutoff Date, the most recent scheduled payment
with respect to any Contract either had been made or was not delinquent for
more than 30 days. To the best of the Seller's knowledge, all payments made
on each Contract were made by or on behalf of the respective Obligor.
(c) NO WAIVERS. As of the Closing Date, the terms of the Contracts
have not been waived, altered or modified in any respect, except by
instruments or documents included in the related Contract File.
(d) BINDING OBLIGATION. Each Contract is a valid and binding payment
obligation of the Obligor thereunder and is enforceable in accordance with
its terms, except as such enforceability may be limited by insolvency,
bankruptcy, moratorium, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally.
(e) NO DEFENSES. No Contract is subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of such Contract or the exercise of any right
thereunder will not render the Contract unenforceable in whole or in part
or subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted or threatened with respect
thereto.
(f) INSURANCE. Each Contract requires the related Obligor to maintain
physical damage insurance (i) in an amount not less than the value of the
Financed Vehicle at the time of origination of the Contract, (ii) naming
the Seller as a loss payee and (iii) insuring against loss and damage due
to fire, theft, transportation, collision and other risks covered by
comprehensive coverage, and all premiums due on such insurance have been
paid in full from the date of the Contract's origination.
(g) ORIGINATION. Each Contract was originated by a retailer of new or
used automobiles or other third party that finances the sale of new or used
motor vehicles in the ordinary course of its business which dealer or third
party had all necessary licenses and permits to originate the Contracts in
the state where such dealer or third party was located, was fully and
properly executed by the parties thereto, and has been purchased by the
Seller in the regular course of its business or directly originated by the
Seller in the ordinary course of its business. To the best of the Seller's
knowledge, each Contract was sold by such dealer or other third party to
the Seller without any fraud on the part of such dealer or third party.
J-1
<PAGE>
(h) LAWFUL ASSIGNMENT. No Contract was originated in or is subject to
the laws of any jurisdiction whose laws would make the sale, transfer and
assignment of the Contract under this Agreement or under the Pooling and
Servicing Agreement unlawful, void or voidable.
(i) COMPLIANCE WITH LAW. None of the Contracts, the origination of the
Contracts by the dealers or other third parties, the purchase of the
Contracts by the Seller, the sale of the Contracts by the Seller to the
Depositor or by the Depositor to the Issuer, or any combination of the
foregoing, violated at the time of origination or as of the Closing Date
any requirement of any federal, state or local law and regulations
thereunder, including, without limitation, usury, truth in lending, motor
vehicle installment loan and equal credit opportunity laws, applicable to
the Contracts and the sale of the Financed Vehicles. The Seller shall, for
at least the period of this Agreement, maintain in its possession,
available for the Depositor's and the Trustees' inspection, and shall
deliver to the Depositor or the Trustee upon demand, evidence of compliance
with all such requirements.
(j) CONTRACT IN FORCE. As of the Closing Date, no Contract has been
satisfied or subordinated in whole or in part or rescinded, and the related
Financed Vehicle securing any Contract has not been released from the lien
of the Contract in whole or in part.
(k) VALID SECURITY INTEREST. Each Contract creates a valid, subsisting
and enforceable first priority perfected security interest in favor of the
Seller in the Financed Vehicle covered thereby, and such security interest
has been assigned by the Seller to the Depositor. The original certificate
of title, certificate of lien or other notification (the "LIEN
CERTIFICATE") issued by the body responsible for the registration of, and
the issuance of certificates of title relating to, motor vehicles and liens
thereon (the "REGISTRAR OF TITLES") of the applicable state to a secured
party which indicates the lien of the secured party on the Financed Vehicle
is recorded on the original certificate of title, and the original
certificate of title for each Financed Vehicle, show, or if a new or
replacement Lien Certificate is being applied for with respect to such
Financed Vehicle the Lien Certificate will be received within 180 days of
the Closing Date and will show, the Seller as original secured party under
each Contract as the holder of a first priority security interest in such
Financed Vehicle. With respect to each Contract for which the Lien
Certificate has not yet been returned from the Registrar of Titles, the
Seller has received written evidence from the related dealer or other third
party that such Lien Certificate showing the Seller as lienholder has been
applied for.
(l) CAPACITY OF PARTIES. All parties to any Contract had capacity to
execute such Contract and all other documents related thereto and to grant
the security interest purported to be granted thereby.
(m) GOOD TITLE. Each Contract was originated by the Seller or
purchased by the Seller for value and taken into possession prior to the
Cutoff Date in the ordinary course of its business, without knowledge that
the Contract was subject to a security interest. No Contract has been sold,
assigned or pledged to any person other than the
J-2
<PAGE>
Depositor and the Issuer as the transferee of the Depositor, and prior to
the transfer of the Contract to the Depositor, the Seller had good and
marketable title to each Contract free and clear of any encumbrance,
equity, loan, pledge, charge, claim or security interest and was the sole
owner thereof and had full right to transfer the Contract to the Depositor
and to permit the Depositor to transfer the same to the Issuer, and, as of
the Closing Date, the Issuer will have a first priority perfected security
interest therein.
(n) NO DEFAULTS. As of the Cutoff Date, no default, breach, violation
or event permitting acceleration existed with respect to any Contract and
no event had occurred which, with notice and the expiration of any grace or
cure period, would constitute such a default, breach, violation or event
permitting acceleration under such Contract. The Seller has not waived any
such default, breach, violation or event permitting acceleration. As of the
Cutoff Date, no Financed Vehicle had been repossessed.
(o) NO LIENS. As of the Closing Date there are no liens or claims
which have been filed for work, labor, materials or unpaid taxes affecting
the Financed Vehicle securing any Contract which are or may be liens prior
to, or equal with, the lien of such Contract.
(p) ENFORCEABILITY. Each Contract contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Financed Vehicle of the benefits
of the security.
(q) ONE ORIGINAL. Each Contract is evidenced by only one original
executed Contract, which original is being held by the Servicer as
custodian.
(r) NO GOVERNMENT CONTRACTS. No Obligor is the United States or any
State government or an agency, authority, instrumentality or other
political subdivision of the United States government or any state
government or municipality.
(s) OBLIGOR BANKRUPTCY. At the Cutoff Date, no Obligor was subject to
a bankruptcy proceeding or other insolvency proceeding.
(t) CHATTEL PAPER. The Contracts constitute chattel paper within the
meaning of the UCC as in effect in the State of Illinois.
(u) NO IMPAIRMENT. Neither the Seller nor the Depositor has done
anything to convey any right to any Person that would result in such Person
having a right to payments due under the Contract or otherwise to impair
the rights of the Issuer in any Contract or the proceeds thereof.
(v) CONTRACT NOT ASSUMABLE. No Contract is assumable by another Person
in a manner which would release the Obligor thereof from such Obligor's
obligations to the Depositor with respect to such Contract.
(w) OBLIGOR LOCATION. Each Contract is a U.S. dollar-denominated
obligation and each Obligor's billing address is located in one of the
states of the United States, the District of Columbia or Puerto Rico.
J-3
<PAGE>
(x) LOCKBOX BANK. The Lockbox Bank is the only institution holding any
Lockbox Account for receipt of payments from Obligors, and all Obligors,
and only such Obligors, have been instructed to make payments to the
Lockbox Account, and no person claiming through or under Seller has any
claim or interest in the Lockbox or the Lockbox Account other than the
Lockbox Bank; provided, however, _______________, shall have an interest in
certain other collections therein not related to the Contracts.
REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACTS IN THE AGGREGATE.
The Seller represents and warrants as of the Closing Date that:
(a) AMOUNTS. The sum of the aggregate Principal Balances payable by
Obligors under the Contracts as of the Cutoff Date equals the sum of the
principal balance of the Certificates on the Closing Date.
(b) CHARACTERISTICS. The Contracts have the following characteristics:
(i) all the Contracts are secured by Financed Vehicles; (ii) no Contract
has a remaining maturity of less than ___ months or more than __ months;
(iii) no Contract had an original term to maturity of less than ___ months
or more than ___ months; (iv) the final scheduled payment on the Contract
with the latest maturity is due no later than ____________ 20__; (v) each
Contract is a fully-amortizing fixed rate Simple Interest Contract; and
(vi) each Contract had a remaining Principal Balance of no less than
$______ and no more than $______. Approximately _____% of the Principal
Balance of the Contracts as of the Cutoff Date is attributable to loans for
purchases of new Financed Vehicles and approximately _____% is attributable
to loans for purchases of used Financed Vehicles. No Contract has a
Contract Rate of less than ___%. No Contract was originated after the
Cutoff Date. No Contract has a Contract Rate less than ____%. The first
scheduled Distribution Date of the Contracts is due no later than
_____________.
(c) MARKING RECORDS. As of the Closing Date, the Seller has caused the
Computer Disk relating to the Contracts sold under the Transfer and Sale
Agreement and concurrently reconveyed by the Depositor to the Issuer to be
clearly and unambiguously marked to indicate that such Contracts constitute
part of the Trust Corpus, are owned by the Issuer.
(d) NO ADVERSE SELECTION. No selection procedures adverse to
Certificateholders have been employed in selecting the Contracts.
(e) TRUE SALE. The transaction contemplated by this Agreement
constitutes a valid sale, transfer and assignment from the Seller to the
Depositor and from the Depositor to the Issuer of all of the Seller's
right, title and interest in the Contract Assets as of the Closing Date or
creates a first priority security interest in the Contract Assets for the
benefit of the Issuer as of the Closing Date.
(f) ALL FILINGS MADE. All filings (including, without limitation, UCC
filings) required to be made by any Person and actions required to be taken
or performed by any Person in any jurisdiction to give the Trustees a first
priority perfected lien on, or
J-4
<PAGE>
ownership interest in, the Contracts and the proceeds thereof have been
made, taken or performed.
REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACT FILES. The Seller
represents and warrants as of the Closing Date that:
(a) POSSESSION. Immediately prior to the Closing Date, the Servicer
will have possession of each original Contract and the related complete
Contract File, and there are and there will be no custodial agreements
relating to the same in effect. Each of such documents which is required to
be signed by the Obligor has been signed by the Obligor in the appropriate
spaces. All blanks on any form have been properly filled in and each form
has otherwise been correctly prepared. The complete Contract File for each
Contract currently is in the possession of the Servicer.
(b) BULK TRANSFER LAWS. The transfer, assignment and conveyance of the
Contracts and the Contract Files by the Seller pursuant to the Transfer and
Sale Agreement and by the Depositor pursuant to the Pooling and Servicing
Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
J-5
<PAGE>
EXHIBIT K
[Form of Yield Supplement Agreement]
K-1
<PAGE>
EXHIBIT L
[Lockbox Bank and Lockbox Account]
LOCKBOX
LOCKBOX BANK
<PAGE>
- --------------------------------------------------------------------------------
ADMINISTRATION AGREEMENT
among
DEALER AUTO RECEIVABLES OWNER TRUST 2000-1,
as Issuer,
PREMIER AUTO FINANCE, INC.,
as Administrator
DEALER AUTO RECEIVABLES CORP.,
as Depositor,
and
____________________
as Indenture Trustee
Dated as of _________, 2000
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TABLE OF CONTENTS
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SECTION 1. DUTIES OF THE ADMINISTRATOR.........................................................................3
SECTION 2. RECORDS.............................................................................................8
SECTION 3. COMPENSATION........................................................................................8
SECTION 4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER................................................8
SECTION 5. INDEPENDENCE OF THE ADMINISTRATOR...................................................................8
SECTION 6. NO JOINT VENTURE....................................................................................8
SECTION 7. OTHER ACTIVITIES OF ADMINISTRATOR...................................................................9
SECTION 8. TERM OF AGREEMENT; RESIGNATION AND REMOVAL OF ADMINISTRATOR.........................................9
SECTION 9. ACTION UPON TERMINATION, RESIGNATION OR REMOVAL....................................................10
SECTION 10. NOTICES...........................................................................................10
SECTION 11. AMENDMENTS........................................................................................11
SECTION 12. SUCCESSORS AND ASSIGNS............................................................................12
SECTION 13. GOVERNING LAW.....................................................................................12
SECTION 14. HEADINGS..........................................................................................13
SECTION 15. COUNTERPARTS......................................................................................13
SECTION 16. SEVERABILITY......................................................................................13
SECTION 17. NOT APPLICABLE TO PREMIER AUTO FINANCE, INC. IN OTHER CAPACITIES..................................13
SECTION 18. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE TRUSTEE....................................13
SECTION 19. THIRD-PARTY BENEFICIARY...........................................................................13
SECTION 19. THIRD-PARTY BENEFICIARY...........................................................................14
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This Administration Agreement (the "AGREEMENT"), dated as of
___________, 2000, is by and among Dealer Auto Receivables Owner Trust 2000-1
(the "ISSUER"), Premier Auto Finance, Inc., in its capacity as administrator,
(the "ADMINISTRATOR"), Dealer Auto Receivables Corp. (the "DEPOSITOR") and The
Bank of New York, not in its individual capacity but solely as Indenture Trustee
(together with its successors and assigns, the "INDENTURE TRUSTEE").
W I T N E S S E T H:
WHEREAS, the Issuer is issuing _____% Dealer Auto Receivables
Asset-Backed, Class A-1 Notes, ____% Dealer Auto Receivables Asset-Backed, Class
A-2 Notes, ____% Dealer Auto Receivables Asset-Backed, Class A-3 Notes, and
____% Dealer Auto Receivables Asset-Backed, Class B Notes (collectively, the
"NOTES") pursuant to the Indenture, dated as of the date hereof (the
"INDENTURE"), between the Issuer and the Indenture Trustee (capitalized terms
used herein that are not otherwise defined shall have the meanings ascribed
thereto in the Indenture) and the ___% Asset Backed Certificates pursuant to the
Trust Agreement (the "TRUST AGREEMENT") dated as of the date hereof between the
Depositor and The Bank of New York, as owner trustee (the "OWNER TRUSTEE");
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Notes and the Certificates, including (i) a Sale and
Servicing Agreement, dated as of the date hereof (the "SALE AND SERVICING
AGREEMENT"), among the Issuer, The Bank of New York, not in its individual
capacity but as Indenture Trustee, the Depositor and Premier Auto Finance, Inc.,
as servicer (in such capacity, the "SERVICER"), and (ii) the Indenture
(collectively referred to hereinafter as the "TRANSACTION DOCUMENTS");
WHEREAS, pursuant to the Transaction Documents, the Issuer and the
Owner Trustee are required to perform certain duties in connection with (i) the
Notes and the collateral therefor pledged pursuant to the Indenture (the
"COLLATERAL") and (ii) the Certificates (the registered holders of the
Certificates being referred to herein as the "OWNERS");
WHEREAS, the Issuer and the Owner Trustee desire to have the
Administrator perform certain of the duties of the Issuer and the Owner Trustee
referred to in the preceding clause and to provide such additional services
consistent with the terms of this Agreement and the Transaction Documents as the
Issuer and the Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
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NOW, THEREAFTER, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DUTIES OF THE ADMINISTRATOR.
(a) Duties with respect to the Indenture.
The Administrator agrees to perform all its duties as
Administrator under the Transaction Documents. In addition, the
Administrator shall consult with the Owner Trustee regarding the duties
of the Issuer or the Owner Trustee under the Indenture. The
Administrator shall monitor the performance of the Issuer and shall
advise the Owner Trustee when action is necessary to comply with the
respective duties of the Issuer and the Owner Trustee under the
Indenture. The Administrator shall prepare for execution by the Issuer
or shall cause the preparation by other appropriate persons of, all
such documents, reports, filings, instruments, certificates and
opinions that it shall be the duty of the Issuer or the Owner Trustee
to prepare, file or deliver pursuant to the Indenture. In furtherance
of the foregoing, the Administrator shall take all appropriate action
that the Issuer or the Owner Trustee is required to take pursuant to
the Indenture including, without limitation, such of the foregoing as
are required with respect to the following matters under the Indenture
(references are to Sections of the Indenture):
(A) the preparation of or obtaining of the documents and
instruments required for execution and authentication of the Notes and
delivery of the same to the Indenture Trustee (SECTION 2.02);
(B) the duty to cause the Note Register to be kept and to give
the Indenture Trustee notice of any appointment of a new Note Registrar
and the location, or change in location, of the Note Register (SECTION
2.04);
(C) the notification of Noteholders of the final principal
payment on their Notes (SECTION 2.07(b));
(D) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the release
of Collateral (SECTION 2.12);
(E) the maintenance of an office in the City of New York, New
York, for registration of transfer or exchange of Notes (SECTION 3.02);
(F) the duty to cause newly appointed Paying Agents, if any,
to deliver to the Indenture Trustee the instrument specified in the
Indenture regarding funds held in trust (SECTION 3.03);
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(G) the direction to the Indenture Trustee to deposit monies
with Paying Agents, if any, other than the Indenture Trustee (SECTION
3.03);
(H) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the collateral and each
other instrument and agreement included in the Collateral (SECTION
3.04);
(I) the preparation of all supplements and amendments to the
Indenture and all financing statements, continuation statements,
instruments of further assurance and other instruments and the taking
of such other action as is necessary or advisable to protect the
Collateral other than as prepared by the Servicer (SECTION 3.05);
(J) the delivery of the Opinion of Counsel on the Closing Date
and the annual delivery of Opinions of Counsel and certain other
statements as to compliance with the Indenture (SECTIONS 3.06 and
3.09);
(K) the identification to the Indenture Trustee in an
Officer's Certificate of a Person with whom the Issuer has contracted
to perform its duties under the Indenture (SECTION 3.07(b));
(L) the notification of the Indenture Trustee and each Rating
Agency of a Servicer Default under the Sale and Servicing Agreement;
(M) the duty to cause the Servicer to comply with the Sale and
Servicing Agreement (SECTION 3.14);
(N) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (SECTION 3.10(b) and SECTION 3.11(b));
(O) the delivery of written notice to the Indenture Trustee
and each Rating Agency of each Event of Default under the Indenture and
each Servicer Default by the Servicer under the Sale and Servicing
Agreement (SECTION 3.18);
(P) the taking of such further actions as may be reasonably
necessary or proper to carry out more effectively the purpose of the
Indenture or to compel or secure the performance or observance by the
Depositor or the Servicer of their respective obligations under the
Sale and Servicing Agreement (SECTIONS 3.19 and 5.17);
(Q) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officer's Certificate and the
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obtaining of the Opinion of Counsel and the Independent Certificate
relating thereto (SECTION 4.01);
(R) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Collateral in a commercially
reasonable manner if an Event of Default shall have occurred and be
continuing (SECTION 5.04);
(S) provide the Indenture Trustee with the information
necessary to deliver to each Noteholder such information as may be
required to enable such Holder to prepare its United States federal and
state and local income or franchise tax returns (SECTION 6.06);
(T) the preparation and delivery of notice to Noteholders of
the removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee (SECTION 6.08);
(U) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee
and any written instruments necessary in connection with the
resignation or removal of the Indenture Trustee or any co-trustee or
separate trustee (SECTIONS 6.08 and 6.10);
(V) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee
is not the Note Registrar (SECTION 7.01);
(W) the opening of one or more accounts in the Indenture
Trustee's name, the preparation and delivery of Issuer Orders,
Officer's Certificates and Opinions of Counsel and all other actions
necessary with respect to investment and reinvestment of funds in the
Trust Accounts (SECTIONS 8.02 and 8.03);
(X) the preparation of an Issuer Request and Officer's
Certificate and the obtaining of an Opinion of Counsel and Independent
Certificates, if necessary, for the release of the Collateral (SECTIONS
8.04 and 8.05);
(Y) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures and the mailing to the Noteholders of notices with respect
to such supplemental indentures (SECTIONS 9.01, 9.02 and 9.03);
(Z) the execution and delivery of new Notes conforming to any
supplemental indenture (SECTION 9.06);
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(AA) the duty to notify Noteholders of mandatory prepayment of
the Notes or to cause the Indenture Trustee to provide such
notification (SECTION 10.02);
(BB) the preparation and delivery of all Officer's
Certificates, Opinions of Counsel and Independent Certificates with
respect to any requests by the Issuer to the Indenture Trustee to take
any action under the Indenture (SECTION 11.01(a));
(CC) the preparation and delivery of Officer's Certificates
and the obtaining of Independent Certificates, if necessary, for the
release of property from the lien of the Indenture (SECTION 11.01(b));
(DD) the notification of the Rating Agencies, upon the failure
of the Issuer, the Owner Trustee or the Indenture Trustee to provide
notification;
(EE) the preparation and delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate payment
and notice provisions (SECTION 11.06); and
(FF) the recording of the Indenture, if applicable (SECTION
11.14).
(b) ADDITIONAL DUTIES.
(i) In addition to the duties set forth in SECTION 1(a), the
Administrator shall perform such calculations and shall prepare or
shall cause the preparation by other appropriate persons of, and shall
execute on behalf of the Issuer or the Owner Trustee, all such
documents, reports, filings, instruments, certificates and opinions
that the Issuer or the Owner Trustee are required to prepare, file or
deliver pursuant to the Transaction Documents or SECTION 5.05 of the
Trust Agreement, and at the request of the Owner Trustee shall take all
appropriate action that the Issuer or the Owner Trustee are required to
take pursuant to the Transaction Documents. In furtherance thereof, the
Owner Trustee shall, on behalf of itself and of the Issuer, execute and
deliver to the Administrator and to each successor Administrator
appointed pursuant to the terms hereof, one or more powers of attorney
substantially in the form of EXHIBIT A hereto, appointing the
Administrator the attorney-in-fact of the Owner Trustee and the Issuer
for the purpose of executing on behalf of the Owner Trustee and the
Issuer all such documents, reports, filings, instruments, certificates
and opinions. Subject to SECTION 5, and in accordance with the
directions of the Issuer, the Administrator shall administer, perform
or supervise the performance of such other activities in connection
with the Collateral (including the Transaction Documents) as are not
covered by any of the foregoing provisions and as are expressly
requested by the Issuer and are reasonably within the capability of the
Administrator.
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(ii) Notwithstanding anything in this Agreement or the
Transaction Documents to the contrary, the Administrator shall be
responsible for promptly notifying the Owner Trustee in the event that
any withholding tax is imposed on the Trust's payments (or allocations
of income) to an Owner as contemplated in SECTION 5.02(c) of the Trust
Agreement. Any such notice shall specify the amount of any withholding
tax required to be withheld by the Owner Trustee pursuant to such
provision.
(iii) Notwithstanding anything in this Agreement or the
Transaction Documents to the contrary, the Administrator shall be
responsible for performance of the duties of the Owner Trustee set
forth in SECTION 5.05(a), (b), (c) and (d), the penultimate sentence of
SECTION 5.05 and SECTION 5.06(a) of the Trust Agreement with respect
to, among other things, accounting and reports to Owners; PROVIDED,
HOWEVER, that the Owner Trustee shall retain responsibility for the
distribution of the Schedule K-1s necessary to enable each Owner to
prepare its federal and state income tax returns.
(iv) The Administrator shall satisfy its obligations with
respect to clauses (ii) and (iii) above by retaining, at the expense of
the Issuer payable by the Administrator, a firm of independent public
accountants (the "ACCOUNTANTS") acceptable to the Owner Trustee, which
shall perform the obligations of the Administrator thereunder.
(v) The Administrator shall perform the duties of the
Administrator specified in SECTION 10.02 of the Trust Agreement
required to be performed in connection with the resignation or removal
of the Owner Trustee, and any other duties expressly required to be
performed by the Administrator under the Trust Agreement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions or otherwise deal with any of its Affiliates; PROVIDED,
HOWEVER, that the terms of any such transactions or dealings shall be
in accordance with any directions received from the Issuer and shall
be, in the Administrator's opinion, no less favorable to the Issuer
than would be available from unaffiliated parties.
(c) NON-MINISTERIAL MATTERS.
(i) With respect to matters that in the reasonable judgment of
the Administrator are non-ministerial, the Administrator shall not take
any action unless within a reasonable time before the taking of such
action, the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent
or provided an alternative direction. For the purpose of the preceding
sentence, "NON-MINISTERIAL MATTERS" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
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(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Contracts);
(C) the amendment, change or modification of the Transaction
Documents;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of successor Administrators or a successor
Servicer, 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.
(ii) Notwithstanding anything to the contrary in this
Agreement, the Administrator shall not be obligated to, and shall not,
(A) make any payments to the Noteholders under the Transaction
Documents, (B) sell the Collateral pursuant to clause (iv) of SECTION
5.04 of the Indenture or (C) take any other action that the Issuer
directs the Administrator not to take on its behalf.
SECTION 2. RECORDS. The Administrator shall maintain appropriate
books of account and records relating to services performed hereunder, which
books of account and records shall be accessible for inspection by the
Issuer, the Owner Trustee and the Indenture Trustee at any time during normal
business hours.
SECTION 3. COMPENSATION. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to a monthly fee
which shall be solely an obligation of the Servicer and shall be agreeable to
the Servicer and the Administrator.
SECTION 4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
SECTION 5. INDEPENDENCE OF THE ADMINISTRATOR. For all purposes of
this Agreement, the Administrator shall be an independent contractor and
shall not be subject to the supervision of the Issuer or the Owner Trustee
with respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by the Issuer, the
Administrator shall have no authority to act for or represent the Issuer or
the Owner Trustee in any way and shall not otherwise be deemed an agent of
the Issuer or the Owner Trustee.
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SECTION 6. NO JOINT VENTURE. Nothing contained in this Agreement (i)
shall constitute the Administrator and either of the Issuer or the Owner Trustee
as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 7. OTHER ACTIVITIES OF ADMINISTRATOR. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other business or,
in its sole discretion, from acting in a similar capacity as an administrator
for any other Person or entity even though such person or entity may engage in
business activities similar to those of the Issuer, the Owner Trustee or the
Indenture Trustee.
SECTION 8. TERM OF AGREEMENT; RESIGNATION AND REMOVAL OF ADMINISTRATOR.
This Agreement shall continue in force until the dissolution of the Issuer, upon
which event this Agreement shall automatically terminate.
(a) Subject to SECTION 8(d) and SECTION 8(e), the Administrator may
resign its duties hereunder by providing the Issuer with at least 60 days' prior
written notice.
(b) Subject to SECTION 8(d) and SECTION 8(e), the Issuer may remove the
Administrator without cause by providing the Administrator with at least 60
days' prior written notice.
(c) Subject to SECTION 8(d) and SECTION 8(e), at the sole option of the
Issuer, the Administrator may be removed immediately upon written notice of
termination from the Issuer to the Administrator if any of the following events
shall occur:
(i) the Administrator shall default in the performance of any
of its duties under this Agreement and, after notice of such default,
shall not cure such default within ten days (or, if such default cannot
be cured in such time, shall not give within ten days such assurance of
cure as shall be reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a
decree or order for relief, and such decree or order shall not have
been vacated within 60 days, in respect of the Administrator in any
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect or appoint a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official for the Administrator or any substantial part of its property
or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to
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the entry of an order for relief in an involuntary case under any such
law, or shall consent to the appointment of a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official for the
Administrator or any substantial part of its property, shall consent to
the taking of possession by any such official of any substantial part
of its property, shall make any general assignment for the benefit of
creditors or shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) above shall occur, it shall give written notice thereof to the
Issuer and the Indenture Trustee within seven days after the occurrence of such
event.
(d) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall have been
appointed by the Issuer and (ii) such successor Administrator shall have agreed
in writing to be bound by the terms of this Agreement in the same manner as the
Administrator is bound hereunder.
(e) The appointment of any successor Administrator shall be effective
only after the satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
(f) Subject to SECTION 8(d) and 8(e), the Administrator acknowledges
that upon the appointment of a Successor Servicer pursuant to the Sale and
Servicing Agreement, the Administrator shall immediately resign and such
Successor Servicer shall automatically become the Administrator under this
Agreement.
SECTION 9. ACTION UPON TERMINATION, RESIGNATION OR REMOVAL. Promptly
upon the effective date of termination of this Agreement pursuant to SECTION 8
or the resignation or removal of the Administrator pursuant to SECTION 8(a), (b)
or (c) respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such termination
pursuant to SECTION 8 deliver to the Issuer all property and documents of or
relating to the Collateral then in the custody of the Administrator. In the
event of the resignation or removal of the Administrator pursuant to SECTION
8(a), (b) or (c), respectively, the Administrator shall cooperate with the
Issuer and take all reasonable steps requested to assist the Issuer in making an
orderly transfer of the duties of the Administrator.
SECTION 10. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
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(i) If to the Administrator:
Premier Auto Finance, Inc.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: _____________
(ii) If to the Depositor:
Dealer Auto Receivables Corp.
230 West Monroe Street
Chicago, Illinois 60606
Attention: Charles Bradford Wolfe
Telecopier No.: _____________
(iii) If to the Indenture Trustee:
The Bank of New York
[address]
Attention: ____________________
Telecopier No.: ________________
(iv) If to the Issuer or the Owner Trustee:
[address]
Attention: ____________________
Telecopier No.: ________________
Each party hereto may, by notice given in accordance herewith to each
of the other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11. AMENDMENTS. (a) This Agreement may be amended from time to
time by a written amendment duly executed and delivered by the parties hereto,
with the written consent of the Owner Trustee but without the consent of the
Securityholders, to correct manifest error, to cure any ambiguity, to correct or
supplement any provisions herein which may be ambiguous or inconsistent with any
other provision herein or in any other Transaction Document, as the case may be,
or to add any other provisions with respect to matters or questions arising
under this Agreement that shall not be inconsistent with the provisions of this
Agreement; PROVIDED,
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HOWEVER that any such action shall not, as evidenced by an Opinion of Counsel,
materially and adversely affect the interests of any Securityholder.
(b) This Agreement may also be amended from time to time with the
consent of the Owner Trustee and the Noteholders of more than 50% of the
aggregate principal amount of the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, voting together as a single class, or, if there are no Class A-1 Notes,
Class A-2 Notes or Class A-3 Notes outstanding, with the consent of the
Noteholders of more than 50% of the aggregate principal amount of the Class B
Notes, or, if there are no Notes outstanding, the consent of Certificateholders
of more than 50% 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 (x)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the Contracts or distributions which are
required to be made on any Note or Certificate, (y) change the interest rate on
any Notes or Certificates which such change adversely affects the priority of
payment of principal or interest made to the Noteholders or Certificateholders
or (z) reduce the aforesaid percentage required to consent to any such
amendment, without the consent of the Noteholders and Certificateholders then
outstanding; and PROVIDED, FURTHER, that no such amendment or consent shall be
effective unless each Rating Agency delivers written confirmation that such
amendment or consent will not cause its then-current rating on any Class of
Notes or Certificates to be qualified, reduced or withdrawn.
(c) Notwithstanding the foregoing, the Administrator may not amend this
Agreement without the permission of the Depositor, which permission shall not be
unreasonably withheld.
SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned
by the Administrator unless such assignment is previously consented to in
writing by the Issuer, the Indenture Trustee and the Owner Trustee and subject
to the satisfaction of the Rating Agency Condition in respect thereof. An
assignment with such consent and satisfaction, if accepted by the assignee,
shall bind the assignee hereunder in the same manner as the Administrator is
bound hereunder. Notwithstanding the foregoing, this Agreement may be assigned
by the Administrator without the consent of the Issuer or the Owner Trustee to a
corporation or other organization that is a successor (by merger, consolidation
or purchase of assets) to the Administrator; provided that such successor
organization executes and delivers to the Issuer, the Owner Trustee and the
Indenture Trustee an agreement, in form and substance reasonably satisfactory to
the Owner Trustee and the Indenture Trustee, in which such corporation or other
organization agrees to be bound hereunder by the terms of said assignment in the
same manner as the Administrator is bound hereunder. Subject to the foregoing,
this Agreement shall bind any successors or assigns of the parties hereto.
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SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, 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 14. HEADINGS. The section and subsection headings hereof have
been inserted for convenience of reference only and shall not be construed to
affect the meaning, construction or effect of this Agreement.
SECTION 15. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same agreement.
SECTION 16. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 17. NOT APPLICABLE TO PREMIER AUTO FINANCE, INC. IN OTHER
CAPACITIES. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY OBLIGATION PREMIER AUTO
FINANCE, INC. MAY HAVE IN ANY OTHER CAPACITY.
SECTION 18. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE
TRUSTEE.
(a) Notwithstanding anything contained herein to the contrary, this
instrument has been countersigned by The Bank of New York not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event shall The Bank of New York in its individual capacity or any beneficial
owner of the Issuer have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder, as to all of
which recourse shall be had solely to the assets of the Issuer. For all purposes
of this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles Six, Seven and Eight of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by The Bank of New York not in its individual
capacity but solely as Indenture Trustee and in no event shall The Bank of New
York 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.
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SECTION 19. THIRD-PARTY BENEFICIARY. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
SECTION 20. NO PETITION. (a) The Administrator will not at any time
institute against the Issuer or the Depositor or join in any institution against
the Issuer and the Depositor of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other proceedings under any United
States federal or state bankruptcy or similar law.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
DEALER AUTO RECEIVABLES OWNER
TRUST 2000-1, as Issuer
By: [____________________], not in its
individual capacity but solely as Owner
Trustee
By:
------------------------------------------
Printed Name:
---------------------
Title:
----------------------------
DEALER AUTO RECEIVABLES CORP.,
as Depositor
By:
------------------------------------------
Printed Name:
---------------------
Title:
----------------------------
____________________, not in
its individual capacity but solely as Indenture
Trustee
By:
------------------------------------------
Printed Name:
---------------------
Title:
----------------------------
PREMIER AUTO FINANCE, INC.,
as Administrator
By:
------------------------------------------
Printed Name:
---------------------
Title:
----------------------------
<PAGE>
EXHIBIT A
LIMITED POWER OF ATTORNEY
State of Illinois )
) SS.
County of Cook )
KNOW ALL PERSONS BY THESE PRESENTS, that [__________________], a New
York banking corporation (the "OWNER TRUSTEE"), whose principal executive office
is located at _____________, by and through its duly elected and authorized
officer, ________________________, a ___________________, on behalf of itself
and of Dealer Auto Receivables Owner Trust 2000-1 (the "TRUST") as Issuer under
the Administration Agreement, dated as of _______________, 2000 (the
"ADMINISTRATION AGREEMENT"), among the Trust, Dealer Auto Receivables Corp., The
Bank of New York, as Indenture Trustee, and Premier Auto Finance, Inc., as
Administrator, does hereby nominate, constitute and appoint Premier Auto
Finance, Inc., a Delaware corporation, each of its officers from time to time
and each of its employees authorized by it from time to time to act hereunder,
jointly and each of them severally, together or acting alone, its true and
lawful attorney-in-fact, for the Owner Trustee and the Issuer in their name,
place and stead, in the sole discretion of such attorney-in-fact, to perform
such calculations and prepare or cause the preparation by other appropriate
persons of, and to execute on behalf of the Issuer or the Owner Trustee, all
such documents, reports, filings, instruments, certificates and opinions that
the Issuer or the Owner Trustee is required to prepare, file or deliver pursuant
to the Administration Agreement, and to take any and all other action, as such
attorney-in-fact may deem necessary or desirable in accordance with the
directions of the Owner Trustee and in connection with its duties as
Administrator or successor Administrator under the Administration Agreement.
Capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Administration Agreement.
The Owner Trustee hereby ratifies and confirms the execution, delivery
and performance (whether before or after the date hereof) of the above-mentioned
documents, reports, filings, instruments, certificates and opinions, by the
attorney-in-fact and all that the attorney-in-fact shall lawfully do or cause to
be done by virtue hereof.
The Owner Trustee hereby agrees that no person or other entity dealing
with the attorney-in-fact shall be bound to inquire into such attorney-in-fact's
power and authority hereunder and any such person or entity shall be fully
protected in relying on such power of authority.
A-1
<PAGE>
This Limited Power of Attorney may not be assigned without the prior
written consent of the Owner Trustee. It is effective immediately and will
continue until it is revoked.
This Limited Power of Attorney shall be governed and construed in
accordance with the laws of the State of Illinois without reference to
principles of conflicts of law.
Executed as of this _____ day of ___________, 2000.
[__________________], not in its individual
capacity but solely as Owner Trustee
By: _______________________________
Printed Name: _______________________
Title: ______________________________
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT OF
NOTARY PUBLIC
State of Delaware )
) SS.
County of New Castle )
On ____________, 2000 before me, ______________________________________
[Here insert name and title of notary]
personally appeared ________________________.
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ties), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature: ________________________________________
[SEAL]
<PAGE>
PERFORMANCE GUARANTEE
This Performance Guarantee is made as of ___________, 2000 by
Virginia Surety Company, Inc., a corporation organized under the laws of
Illinois ("VSC"), in favor of Dealer Auto Receivables Owner Trust 2000-1 (the
"TRUST").
WHEREAS, Premier Auto Finance, Inc. (the "SERVICER") is a
wholly-owned indirect subsidiary of VSC and the indirect general partner of
Premier Auto Finance, L.P. (the "SELLER") and VSC is expected to receive
substantial indirect benefits from the transactions contemplated by the
Transaction Documents; and
WHEREAS, as an inducement for (i) the Depositor to enter into
the Transfer and Sale Agreement with the Seller and purchase from the Seller the
Contract Assets and (ii) the Trust to enter into the Sale and Servicing
Agreement with the Depositor and acquire from the Depositor, among other things,
the Contract Assets and the Depositor's rights under the Transfer and Sale
Agreement, VSC has agreed to guaranty the due and punctual payment and
performance of the Seller's obligations under SECTION 5.01 of the Transfer and
Sale Agreement.
SECTION 1. DEFINITIONS. Capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Sale and Servicing
Agreement, dated as of __________, 2000 (the "SALE AND SERVICING AGREEMENT"),
among the Trust, as Issuer, Dealer Auto Receivables Corp. (the "DEPOSITOR"),
Premier Auto Finance, Inc., as Servicer, and The Bank of New York, as Indenture
Trustee.
SECTION 2. GUARANTEE OF REPURCHASE OBLIGATION. VSC hereby
unconditionally guarantees in favor of the Trust and its successor and assigns
the full and punctual performance by the Seller of its obligations under SECTION
5.01 of the Transfer and Sale Agreement (the "OBLIGATIONS"). This Performance
Guarantee is an absolute, unconditional and continuing guaranty of the full and
punctual payment of the Obligations and is in no way conditioned upon any
requirement that the Trust first attempt to collect any amounts owing by the
Seller to the Depositor or to resort to any collateral security or any other
means of obtaining payment. Should the Seller default in the payment or
performance of the Obligations, the Trust or its assigns may cause the immediate
performance by VSC of the Obligations and cause any payment Obligations to
become forthwith due and payable to the Trust or its assigns, without demand or
notice of any nature, all of which are expressly waived by VSC.
VSC further agrees, as the principal obligor and not as a
guarantor only, to pay to the Trust or its assigns forthwith upon demand in
funds immediately available all reasonable costs and expenses incurred or
expended by the Trust or its assigns in connection with the Obligations, this
Performance Guarantee and the enforcement thereof.
SECTION 3. WAIVERS. Without limiting the generality of any other
provision of this Performance Guarantee, VSC expressly waives:
(a) notice of acceptance by the Trust of this Performance
Guarantee;
<PAGE>
(b) notice of the existence, creation, performance or
nonperformance of all or any of the Obligations;
(c) presentment, demand, notice of dishonor, protest, notice
of protest, notice of default and all other notices whatsoever with respect to
the performance of the obligations or any performance by the Seller under the
Transfer and Sale Agreement;
(d) any right to direct or affect the manner or timing of
the Trust's enforcement of its rights or remedies;
(e) any defense, right of set-off or other claim whatsoever
that VSC may have against the Trust in connection herewith or any other
transaction, related or unrelated;
(f) all other principles or provisions of law, if any, that
conflict with the terms of this Performance Guarantee, including, without
limitation, the effect of any circumstances that may or might constitute a legal
or equitable discharge of a guarantor or surety;
(g) the invalidity or unenforceability of any of the
Obligations; and
(h) any change in, or the imposition of, any law, decree,
regulation or other governmental act which does or might impair, delay or in any
way affect the validity, enforceability or performance when due of the
Obligations.
VSC hereby agrees that the validity or enforceability of this
Performance Guaranty shall not be impaired or affected by any of the following:
(a) an amendment or modification of, or supplement to, the
Transfer and Sale Agreement or any other Transaction Document, including,
without limitation, any amendment or modification of the Obligations;
(b) any waiver, consent, extension, granting of time,
forbearance, indulgence or other action or inaction under the Transfer and Sale
Agreement or the other Transaction Documents or any right or remedy with respect
thereto;
(c) any exercise or non-exercise of any right, power or
remedy with respect to the Obligations or any Transaction Document; or
(d) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, or any other
obligation of any person or entity with respect to the Obligations.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
(a) VSC is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and
qualified to do business in all jurisdictions where such qualification is
required except where failure to be so qualified could not be
2
<PAGE>
reasonably expected to have a material adverse effect on its ability to perform
its obligations hereunder or the validity or enforceability of this Performance
Guarantee.
(b) VSC has full power, authority and legal right to execute
and deliver, and to perform their obligations under, this Performance Guarantee,
and all necessary corporate action to authorize this Performance Guarantee on
the terms and conditions hereof and to authorize the execution, delivery and
performance of this Performance Guarantee has been duly taken.
(c) This Performance Guarantee has been duly executed and
delivered by VSC and constitutes the legal, valid and binding obligations of VSC
enforceable against VSC in accordance with its terms, except to the extent that
such enforceability is subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally, or the
availability of equitable remedies, which are subject to the discretion of the
court before which an action may be brought.
(d) The execution, delivery performance by VSC of this
Performance Guarantee and the consummation by VSC of the transactions
contemplated hereby do not contravene and will not be in contravention of any
applicable law, the corporate charter or bylaws of VSC or any order or material
agreement by which VSC or any of its property is bound.
SECTION 5. TERMINATION. This Performance Guarantee shall remain in
full force and effect until the Obligations have been terminated.
SECTION 6. GOVERNING LAW. This Agreement and all matters arising
hereunder or in connection herewith shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois.
SECTION 7. NOTICES. All notices, demands or other communications
hereunder shall be given or made in writing and shall be effective (a) upon
receipt when sent through the U.S. mails, registered or certified mail, return
receipt requested, postage prepaid, with such receipt to be effective the date
of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to a
Responsible Officer of the party to which sent, or (d) on the date transmitted
by legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(a) If to the Servicer:
At the address set forth in the Sale and Servicing
Agreement
3
<PAGE>
(b) If to VSC:
Virginia Surety Company, Inc.
123 N. Wacker Drive
Chicago, IL 60606
Attention: Ronald D. Markovits, Esq.
Fax No: (312) 701-4910
(c) If to the Trust:
Dealer Auto Receivables Owner Trust 2000-1
c/o
[Address]
Attention:
Fax No: ( )
SECTION 8. AMENDMENTS. This Agreement may be modified, amended or
supplemented only by the mutual written agreement of the parties hereto and the
consent of the Indenture Trustee.
SECTION 9. HEADINGS. The headings in this Performance Guarantee
are for convenience of reference only and are not part of the substance of this
Performance Guarantee.
SECTION 10. SEVERABILITY. Whenever possible, each provision of this
Performance Guarantee shall be interpreted in such a manner to be effective and
valid under applicable law, but if any provision of this Performance Guarantee
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Performance Guarantee.
SECTION 11. SUCCESSORS AND ASSIGNS. This Performance Guarantee and
all obligations of VSC hereunder shall be binding upon the successors and
assigns of VSC and shall inure to the benefit of the Trust. VSC hereby
acknowledges that this Performance Guarantee will be assigned by the Trust to
the Indenture Trustee for the benefit of the Noteholders.
[signature page follows]
4
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Performance Guarantee as of the date first above written.
VIRGINIA SURETY COMPANY, INC.
By:
--------------------------------
Title:
-----------------------------
5
<PAGE>
DEALER AGREEMENT
THIS AGREEMENT, between Premier Auto Finance, L.P. ("Purchaser"), 230
West Monroe Street, Suite 1000, Chicago, Illinois, 60606 and each of the motor
vehicle dealers listed below (individually and collectively referred to herein
as "Dealer"), sets forth the terms under which Purchaser may purchase Contracts
(as hereinafter defined) from Dealer and the rights and obligations between
Purchaser and Dealer with regard to such Contracts.
1. SALE AND PURCHASE OF CONTRACTS
a. CONTRACTS; PROGRAM REQUIREMENTS. Purchaser may, from time to
time, in its sole discretion purchase from Dealer such
Contracts (as hereinafter defined) offered by Dealer as shall
be written on forms satisfactory to Purchaser and otherwise
acceptable to Purchaser. For purposes of this Agreement, the
term "Contract" shall mean any retail installment contract,
conditional sales contract, security agreement or other
document providing for the payment by a Buyer of a motor
vehicle and secured by a first priority lien or purchase money
security interest in that motor vehicle. The term "Vehicle"
shall mean the motor vehicle purchased under and securing any
Contract, together with any related options and accessories.
The term "Buyer" shall mean any person (including an
individual or other legal entity) which purchases a motor
vehicle from Dealer, including any co-purchaser. Purchaser
will from time to time communicate to Dealer the criteria
which the Contracts, Vehicles and Buyers must meet in order to
make the Contract eligible for purchase by Purchaser. These
criteria may include rate information, insurance requirements,
Buyer credit qualifications, and so on. Purchaser may
communicate this information in the form of one or more
"Program Letters", Rate Sheets or otherwise. These
requirements are collectively referred to herein as the
"Program Requirements". All Contracts purchased by the
Purchaser must meet all Program Requirements; but Purchaser
retains the sole discretion to decide which Contracts to
purchase, even though the Contract may conform to the Program
Requirements.
b. EFFECTING A PURCHASE. Dealer shall communicate to Purchaser
credit information concerning a Buyer (and any other person
named by a Buyer in his credit application) as Dealer may have
or as may be requested by Purchaser. Purchaser will decide, in
its sole discretion, whether to purchase each Contract offered
to it by Dealer after documentation (including credit
information) satisfactory to Purchaser has been received and
reviewed. If Purchaser decides that it will purchase a
Contract, Dealer shall (i) execute an assignment of the
Contract to Purchaser, (ii) deliver the original executed
Contract (and all other original executed documents relating
thereto) to Purchaser, (iii) file and record all such
documents and take all such action, as may be necessary, under
the Uniform Commercial Code and other applicable law to convey
to Purchaser (and to record such conveyance of) the Contract,
to perfect a valid and enforceable first priority security
interest in favor of Purchaser in the motor vehicle to which
the Contract relates, and to comply with all related
provisions of applicable motor vehicle laws, including motor
vehicle and certificate of title laws, and (iv) if required by
applicable law, send to the Buyer a notice that such Dealer
has assigned the Contract to Purchaser.
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<PAGE>
c. PURCHASE PRICE. Purchaser shall only consider purchasing
Contracts which comply with the Program Requirements announced
from time to time by Purchaser. The price at which Purchaser
may purchase Contracts will be the "Amount Financed" shown on
the Contract. Such price shall be paid to Dealer upon
Purchaser's receipt and review of satisfactory documentation
unless other arrangements for payment have been made between
Purchaser and Dealer.
d. NATURE OF TRANSFER. Dealer and Purchaser intend that each
purchase of a Contract under this Agreement shall be a true
sale of all of Dealer's right, title and interest in, to and
under such Contract, providing Purchaser with the full
benefits of ownership of the same, and Dealer and Purchaser do
not intend the transaction evidenced hereby to be, or for any
purpose to be characterized as, a loan secured by such
Contract from Purchaser to Dealer. Without prejudice to the
foregoing intention of the parties, if a court characterizes
any purchase of a Contract hereunder as being a loan rather
than a true sale, then Dealer hereby pledges, grants a
security interest in and assigns to Purchaser all of its right
and title to and interest in the Contracts which the parties
hereto intend now or at any time in the future to be sold to
Purchaser as security for the payment and performance of all
obligations of Dealer hereunder.
e. RESERVES. For each Contract purchased by Purchaser from
Dealer, Purchaser will credit to a Dealer Reserve Account an
amount equal to all or part of the difference between a) the
finance charge disclosed on the Contract and b) a projected
finance charge on the same Contract calculated at Purchaser's
then applicable buy rates as announced from time to time by
Purchaser, as provided in the Dealer Reserve Schedule A
attached hereto and made a part hereof. The Dealer Reserve
Account shall be a non-interest earning account and will not
be a separately funded. Dealer acknowledges that the Dealer
Reserve Account shall be and remain the sole property of
Purchaser and Dealer shall have no vested interest therein
until such time as any amount becomes payable to it as
provided in the Dealer Reserve Schedule A. In the alternative,
in case any court holds or any third party asserts that the
Dealer Reserve Account is the property of the Dealer, the
Dealer hereby grants a security interest in favor of Purchaser
in all amounts credited to the Dealer Reserve Account to
secure all obligations of Dealer to Purchaser.
Dealer further acknowledges that Purchaser's right to charge
the Dealer Reserve Account is solely within Purchaser's
discretion reasonably exercised. All amounts held therein
shall from time to time be paid to Dealer in accordance with
the terms and conditions of this Agreement and the Dealer
Reserve Schedule A.
As provided in the Dealer Reserve Schedule A, if a Contract
prepays in whole or in part before its stated maturity date
Dealer shall be responsible for Dealer's proportionate share
of any unearned finance charges, insurance premiums and/or
charges for extended warranty, mechanical breakdown or
comparable programs, whether or not the amount of the Dealer
Reserve Account is sufficient to cover such liability and
whether or not this Agreement has theretofore been terminated.
2
<PAGE>
By mutual agreement between Dealer and Premier, the Dealer
Reserve Schedule A may change from time to time, and the
Dealer Reserve Schedule A may vary from Dealer to Dealer.
2. INSURANCE. As provided in the Program Requirements, Dealer will provide
Purchaser or its agent with written evidence that there is insurance acceptable
to Purchaser covering each Vehicle against fire, theft and collision at the time
the Contract is purchased by Purchaser and that Purchaser is named as the loss
payee.
3. PAYMENT FROM BUYER. After purchase of a Contract by Purchaser, Dealer
shall promptly forward to Purchaser any payment on the Contract received by
Dealer and any payments so received shall be held in trust by Dealer for the
benefit of Purchaser. In the event such payment is made by check or other
instrument payable to Dealer, Dealer shall endorse such check or other
instrument to Purchaser and immediately remit such payment to Purchaser at the
following address: 230 West Monroe Street, Suite 1000, Chicago, Illinois 60606.
Dealer shall not make any payment in respect of any Contract on behalf of any
Buyer without the prior written consent of Purchaser.
4. AMENDMENT OR MODIFICATION OF CONTRACTS. Upon or any time after
Purchaser's purchase of a Contract from Dealer, Purchaser may, in its sole
discretion, renew, extend, accelerate or otherwise modify or amend any of the
terms and conditions of such Contract including, without limitation, extending
or modifying the time for payment or extending additional credit thereunder. Any
such amendments, renewals, extensions or modifications shall be considered as
part of the Contract for all purposes hereunder. Purchaser shall not extend or
amend any undertaking, warranty or representation made by Dealer to Buyer in
connection with the sale of the Vehicle to Buyer.
5. DEALER'S REPRESENTATIONS AND WARRANTIES. As to each Contract sold by
Dealer to Purchaser, and in addition to any representations and warranties of
Dealer in the Contract or elsewhere in this Agreement, Dealer warrants and
represents to Purchaser, its successors and assigns that, as of the time of each
sale of a Contract to the Purchaser:
a. Dealer and its employees and agents and each Contract are in
compliance with all requirements of the Federal Truth in
Lending Act, the Federal Equal Credit Opportunity Act and all
other federal, state, local, and other laws, regulations or
rules including, but not limited to, consumer protection laws
and all regulations or rules applicable to the extension of
credit, the sale of the Vehicle and any accessories, services
or products sold in connection with the Vehicle, or otherwise
applicable to the Contract and the sale of the Vehicle;
b. Dealer will have the right and all required licenses to make
such sales;
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<PAGE>
c. Dealer will have received the down payment specified in the
Contract and will not have made a loan to the Buyer or
assisted the Buyer in obtaining a loan from any third party,
to be used as a part or all of such down payment or any other
payment on a Contract, except (in any such case) as may be
specifically indicated on the face of the Contract. If the
down payment is paid to the Dealer in the form of a check the
Dealer has verified that the check represents "good funds"
prior to submitting the Contract to Purchaser. Upon giving
effect to the sale of such Contract to Purchaser, Dealer shall
cease to have any claims against the applicable Buyer in
respect of payment of the purchase price for the applicable
Vehicle, any financing theretofore provided by Dealer to the
Buyer or otherwise;
d. if any part of the down payment is from a manufacturer,
distributor or Dealer rebate, the Dealer has disclosed this to
Purchaser at the time the credit application is presented to
Purchaser for approval and the rebate has been shown on the
applicable Contract as a rebate;
e. the Vehicle sold under the Contract will have been actually
delivered to the applicable Buyer or the parties agreeing to
the security interest in favor of Dealer or its assignee, the
Vehicle conforms to the description of the Vehicle provided to
Purchaser in the Contract or otherwise, and the Dealer shall
otherwise have fully performed and discharged all of its
obligations to Buyer and such parties arising in connection
with the sale of the Vehicle to the Buyer;
f. the Contract is a legal, valid and binding agreement,
enforceable against the persons shown as Buyers in the
Contract according to its terms and free from any defenses,
offsets and counterclaims and evidences the sale of the
Vehicle to the persons named as Buyers therein and the
incurrence of a debt obligation in connection therewith;
g. All registered owners of the Vehicle will have signed the
Contract either as Buyers or as parties agreeing to the
security interest in favor of Dealer or its assignee;
h. Dealer, its employees and agents have not recommended,
assisted, encouraged or suggested that Buyer provide any false
or misleading information, or that Buyer fail to provide
information needed to make the information complete and not
misleading in any credit application, contract, document or
other form of information submitted to the Purchaser, and
Dealer, its employees and agents have no knowledge that any
information provided to the Purchaser in any credit
application, contract, document or otherwise, is false or
misleading;
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<PAGE>
i. such Contract (i) fully complies with all Program Requirements
established by Purchaser from time to time regarding the
purchase of Contracts, (ii) does not require the obligor under
such Contract to consent to or receive notice of the transfer,
sale or assignment of the rights and duties of Dealer under
such Contract, (iii) constitutes "chattel paper" as such term
is defined in the Uniform Commercial Code in effect in the
jurisdiction in which the sale of the Vehicle giving rise to
such Contract shall have occurred and (iv) is comprised of but
one original, the ownership interest in which may be
transferred by delivery;
j. prior to the purchase of such Contract, (i) Dealer shall be
the owner of such Contract, free and clear of any lien, claim
or other encumbrance and (ii) the Vehicle related thereto
shall be free and clear of any lien, claim or other
encumbrance other than the lien granted therein in favor of
Dealer to secure the indebtedness of the applicable Buyer
existing under the Contract;
k. there is a valid, enforceable perfected first priority
security interest in the Vehicle and in any proceeds therefrom
in favor of Dealer as the secured party and that security
interest has been validly assigned by Dealer to Purchaser;
l. all sales taxes and other taxes payable in connection with the
sale of the applicable Vehicle to Buyer have been paid in
full; and
m. Dealer has full power and authority to enter into and perform
this Agreement, and this Agreement is the legal and valid
agreement of the Dealer enforceable against Dealer according
to its terms, complies with all laws applicable to Dealer, and
has been duly and validly authorized by all required action of
Dealer; and
n. at the time of a purchase of a Contract by Purchaser, the
related Vehicle is insured against fire, collision, theft and
damage, and Purchaser is named as a loss payee under such
policy, all in accordance with the Program Requirements.
6. DEALER'S COVENANTS. Dealer covenants and agrees as follows:
a. From and after the sale by Dealer of any Contract to Purchaser
hereunder, Dealer shall not (i) assert any right or claim in
or to such Contract or the Vehicle related thereto, (ii)
purport to grant any right or interest to any person or entity
other than Purchaser in or to such Contract or (iii) purport
to exercise any authority to modify, alter or amend such
Contract.
b. Dealer agrees that from time to time, at its expense, it will
promptly execute and deliver all further instruments and
documents, and take all further action that Purchaser may
reasonably request in order to perfect, protect or more fully
evidence Purchaser's ownership interest in the Contracts
purchased hereunder and Purchaser's security interest in each
Vehicle. Dealer will deliver to Purchaser the original copy of
each Contract purchased hereunder.
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<PAGE>
c. Dealer shall take all necessary action to record properly each
transfer of Contracts hereunder to Purchaser as a sale to
Purchaser and to reflect Purchaser's ownership of such
Contracts on its books and records.
7. DEALER LIABILITY.
a. If any representation, warranty, covenant or agreement made by
Dealer (or any of its agents or employees) hereunder (or in
any Contract) in connection with a Contract or this Agreement
is breached, untrue, misleading or incomplete, or if Dealer
fails to perform any obligation it may have under any Contract
or this Agreement or otherwise, or if the Buyer asserts any
claim arising out of or relating to, or in connection with,
the purchase of a Vehicle from Dealer under a Contract sold to
Purchaser, the Dealer shall promptly pay Purchaser any or all
of the following amounts at the sole election and demand of
Purchaser: (i) the unpaid balance, as determined by Purchaser,
of all Contracts affected by such breach, misrepresentation,
failure to perform or claim; (ii) Dealer's portion of any
unearned finance charges, insurance premiums, and/or charges
for extended warranty, mechanical breakdown or comparable
programs; (iii) all damages, costs, losses and expenses
(including, but not limited to, reasonable attorneys' fees and
costs) incurred by Purchaser as a result of such breach,
misrepresentation, failure to perform or claim. In addition,
Dealer shall indemnify and hold Purchaser, its partners, its
and their shareholders, affiliates, officers, directors,
employees and agents (each, an "Indemnified Party") harmless
for all losses or expenses, including reasonable attorneys'
fees and legal costs, suffered or incurred by any Indemnified
Party in any judicial, administrative, or any other proceeding
because of any claim or defense asserted against an
Indemnified Party as a result of any act or omission by Dealer
or its employees or agents including, at the election of
Purchaser, the unpaid balance of the affected Contract as
determined by Purchaser. Dealer agrees that Purchaser may
proceed against Dealer for any and all amounts due to any
Indemnified Party from Dealer under this Agreement or any
other party and without proceeding against or applying any
security which Purchaser may have or hold, Purchaser may, at
its option, debit the Dealer Reserve Account for any amounts
owing to Purchaser under this Agreement.
b. If Dealer:
(i) fails to disclose a pickup payment agreed to by
Dealer and Obligor, or other form of deferred down
payment, or balloon payment on the Contract, or
(ii) fails to collect an agreed upon pickup payment or
other form of deferred down payment, such failure
shall be considered a breach of a representation
under subparagraph 7a above and Dealer shall be
liable to Purchaser as specified in subparagraph 7a.
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<PAGE>
c. Anything herein to the contrary notwithstanding, (i) Dealer
shall remain liable under each Contract to perform all of its
continuing duties and obligations (if any) thereunder in
respect of warranties, servicing arrangements and similar
agreements (the "Ancillary Agreements") to the same extent as
if this Agreement had not been executed, and (ii) neither
Purchaser nor any of its assignees shall have any obligation
to perform or otherwise have any liability in respect of, the
Ancillary Agreements by reason of this Agreement.
8. LIABILITY FOR BUYER DEFAULT. Except as specifically provided herein or
as otherwise agreed, Dealer shall have no responsibility for any default by a
Buyer in respect of any Contract purchased by Purchaser hereunder.
9. BOOKS AND RECORDS. Dealer agrees to maintain complete and accurate
books and records in accordance with generally accepted accounting
principles concerning the sale of each Vehicle, including but not limited to
records of all other transactions affecting the Vehicle and the sale of each
Contract. Dealer will, upon request by Purchaser, promptly deliver any such
books and records or furnish copies thereof or abstracts therefrom to Purchaser
or its agent. Purchaser's representative may from time to time inspect Dealer's
books and records. Dealer shall furnish to Purchaser such information concerning
Dealer's financial and business affairs as Purchaser may reasonably request.
10. COMMUNICATIONS. Dealer agrees to promptly forward to Purchaser all
communication (including correspondence, inquiries, remittances or information),
oral or written, received by Dealer from any source with respect to any
Contract. Dealer agrees to reimburse Purchaser for all losses and expenses
Purchaser may suffer or incur due to Dealer's failure to comply with this
section.
11. COSTS AND EXPENSES. Except as provided herein, each party to this
Agreement shall fulfill its obligations hereunder at its own cost and expense;
provided, however, that Purchaser shall reimburse Dealer for filing fees or
other costs paid by Dealer to public officials to perfect Purchaser's security
interest in each Vehicle unless the fees and costs are otherwise legally
chargeable to the Buyer.
12. AGENCY. Neither this Agreement nor any action pursuant hereto shall
make Dealer the agent, representative or employee of Purchaser for any purpose.
Dealer is not granted any express or implied right to bind Purchaser for any
purpose. Wherever in this Agreement reference is made to any agent or
Purchaser, such reference is intended to mean any third party that Purchaser may
from time to time appoint to fulfill any of its obligations under this
Agreement.
13. FAILURE TO EXERCISE REMEDIES. The exercise of any right or remedy
available to Purchaser shall not operate as a waiver of any other right or
remedy. The failure of Purchaser to exercise or a delay by Purchaser in
exercising any right or remedy shall not operate as a waiver of such right or
any other right. All of the Purchaser's rights and remedies shall be cumulative
and may be exercised singularly or concurrently.
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14. SUCCESSORS AND ASSIGNS. The Agreement shall be binding upon and
shall inure to the benefit of the parties to this Agreement and their
respective successors and assigns; provided, however, that Dealer may not
assign or otherwise transfer any of its rights, obligations, title or
interest in, to or under this Agreement without the prior written consent of
Purchaser and any purported assignment or transfer by Dealer without such
consent shall be void and without effect. Purchaser shall have the
unrestricted right to assign any and all of its rights, obligations, title
and interest hereunder, and Dealer expressly acknowledges that Purchaser has
transferred, or may in the future transfer, all or a portion of its right,
title and interest in and to the Contracts acquired in connection with such
purchase as well as all or a portion of its rights under this Agreement to
certain other persons and entities (each, a "Purchaser Assignee") and Dealer
agrees that each Purchaser Assignee, to the extent of such transfer, shall
succeed to Purchaser's rights hereunder. To the extent that notice of any
such assignment by Purchaser to any Purchaser Assignee shall be required to
be given to Dealer under applicable law to effect or more fully protect any
such assignment, the parties hereto agree that this paragraph 14 provides
such notice. Any obligation of Purchaser, or any function to be performed by
Purchaser under this Agreement, may at the sole option of Purchaser, be
delegated to, and performed by, an agent of Purchaser, which agent shall have
such power and authority as Purchaser shall delegate to it.
15. TERMINATION. Purchaser or Dealer may terminate this agreement upon 5
days written notice to the other party, such termination to be effective on the
date set out in such notice. The termination of the Agreement shall not release
Purchaser or Dealer from any obligations incurred with regard to any Contracts
purchased prior to the effective date of such notice, and all such obligations
shall remain in full force and effect, notwithstanding any sale of the
Contracts, until fully satisfied in accordance with the terms and conditions of
this Agreement.
16. VALIDITY, COMPLETE AGREEMENT, AMENDMENTS. Any invalidity, in whole
or in part, of any provision of this Agreement shall not affect the validity
of any other provision hereof. This Agreement and any representations,
warranties or agreements made by Dealer to Purchaser in any Contract
constitute the complete understanding between the parties and supersede all
prior oral, written or implied discussions or understandings with respect to
the subject matter hereof between the parties. No alteration, amendment or
modification of any other terms and provisions hereof shall be valid unless
made pursuant to an instrument in writing signed by both of said parties.
17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the state of Illinois.
18. ATTORNEYS' FEES. In the event that either party shall institute any
action or proceeding to resolve a dispute arising from the interpretation or
construction of or to enforce this Agreement, the successful party in such
action or proceeding shall be entitled to recover from the other party, in
addition to any other relief to which it may be entitled, reasonable attorneys'
fees and costs incurred in prosecuting or defending such action or proceeding.
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19. NOTICE. Except as otherwise provided in this Agreement, all notices and
other communications hereunder shall be in writing and shall be deemed duly
given if and when personally delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid, or by reliable overnight
delivery service or by facsimile machine with receipt confirmed, addressed as
follows: (a) if to Purchaser, to the address shown at the beginning of the
Agreement; (b) if to Dealer, to the address shown below. Either party may change
the address to which each such notice or communication shall be sent by giving
written notice of such address in the manner provided herein to the other party.
20. GENDER, NUMBER, PARAGRAPH HEADING. Unless the context of this Agreement
otherwise requires, the masculine, feminine or neuter gender each shall include
the other genders, and the singular shall include the plural. The paragraph
headings contained in this Agreement are for convenience of reference only and
shall not limit or define the text hereof.
IN WITNESS WHEREOF, Purchaser and each Dealer have caused this
Agreement to be signed by their duly authorized representatives as of the date
below.
PREMIER AUTO FINANCE, L.P.
[Purchaser]
BY:
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VICE PRESIDENT, THE AUTO CONDUIT CORPORATION,
ITS GENERAL PARTNER
By signing below, I am signing on behalf of each of the companies listed below
and each of them is bound by this Dealer Agreement and the Dealer Reserve
Schedule A. I represent and warrant that I am authorized to sign on behalf of
each of those companies.
BY:
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On behalf of each of the companies listed below.
Dated as of , 199
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DEALER:
ADDRESS:
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